How to Set Up a Merchant Account: A step-by-step guide

Step-by-step guide to setting up a Merchant Account

1. Find the right Merchant Account Provider

Before you can set up a Merchant Account, you need to choose the Merchant Account Provider that fits your business type. There are three main options to choose from:

-         Traditional banks such as BNPP

-         Acquiring banks, also known as Acquirers and Payment Processors such as Worldpay and Stripe

-         Independent Sales Organizations (ISOs), such as eFlow.

If you would like to know more about the third option, and more specifically what are the benefits of partnering with an ISO that provides merchant accounts and other merchant services, read our associated blog posts (links below):

• Top reasons to partner with an ISO
• Key benefits of partnering with an ISO

2. Apply for a Merchant Account

Once you’ve chosen a provider, fill out the application form. The application form will ask for detailed business and financial information, so it’s important to ensure accuracy. Merchant Account Providers will evaluate applications based on factors like:

·       Business Type: High Risk industries such as subscription billing may face stricter requirements or higher fees.

·       Processing history: Your fraud and chargeback performance will be analysed.

·       Expected sales volume: Providers will need to know your projected monthly sales volume, to assess their expected profits.

What type of documents will be requested by the Merchant Account Provider? Feel free toget in touch with our team to get a complete overview, but here are some of the required KYC documents: Certificate of incorporation, proof of directorship, proof of identity, proof of address, Articles of association, processing history, bank account statement, fraud and chargeback policies, etc.

3. Due diligence and approval process

After submitting your application, the Merchant Account Provider will perform a due diligence of your business. Approval typically takes between a few days to a few weeks, depending on the complexity of your business model and how fast your can meet the requirements of the Provider. High-Risk businesses may face longer approval timelines or additional document requests. This is the most frustrating step to set up merchant account, because it could consist in a lot of back-and-forth discussions.

4. Negotiate the terms

Merchant Accounts come with several fees, and understanding these costs upfront is crucial:

·       Transaction fees: typically a percentage of each sale plus a fee per transaction

·       Monthly fees: some providers charge a flat fee for maintaining the account

·       Setup fees: an initial fee to set up your account

·       Chargeback fees: if a cardholder disputes a transaction, you will get a fee for handling customer disputes and chargebacks

It’s essential to review the fee structure of each provider carefully, as these costs can vary greatly depending on your business type and volume of sales.

5. Integrate via a payment gateway and set up merchant account

How to set up merchant account? The merchant’s payment gateway is the link between the checkout page on the merchant’s website and the acquiring bank, holding Visa or Mastercard license. It allows a secure transmission of the card data and transaction details. The integration can take between a few days and a couple of weeks, depending on the number of features. In the meantime, the provider will set up the merchant account. How to set up a Merchant Account? The merchant will receive credentials, known as MIDs (merchant identification numbers) and share them with the merchant. The MID details will be implemented by the payment gateway once the integration is complemented.

6. Process transactions

Here is how it works – The merchant’s payment gateway is sending the transaction request to the Acquiring Bank. The Acquiring Bank forwards the information to the Issuing Bank (the bank that issued the customer’s card). The Issuing Bank authorizes or declines the transaction based on the customer’s account status. Once approved, the funds are held in the Merchant Account, after settlement, they are transferred to the business’s main bank account. It’s important to highlight that the funds temporarily held on the merchant account are NOT accessible for the merchant.

When moving the funds to the merchant account, the acquirer deducts any applicable fees, and eventually transfers the remaining amount to the business’s bank account.

The whole process usually takes a few days, although some providers offer same-day or next-day funding for a fee. This delay allows the payment processor to clear transactions and reduce the risk of fraud.

Summary

To sum up, setting up a Merchant Account involves more than just creating an account. It involves many stakeholders, from the technical payment gateway to the issuing bank, without forgetting the card schemes and the acquiring banks. These components work together to allow e-commerce businesses to process card payments, ensuring both security and efficiency in the payment process.

By investing the time in setting up a merchant account properly, you’ll be positioned to handle more transactions, expand your customer base, and increase revenue. If you’re ready to get started, choose a provider that aligns with your needs, and take the first step toward better payment management today!

Here is the link to apply for free with us and set up merchant account.