Why do you need a Merchant Account?

According to the reports, 60 % of the people above 18 years of age are using credit cards. So the point is if you do not have a merchant account, you are not giving a right to make payment via credit card hence losing a large number of prospective customers. Whether you are a start-up or expanding the business online, you need to have a merchant account for accepting the credit card payments.

Before getting themerchant account for e-commerce, merchants feel that the cost of having the merchant account will be high as compared to increase in sales. It does not cost much. The merchant account provider company charge very minimum percentage on each transaction. And suppose the volume of your business is high then also you can get the account at competitive rates. In case of Startup Company or small business, it might take some time to maintain the minimum cost expense.

When you set up the e-commerce website, you also set up a payment gateway to receive the payments. For payment gateway services it is mandatory to have the merchant account. A merchant account can be optional depending on the type of business and banking set up.

Relationship between payment gateway and merchant account

In the real-time situation, through payment gateway customer makes payment via services like CCAvenue, PayPal or any other. The customer initiates the payment but merchant does not receive payment immediately may be on a scheduled time later or maybe weekly. In some cases, merchants also get paid immediately. Both scenarios are different. A merchant account is a bank account which allows the payment via debit card or credit card.

Through payment gateway, you process the credit card transactions. When the customer buys online via credit card, the card details are sent to the payment gateway to process the payment, after the approval of the payment, gateway transfer the money to a merchant account. So, merchant account temporarily holds the money and after some time transfer to the merchant’s bank account.

Every payment gateway is associated with the merchant account. There are aggregate merchant accounts in which you are not required to set up the merchant account separately for e.g. PayPal such accounts are not under the control of merchants. There are other merchant accounts like dedicated merchant account where you have to set up the merchant account like CCAvenue.

So, in our opinion for startups, you can use the aggregate merchant account as they are not that complicated and there is no maintenance fee. Generally, the flat-rate system is followed. It is very easy to set up, you just need to sign up and start receiving payments in second. But they are bit expensive. If you are running a large business there is the total need to open the merchant account. The fees charged will be low due to the volume of the business. In both the cases, payment cannot be received without the merchant account.