Why Does a Business Require a Merchant Account? What is a Merchant Account? Transaction Processing Methods What Are Dedicated Merchant Accounts? What is an Aggregated Merchant Account? Merchant Account Providers UK List of acquiring banks Acquiring Banks - Not on the high street Payment Gateway Providers in the UK Accepting Card Payments
If a business wishes to accept card payments they will need a merchant account, without this type of bank account card payments will not be able to be processed. There were 14.8 billion card transactions in 2016, equivalent to 40.5 million transactions a day or 469 a second, data from The UK Cards Association shows. This is set to grow over the next decade with more cards coming into circulation in the UK. In this article, we will explain what merchant account/ services are and how they work within the payment ecosystem.
A merchant account is a type of bank account that is needed in order for businesses to accept payments by credit and debit card. The merchant account will hold the money before it is transferred to your business account. Typically, a merchant account can be provided as part of a Payment Service Provider (PSP) package or through an acquiring bank. When you obtain a merchant account you’ll be provided with a merchant account ID.
What is a merchant account ID? This is a unique code that a business is given before they start accepting card payments. The ID specifies a merchant account when a transaction is made.
A merchant account ensures that transactions are made safely, providing security to both the business and the customer. The merchant account also checks that the customer has sufficient funds before authorising the transaction. After a transaction is approved and processed, the payment will go to your merchant account and will be stored for a fixed period, they will then be transferred into your business account (the fixed period is usually between a couple of days and 1 week).
In order for the transaction to be processed and the funds to be released to your merchant account there are three key things that are needed. These are:
1) Merchant Account
2) Payment Gateway
3) Physical Card Terminal or Online Shopping Cart
The merchant account receives the funds, the payment gateway ensures the card information is safely transmitted online, checks for fraud, confirms there are enough funds and debits the account of the customer. The card terminal is the final piece of the puzzle and is needed in order to process payments. You will need certain software to obtain the relevant card information, the software used depends on the method of transaction; if you are an online store then you will need to use shopping cart software, if you are taking a face-to-face payment you will need a PDQ machine and if you are taking phone payment you will need to use a virtual terminal.
You will usually get a merchant account and a payment gateway together as a package but you will need to invest in a card terminal separately.
This type of merchant account is one that is exclusive to your business, this means the account is set up to be solely used for your business. Having a dedicated merchant account gives you more control over the finances and you will often be able to customise the sales rates by looking at the number of products and the type of products that you sell.
In order to get a dedicated merchant account, your business will need undergo a stringent application process. This process includes a thorough credit check and you will be required to give copies of your business information and bank records to the merchant acquiring bank. Due to this, it can be a time-consuming process to apply for one of these accounts.
An aggregated merchant account is different to a dedicated merchant account as your funds will be stored with the funds of several other companies rather than being solely for your business.
An aggregated account is easier to get and the process is a much faster one, you will be required to provide a certain amount of information about your business but not as much as if you were applying for a dedicated merchant account. Although quicker to obtain, an aggregated account will not give you much control over the sales rate and the amount of time it takes for the money to be processed and sent to your business account.
What is a merchant account provider?
A merchant account provider is a bank or financial institution that offers businesses merchant account services. The services offered include solutions for accepting card payments for face-to-face transactions and online/ e-commerce transactions.
There are many merchant acquiring banks and payment processing companies within the UK, below are some of the top options.
The banks listed below all offer merchant accounts, as you can see some of them partner with other provides in order to deliver the service. All of the banks below can be found throughout UK high streets.
- Bank of Ireland (partnered with Elavon)
- Barclays (partnered with Barclaycard Merchant Service)
- Clydesdale Bank
- HSBC (partnered with Global Payments)
- NatWest (partnered with WorldPay)
- Royal Bank of Scotland (partnered with WorldPay)
- Santander (partnered with Elavon)
- The Cooperative Bank
- Yorkshire Bank
There are also acquiring banks that offer merchant accounts but cannot be found on the high street, the most popular options are:
There are also several payment gateway providers, although most of the time you will be able to acquire a merchant account and payment gateway together as a package. The most popular payment gateway providers include:
Ultimately, if you want your business to hold its own against competitors you’ll need to be able to accept multiple payment types. Cash is becoming less and less frequently used while card transactions continue to rise. A merchant account allows you to accept and process card payments and there are many merchant account providers out there to compare and choose from.