Today, many companies whose main activity is concentrated in the online segment have a merchant account, additionaly to the regular bank account. What is a merchant account, what are its features, why is it convenient, what might be the risks, and basically why there a need for it? In today's review, we give the answer to all these questions.
Its features and varieties
The word “merchants” is probably familiar to many of those, who planned to do business in one or another way, but so far have not yet decided to complete serious actions. This term means a specialized account activated by the company, which allows you to accept incoming payments from customers of the online service, coming from debit or credit cards, as well as from bank accounts. Such payment system best suits the websites specialized in electronic commerce in all its forms, as well as for resources that provide gambling services.
By using a merchant account, any visitor of the site gets the opportunity to make a deposit for playing slot machines, roulette (read more about odds for roulette game), poker, or blackjack using a common Visa/MasterCard plastic bank card. The system also allows to accept payments via e-mail and POS terminals, where the buyer needs to fill out the form by entering the card number and specifying the identity information of the merchant account.
At the same time, the operation is not carried out instantly – before being debited from the buyer's account, the funds go through a chain that consists of the following actions:
- the client applies to the bank that issued the card by sending a request to transfer the money from the account;
- the bank, by using the processing system, transfers the funds to the merchant account of the gambling service;
- the processing operator holds (though it depends on the specificities of the agreement, in some cases there may be no hold) a commission, transfers the money to the bank account of the online casino.
Thus, in this case, the key role is assigned to the acquiring bank, which determines the speed of processing the request and transferring funds to the merchant account. In real world, modern systems allow you to process up to a thousand transfer requests per minute.
Nowadays, there are two most relevant types of merchant accounts:
- For online casinos that have not started working actively, have their zero balance account being registered. None of the bank cards is attached to it. This is the most common format, similar in its essence to any payment system used on the network.
- The account, similar to the one set up for land-based businesses (which use terminals for accepting payments) is used for the live gambling services with a valid database.
In addition, during the registration process the risks evaluation of using the merchant account system takes place – its level is determined according to the specifics of the online business. The main criterion is the potential volume of charge backs, which have a significant impact on the entire processing chain.
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The difference between a merchant account and a bank account
The main difference between these systems is the absence of time limits for making transfers. The merchant account allows carrying out transactions around the clock without waiting for bank employees to start working. It is also worth noting that the absence of strict requirements regarding the documentation of transactions, currency control, as well as strict procedures that banks often abuse. In addition, opening a merchant account in the offshore zone allows you to take advantage of the preferential tax regime.
The opening procedure will nevertheless require the preparation of a documents package, as well as the successful completion of a mandatory identity verification procedure. Banking organizations, usually have rather standard requirements for potential customers, such as:
- availability of a registered legal entity;
- placement of the service on an official paid hosting with at least a second-level domain;
- utilization of secure protocols for making payments;
- integrated registration system, which reduces the likelihood of access to third party accounts;
- availability of a valid account with a licensed bank that is part of the processing structure.
The list of certified copies that the bank will require to register a new merchant account includes statutory and corporate documents, certificates and licenses, owners’ personal identification cards, as well as much more – the full list is best clarified on the website of the Wellcoinpay payment aggregator, or obtained from the manager on the site.
The application review process takes several business days, after which, in case of approval, the applicant receives a letter with the contract, which records the company ID, as well as encryption keys. Signing documents means that you can proceed with the final stage – the service integration to a digital platform.
How to choose an acquiring bank
When selecting a bank, it is recommended to focus on several criteria, the priority of which is determined by the potential owner of the merchant account. These include:
- availability of a license for processing activities;
- possibility to process a large volume of applications;
- absence of restrictions on the daily number of operations performed;
- the degree of difficulty in filling out an application for opening an account.
In most of the cases, banks are looking for the ways of minimizing potential risks. Here are the most common issues when using processing:
- unauthorized money withdrawal by the account holder from a client card;
- the risk of claims for the return of previously transferred funds.
In the latter case, the liability, according to the terms of the contract, is most likely to be incurred by the owner of the merchant account, who will be obliged to pay a fine to the bank and compensate the amount of the charge back with all related operating expenses.
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