Merchant Account

A merchant account is a bank account that allows businesses to accept and process electronic payments in multiple ways, typically credit and debit card transactions. Companies must partner their merchant accounts with a merchant acquiring bank to process and facilitate credit and debit card transactions on their behalf.

When a customer pays for a product or service online with a credit or debit card, the amount is first deposited into the merchant account. From there, it will eventually be transferred to the business bank account.

Types of merchant accounts

Retail merchant account (Traditional merchant account): These accounts are best suited for retailers who conduct business with customers face-to-face and own a retail store in at least one or more stationary locations. The transactions through these accounts are processed through a point-of-sale terminal (PoS).

MOTO (Mail or Telephone order): MOTO merchant accounts are best suited for businesses that conduct transactions over the phone or by mail and manually key-enter transactions.

eCommerce merchants account (Website order processing): These accounts are best suited for retailers who conduct business online and collect and process payments in real-time using a payment gateway that’s embedded into the website’s shopping cart.

Merchant aggregator: These accounts are typically used by merchants who couldn’t open a merchant account. A merchant aggregator is a third-party responsible for processing a merchant’s online transactions. They process payments from customers to merchants via credit card, debit card, bank transfer, e-wallet, or stored value account, without going through a merchant bank.

High-risk merchant account: These accounts are used by merchants who have been labeled as “high-risk” by banks due to a high volume of chargebacks, fraud history, bad CIBIL score, and financial instability. The best example would be the tobacco and firearm businesses.

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