HOW DOES MERCHANT BUSINESS PAYMENT PROCESSING WORK?
Find out how payment processing helps businesses to thrive in financial technology domain
What is a Merchant Account?
A merchant account is an account set up through a credit processing company or a bank to accept and process charge card orders. Without a merchant account, one cannot accept payments by any of the major credit card brands.
eCommerce payment processing is a modern necessity
People look for fast and easy ways of doing everything, from business communications to online shopping. When you provide consumers with the possibility to buy something with a touch of a finger, your business tremendously benefits in terms of both income and business process efficiency.
Here’s where payment processing industry comes in handy. It doesn’t matter whether you own a brick and mortar store or work via the internet only or whether you’re involved in the hotel business or financial services. You have to understand the how-to’s of contactless payment processing and online payment software if you care about your business.
According to the American Express Digital Payments survey, 71% of merchants agree that their annual online and mobile sales are increasing, and Dun and Bradstreet’s report states that consumers spend 12% to 18% more when using credit cards than when using cash.
How do I get a Merchant Account?
Merchant accounts are obtained via a formal application process through an acquiring financial institution, or the merchant services department of a bank. Think of a merchant account as a form of credit – this means your financial institution will assess your credit to see if your company is worth the risk. Therefore, merchant account providers will usually require copies of financial statements however, if you are a start-up, you will most certainly need an extensive business plan which outlines, your sales venture.
What credit cards can I accept?
eDatapay.com allows you to accept all major card brands including: Visa, MasterCard, American Express, Discover, Diners Club, JCB, as well as all major Charge (Debit) Cards. Contact a eDatapay.com Support Specialist at 888-395-9554 should you wish to discuss which credit cards you want to accept.
What is an Issuer?
The issuing financial institution extends credit to a cardholder through bankcard accounts. The financial institution issues a credit card and bills the cardholder for purchases against the bankcard account. Also referred to as the cardholder’s financial institution.
What is an Acquirer?
An Acquirer is a Visa / MasterCard Affiliated Bank or Bank/Processor alliance that is in the business of processing credit card transactions for businesses and is always Acquiring new merchants.
How About Card Processing Fees?
A merchant account has a variety of fees, some periodic, others charged on a per-item or percentage basis. The majority of the per-item and percentage fees are passed through the merchant account provider to the credit card issuing bank according to a schedule of rates called interchange fees, which are set by Visa and Mastercard.
What is an Interchange Fee?
Each credit card payment qualifies at a certain Interchange rate; Interchange refers to a matrix of discount rates and transaction fees defined by the Card Associations (e.g. Visa and MasterCard). These fees are paid by the payment processor (e.g. eDatapay.com) to the cardholder’s bank to compensate for accepting credit card payments. Factors that influence Interchange fees include type of card presented, business type and how the transaction is performed. Interchange Fees are updated directly by Visa and MasterCard.
What is a “Chargeback”?
Essentially, a chargeback fee occurs when a cardholder disputes the sale with their card issuing bank. This is not to be confused with a refund, which is simply a merchant refunding a transaction. With chargebacks the card issuing bank sends through a request to recover money for their cardholder. The merchant agrees to pay a chargeback fee (usually between $25-$50), for each chargeback that the bank deems valid. The most common complaint for a chargeback is that the cardholder cannot remember the transaction. However, the chargeback ratio is very low for transactions in a face-to-face (POS) environment. See Chargeback Management.
- Merchant account ( MID). This is a bank account that enables online payment processing for internet businesses. You can receive a merchant account via a payment processing company, an independent contractor, or a large bank. Without it, you would have nowhere to keep the money your customers pay you.
- Payment processor ( eDataPay.com). A payment processing company or financial institution handles the transactions between your customers’ banks and your bank. They deal with such questions as credit card validity, available funds, card limits, and so on. One more essential function of the payment processor is security. It’s the responsibility of a payment processor to check whether card information is correct and to protect you from fraudulent activities. They also take care of various errors, accidental transactions, and incorrect charges.
- Payment gateway ( eData Bridge Gateway). This is like an online point of sale. A payment gateway is a mediator between all transactions on your website and the payment processor. It connects your merchant account with credit and debit card issuers like Mastercard and Visa. You need a payment gateway because security measures forbid transferring data directly from bank to bank. So a payment gateway is essential for an internet payment processing system.