Merchant Account

A merchant account is a business bank account that is used by businesses to accept credit card payments in exchange for their products and services. A merchant account acts as an agreement between the merchant and an acquiring bank where the merchant agrees to abide by the operating regulations that are established by banks like MasterCard, Visa, etc. It is important to maintain your account within the state/federal regulations and this is administered by your merchant service provider(MSP). It also helps you to provide customer support and protect against fraud. Since a merchant account enables you to accept payments in multiple ways, it can open up new opportunities for your business and add value to it.

The working of MSP

You can get a clear understanding of how your MSP works with this 6 step process of a credit card transaction-

Step 1: The customer decides to make a purchase or donation with their credit card.

Step 2: The credit card is either swiped in person or entered through an online payment page.

Step 3: The customer’s card-issuing bank is contacted for a live authorization. Once authorized, the merchant completes the sale and the customer receives their goods or a confirmation of their order.

Step 4: The MSP then pays the customer’s card-issuing bank for the value of the transaction, in addition to all interchange fees associated with the transaction.

Step 5: The MSP deposits the value of the transaction into the merchant’s bank account within 2 business days.

Step 6: The merchant is billed for the previous month’s fees and sent a statement summarizing all transactions.

Benefits of a Merchant Account

1. Accept payment through multiple options- Nowadays, most people prefer to shop with their credit or debit cards in hand. With a merchant account, you have the ability to accept payment through cards which can ensure a better customer retention and improve cash flow.
   

2. Increase sales- If you offer multiple payment options to the customers, then the checkout process turns out to be convenient for them and they become your repeat buyers, thus increasing the overall sales.
   

3. Better money management- Counting cash can be cumbersome at times. Therefore, switching to online payment options ensures better money management that is fast and efficient.
   

4. Customer convenience- Customers tend to feel happy when they can shop in whatever they want with ease. Not having their preferred mode of payment can be a bummer, so electronic payment options give them the flexibility of payment in different ways.