An e-commerce merchant account is a type of bank account which is created for the purpose of processing credit card payments over the web. It acts as a repository for funds which have been made by credit cards. E-commerce merchant accounts will hold the funds for a specific period of time, after which they will be placed in the seller’s checking account. This process will typically take a couple of days. Any seller who wants to accept credit card payments online must have either a merchant account or an aggregator.
E-commerce Merchant Account vs. Aggregator
Traditional merchant accounts can be tedious and costly to open. The merchant must apply for them, and whether or not they are approved will depend on many factors, including the nature of their business. This is why many businesses, particularly smaller ones, choose to use aggregators. An aggregator is a company that has its own merchant account, and will use this account to facilitate transactions for businesses that do not have them. PayPal is an example of an aggregator, and is one of the biggest on the web.
Many businesses prefer aggregators because they are simple and cost effective. An account can be opened quickly, and the aggregator will only require the bank account or credit card of the business to be verified. Many aggregators do not require an application process or fee, and will instead earn their profits whenever the merchant sells a product, by taking a small percentage of each transaction that is processed through their service. Aggregators are the easiest way to accept credit card payments online; however, they are not as flexible as actual merchant accounts, which are best for larger companies.
Getting approved for a E-commerce Merchant Account
To get approval for a merchant account, you will need to show your financial statements. This will ensure that you get the best terms possible. Many businesses are uncomfortable revealing their financial statements due to privacy concerns. However, underwriters prefer seeing these statements as it allows them to determine whether the company is financially solvent. Startup companies will often lack financial statements, which will make it difficult for them to get approved.
Underwriters also like merchants who have a good processing history. This means that the merchant trades a lot of money with minimal chargebacks. When applying for e-commerce merchants account it is important to make sure that your business can provide a minimum of three months’ worth of processing statements. Merchants who trade at a high volume or who sell high risk products should consider providing a years’ worth of processing statements, as this will reassure the underwriter that your business is reliable. While the process can be tedious, it is worth it because it reduces the necessity for security reserves.
A processing statement should always show the amount of transactions you’ve received, as well as the volume and the number of refunds you’ve had. Additional items that should be present on the statement include the volume of refunds, the amount of chargebacks and the complete chargeback volume.