What is a merchant account and why do I need one?

Oct 2, 2023

In short, a merchant account is a business bank account that allows a company to accept credit card payments. This is essential for companies wanting to evolve beyond cash or check payments to step into the modern age of accepting customer payments. If you have a business account, then you can start your journey by setting up a merchant account for the company. There are different types of merchant accounts, which means there is one out there that best aligns with your business type. These types include:

  • Retail merchant accounts
  • Mobile merchant accounts
  • E-commerce merchant accounts
  • Healthcare merchant accounts

Why do businesses need merchant accounts?

The biggest reason businesses need these types of accounts is to accept card payments. Investing in these accounts can keep customers from turning away from a business simply because they don’t accept their preferred payment method. Here are some of the benefits your company can experience from setting up these accounts:

Expanded payment methods

As briefly mentioned before, merchant accounts let your company expand beyond cash and check payments. This enables the company to accept debit, credit, and mobile wallet payments through a secure and encrypted payment gateway. Accepting multiple payment types can also enhance the customer experience, making for a boost in satisfaction.

Enhanced credibility

People want to trust those they do business with, and this includes companies they purchase goods and services from. Having merchant accounts in place to securely accept different payment options enhances that credibility. The reasoning behind this is due to the secure method of payment. Since transactions are encrypted and communicated directly with the customer’s bank, there is considerably less likelihood of those customers having their banking information stolen.

Improved PCI compliance

Every company that accepts and processes customer card payments has a set of laws and regulations to secure customer data. Since merchant account transactions are secured and encrypted from end to end, your company can rest easy knowing that you and your customer’s data is protected.

Application process overview

Since the application process for getting a merchant account for your business can be quite lengthy, knowing all about the process beforehand can help you collect all the needed documents and details you need. This can help speed up the process and prevent the time-consuming cycle of getting denied and having to restart the process over again. Here’s an overview of the application process:

Register your business

Part of starting your business is registering it. While specific requirements may vary based on your specific business type, registering your business shows you have the necessary permits, licenses, and other information to sell your products or services. During this process, you also will obtain a unique Employer Identification Number (EIN). You’ll need this number to set up your business bank account and pay business taxes. This also helps customers verify your company as an official business.

Open a business bank account

Speaking of a business bank account, this is essential to setting up your merchant account. Why open a bank account when a merchant account is what you use to receive customer transactions? Well, merchant accounts are only there to receive those transactions and are unable to provide the host of other services that business bank accounts can. When searching for a business bank account provider, comparing fees, online banking options, and customer support ratings can help you narrow down your list to find the provider that will work best for your company.

Do your research

After setting up your business bank account, you’re ready to find your merchant account provider. Not all merchant account providers are the same, and some specialize in industries like insurance payments and healthcare services. To find a quality merchant account, here are some things to consider:

  • Fees
  • Processing time
  • Customer support
  • Security features
  • Integration capabilities
  • Reputation Scalability

Fill out an application

While each merchant account provider might have a slightly different list of required documents, you can count on a few to make their way to application requirements no matter the provider. This includes your company name, your company’s tax identification number (that EIN mentioned earlier), and some basic contact information. Some providers also ask questions to gather basic details about how you intend to use the merchant account and what industry the company is in, which can help them tailor-make a merchant account program that best fits your company’s needs.

Submit supporting documentation

Along with your application, merchant account providers also have a list of supporting documents they need to start the underwriting and approval process. Business registration documents, bank statements, and tax returns—if you have them—all help a merchant account vendor analyze risk and make a decision on whether to approve your application.

After submitting these documents, your application goes into an underwriting and approval process that can take several days to several weeks. Because the process can be so lengthy, it’s important to get everything right the first time. Ensure to check all your documentation thoroughly beforehand to catch any errors or even weed out missing documentation. Checking your application regularly also lets you respond to any additional information requests or questions quickly, which can help speed up the process.

Set up and test your system

Once you get your approval notification, it’s time to set up and test your account. Setting up your account means establishing and testing the tools and services you need to run your business. This can vary based on whether you’re a point-of-sale retail store or a healthcare provider accepting online payments. No matter what you use, test the system before pushing it to your customers. This helps you find any problems before you start, which can improve customer satisfaction as soon as you roll this payment system out.

Or instead of all that you could leave it up to the Geniuses

If you’re a healthcare, benefits, or insurance company, you can trust Genius Avenue with all your sub-merchant account needs. With the expertise you can count on and flexible sub-merchant account programs you need, you can count on our teams of experts to create an account to meet your exact needs.

Interested? Contact us to get in touch!

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