What is a Merchant Account for eCommerce?
by TBF Finance

A merchant account is a bank account that allows accepting credit card payment. In brick and mortar retail, merchant accounts come with credit card readers, settlement procedures, and supply and maintenance deals for the card reader equipment. For on-line selling, a merchant account for eCommerce is usually simpler and often offered as a feature of the eCommerce platform.


Merchant Accounts let you accept payment from credit and debit cards directly from your clients. Opening a merchant account has similar requirements to other bank accounts.


Because the credit card enterprises offer guarantees to their card holders, they need to make sure that if your customer returns something, you’ve got the financial resources to give them their money back. (If you don’t then the bank has to pay, and banks don’t like to do that.) They’ll also want to be sure that you’re running a credible business to guard themselves and their card holders against fraud.


You can expect the approval process to get a merchant account to be similar to getting a loan. You basically have to convince to the provider that you’re going to make them money (in the form of fees on your transactions) not cost them money (in the form of unreimbursed charge backs or fraud).


There are many on-line services that will help you set up an account. For all of them, you’ll need a business bank account, a business license, and an application with information about you and your business. The amount of additional documentation (bank statements, financial records, and business plans) depends on the amount of money you expect to flow through your account, and the details of your business. Simple accounts may require just a voided business check.


Do you need a Merchant Account?


Before you investigate the documentation needs for applying for a merchant account, ask yourself if that’s what you really need. Depending on your business and eCommerce platform, you may or may not even be able to use an individual merchant account with the eCommerce software.


Who Needs Individual Merchant Accounts:


Big businesses with large merchant account quantities of transactions and/or high dollar value sales may need to consider an individual merchant account.


Medium sized business, especially those with lots of in person charges (as through a brick and mortar business), may want to consider an individual merchant account.


However, with services like stripe offering card readers that hook up to a phone, for smaller operators, even face to face sales and brick and mortar businesses have the option to choose an internet based aggregate card service.


The Third Party Processor Option:


Many businesses choose to accept credit card payments through a service like PayPal, Stripe and Square. These businesses are different than a traditional merchant account. You’re essentially accepting a middle man, and allowing the third party service to provide account services. You may have less control over the system, and there may be a lag between your sale and receipt of funds, but in return, you get much less of a start-up curve, and often some cool tools that allow you to analyses your business.


Integrated payment methods from eCommerce portals: eCommerce platforms like Shopify, Volusion, 3dCart, and BigCommerce (to name a very few) have integrated payment platforms that do not require you to set up a merchant account. Even web building sites like Weebly and Wix have partnered with payment providers to provide seamless integration with third party processing products.


Research Your eCommerce Portal and Payment Options


Because your online payment processing choice is likely to be tied to your eCommerce platform, you’ll want to research them together. There are many factors to research before deciding on an eCommerce portal and the payment methods you’ll need to make it work. The answers to these questions vary by business, so you’ll have to do your own research.


  • Cost: investigate the cost of the whole package. This includes (but isn’t limited to) the costs of the website like hosting costs, plug ins (often with their own associated costs), storage, and bandwidth charges. It also includes the costs of transactions, including the cost of the merchant account (if you need one) or the fees you’ll pay to integrated or third party transaction processors.
  • Features:How does the software work, how easy is it to add and change inventory, what are the inventory management, transaction processing, and other functionality options? What kind of marketing packages are available, and do they fit your needs? Does the transaction processor accept the payment methods you expect? Does it offer processing in the currencies you need?
  • Flexibility: How quickly and extensively can you change your site? If your business expands, will your software expand with it? If your inventory doubles, is the inventory management system still going to be robust enough to support your business? What about the other interfaces, will they scale with your most optimistic growth scenarios?
  • Usability: How intuitive is the software? Will you or your team spend too much time figuring it out? Can it be configured to meet your unique needs? Where can it be customized and where is it static? Are there any areas that must be customized? If you can customize, is the technology involved accessible to your team? Do they know the languages needed?

There is an almost blinding array of options for taking credit and debit card payment online. A traditional merchant account is among them, but be sure you investigate other payment processing options as well. Always take your chosen eCommerce platform into account while you’re making your choice, as the different platforms often limit the options you have for integrating payment platforms. Many eCommerce platforms won’t allow you to use a merchant account, and some offer only a single payment plan for the platform. As with all business decisions, the options are many and the choice is yours, just be sure you’re doing the research to ensure the choices you make are the best ones for your company.