In the fastest growing e commerce payment system in India and for that matter in the world, the question arises that how come the cashless money works. How is it that the transactions of huge amount like millions are made via electronic payment system?
What is A Merchant Account?
A merchant account as the name says itself is used by the merchants. It is a type of a bank account that allows business to accept payments by debit or credit cards. Now we see most of the shopping stores using POS for billing at the time of payment. Not everyone can use them. A merchant account is an agreement between a retailer, a merchant bank and the payment processor for the settlement of transactions through credit or debit cards.
When a customer pays through credit or debit card, the funds are first deposited into the merchant account and then from there to business bank account. Today even the shopkeepers have merchant account in order to make transfers quick and easy.
These transfers from merchant account to the bank account are done on a daily or at time weekly basis too.
For e commerce business the merchant needs to have an internet merchant account.
How can you make a Merchant Account?
There is yet another business of opening merchant account because it is quite competitive. First it is seen what the type of business is before approving the business for merchant account. Vendors use proper criteria to determine whether to open merchant account or not.
Factors for determining to approve for merchant account are:
- What is the previous record of business (bankruptcies, defaults etc.)
- How high or low the risk in fraud of credit card or returns in the business
- What is the time length in business
- Whether the applicant has had merchant account previously or not
Here it is required to mention that the higher risk doesn’t mean less chance for merchant account, but yes it demands higher transaction or other fees to compensate the risk. Later on if the business is well established this fee can be renegotiated later.
Internet Merchant Account
As it is clear now that for the use of debit and credit card manually at billing counter it requires having a merchant account of the business. However, what when online payments are done via e payment system?
For accepting credit cards online the merchant needs to have an internet merchant account irrespective of whether the applicant has a merchant account or not. The fees for internet merchant account are comparatively higher than the merchant account because the risk of online fraud is higher.
For accepting credit card payments online you also got to have a payment gateway which authenticates the submitted credit card information.
What are the fees for merchant account?
- Application fee
- Set up fee
- Monthly fee
- Discount rate
- Per transaction fee
- Cross border fee
- Rental fee for a credit card terminal
