Merchant account
What is a Merchant Account?
A merchant account is a type of business bank account that allows a company to accept and process card payments, including both credit and debit cards. When a customer completes a transaction, the payment is first held in the merchant account before being transferred to the business’s regular bank account. This process is essential for any business wanting to offer secure, reliable payment options to its customers, particularly in eCommerce, where electronic payments are the norm.
To open a merchant account, a business typically enters into an agreement with a merchant acquiring bank, which outlines the terms for handling payments. This includes transaction fees, settlement times, processing networks used, and any monthly or service charges.
What are the different types of merchant account providers?
There are two main options when it comes to accepting payments online:
- Traditional merchant accounts: These accounts are set up directly through an acquiring bank or specialist payment processor. They often offer more control, flexibility, and room for negotiation on fees, but the setup process can be more complex and may involve stricter eligibility requirements.
- Payment service providers (PSPs): PSPs like Stripe, PayPal, Square or Braintree simplify the process by letting businesses accept card payments without setting up a full merchant account. Funds are processed through the PSP’s system, then transferred to the business’s bank account. This option is often easier and faster to set up, making it ideal for new or small businesses.
However, PSPs may come with fixed fee structures, fewer options for customisation, and limitations on scaling, especially for high-volume or high-risk industries. Choosing the right payment setup depends on your business size, goals, and technical needs. Whether opting for a dedicated merchant account or a PSP, the key is to ensure your payment system is secure, user-friendly and transparent, helping build trust with customers while keeping transaction costs manageable.
