Merchant banking services

There are two ways to accept online credit card payments though an ecommerce website, one is using a secondary ecommerce provider such as PayPal which will process your credit card transactions though their merchant account for a fee. The other is to accept credit cards through your own merchant account. For this you will need a merchant account and the services of a payment processing company, such as Protx.

Merchant accounts usually offer a better deal and importantly using a reputable processing company means that all credit card transactions passed through the 3D secure system, the advantages of this are that Visa and MasterCard, the two largest credit card companies in the world, will accept full liability of any fraudulent purchases made against you the merchant.

What is a merchant account?

Merchant accounts are much like bank accounts, provided by either banks or financial institutions and are specifically designed to collect the funds from the different credit card companies.

There are different types of merchant accounts, there is the CP (card holder present) merchant account, which is for credit card payments made when the cardholder has to be present during the transaction. The security measures here rely on the cardholder entering their personal identification number (PIN) at the point of sale.

The other type is a CNP (card holder not present) merchant account, which is for transactions carried out when the cardholder is not present at the time of the transaction such us payments made over the phone or ecommerce transactions.

CNP merchant accounts

There are a host of merchant account providers to choose from but qualifying for a CNP merchant account can sometimes be difficult. Most providers look to see a trading history, so if you’re starting a new business, then merchant accounts are commonly unobtainable.

A way to obtain a merchant account when you are a new business or considered high risk is to offer a bond.

What is a bond?

A bond is in effect a pot of money that merchant banks hold on to indefinitely. The merchant provider might calculate the value of the bond. based on the level of risk, so for example they might wish to see your terms and conditions, including your returns policy (a basic copy of these is provided as part of our websites packages should you wish to use them) they are likely to want to know typical transaction value and the projected volume of sales.

It is common for the merchant provider to obtain the bond from the proceeds of the credit card payments until the value of the transactions has reach the bond amount, once the bond has been met, the 'overflow' will be paid to you.

The biggest downside to using this type of security is that it can have a significant effect on your liquidity (cash flow) because you may be sending out and buying new goods, before you receive any revenue

Once you have qualified for a merchant account the merchant provider will issue you with a set of rates, these typically vary dependent on the type of card used, the following format is a typical example:

Standard processing rates example*

Negotiate

As with most elements of business, these rates and the bonds are negotiable, but it is up to your own negotiating skills to secure the best rates, either way, the longer you prove your trading history the more you have to negotiate with.