If you are looking to enter the league of businesses in the eCommerce world and offer your goods or services for customers online, then you must have a means to accept credit card payments. For this, you will need an online merchant account.
An online merchant account (or internet merchant account) is a must-have for all businesses that take payment online. You will need to understand how this type of merchant account works and how it interacts with other elements of online credit card processing (payment processors, gateways, etc.) to enable you to receive payments for the goods and services you sell
What Is A Merchant Account?
Generally, a merchant account is a type of business account that makes it possible to receive payments made by your customers when they use credit or debit cards to make payments for goods or services they purchase from you. The merchant account is operated by a merchant account provider that verifies payment in conjunction with the credit card company and issuing bank and transfers the funds from authorized transactions into this special business account for you.
But why is a special business account even needed for credit card payments in the first place?
You see, credit card processing is a complicated process that involves lots of players. But the two major parties in every credit card transaction is the cardholder’s bank (also known as the issuing bank) and the acquiring bank (your own bank). When a cardholder makes a payment with their credit card, the request is routed to the acquiring bank that sends a request to the issuing bank. The bank verifies if the customer has enough funds to make the payment and the authenticity of the transaction. Once the transaction has been authorized, the bank then transfers the funds into the merchant account which serves as a sort of temporary holding space for the funds.
So how is this different from an online merchant account?
An online merchant account is a unique type of merchant account whose specific purpose is for processing credit card payments made over the internet. Unlike traditional merchant accounts that are used for in-person transactions made with tools such as Point Of Sales terminals, online merchant accounts are used for tools and services sold in the eCommerce space.
To take payments online, there are a lot of components that drive the system. This includes an online store or shopping cart and a payment gateway. An online merchant account is a final stop for your funds from online payments before it is deposited into your regular business account. After all the approval has been granted for an online purchase by the issuing bank, the payment processor makes the payment into your internet merchant account temporarily before it is eventually transferred into your regular business account.
In addition to serving as a temporary holding for your funds, some internet merchant account providers also provide all the infrastructure needed to receive online payments such as shopping carts and payment gateways all for a small setup fee and a small percentage of every transaction completed.
If you intend to sell your goods or services online, then you will most definitely need to get an online merchant account. There are different providers to choose from all offering different terms and services but at the very least, you should ensure that your online merchant account to be compatible with the other infrastructure that makes online payment processing possible to ensure smooth and seamless transactions.