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Merchant accounts: packaged solutions for the new generation of commerce

For many businesses, the traditional bank is the first-stop shop for anything related to payment processing. All major financial institutions have therefore been proposing packaged solutions to allow their business clients to handle credit card transactions.

Although their many features and benefits come at a price, it is important to understand the possible operational frameworks of a merchant account to consider which contract is better for a prospective business customer.


 Merchant account


Features and benefits of a merchant account

Merchant accounts are designed as packages which include several features and benefits.


1) PDQ card payments handling

The main reason why business customers choose such accounts is because they allow credit card payments to be processed. The bank will typically provide:

• The lease of a PDQ terminal,

• PDQ integration within the POS if needed,

• Handling of foreign currency account holder payments,

• Maintenance and upgrades to this hardware,

• A separate account to immediately process credit or debit card payments - and transfer the funds to the business account about 2 or 3 days later.


2) Online or remote payment processing

When a business can handle in-store credit card payments, accepting credit card payments online or remotely is just a short step away.

• Payments made over the phone (“cardholder not present”) can be processed by entering relevant data on the PDQ terminal directly,

Online payments will be possible as soon as a payment gateway, provided by the bank and linked with the Merchant Identification Number, has been installed on the e-commerce website.


3) Payment security

It is important to note that transaction security, as long as the installation has been made by the book on the merchant side, when a merchant account is subscribed, is handled by the bank and its partners. Both the merchant and the end-customer will be indemnified by the bank in most fraud cases.


4) Savings

While such accounts may seem costly, one has to also consider the savings induced by credit card operations, as banks will also charge significant fees when other means of payment are remitted:

• large cash deposits,

• cheques,

• wire transfers.


Operational framework

Several organizations may be at play in a merchant account


1) Payment services providers

Payment services providers or PSPs actually checks, authorizes and proceeds debit and credit card payments, from a PDQ terminal, over the phone or online, before sending a confirmation. Major PSPs in the UK include:

• Ingenico,

• Webmerchant,

• PaymentSense,

• Streamline.


2) Acquiring banks and issuing banks

The bank which maintains the bank account is called within the card payment framework an acquiring bank, as they are in touch with the business customer. The issuing bank, in turn, is the financial institution which issues the credit card on behalf of Visa, Mastercard etc.


3) Independent sales organizations (ISOs)

The Credit Card Associations of Visa and MasterCard defined Independent Sales organizations which are not members of their association and networks, but has a bank card relationship with a bank which is. Although they sell merchant accounts, the actual handling of the money is done by an acquiring bank related to this ISO and issuing bank.



Merchant accounts include several series of costs


1) Basic costs of a merchant account

Levied costs for the most common options within a merchant account include:

• Monthly fees, with both a flat base fee and a statement fee based on transaction volume,

• Additional per-transaction fees,

• Credit card terminal leasing fees.


2) Possible other fees

Some banks may charge the following other fees:

• Set up fee,

• Gateway fee for e-commerce transactions,

• Transmission fees when payment data is uploaded to the bank’s servers.


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