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Merchant Account Providers are becoming more and more known in today's fast paced Internet driven society. But not everyone always takes the time to carefully understand all the components behind merchant account providers and how they work. Let's look at a simple overview of a standard ecommerce website selling 1-1,000,000 different products and/or services.
First you have the website: This is where the products and/or services are shown for public viewing and where they can be purchased. When choosing a merchant account provider it is necessary to ensure that the service provider will integrate with your website and your payment gateway (see below). Most service providers will provide you with details on how to do this.
Second you have the Payment Gateway: This is simply how the customer (or the vendor on the customer's behalf) provides the payment information that is then relayed to the merchant account provider. Basically, it is programming code that allows for the collection and transmission of the information (credit card number, cvv code, expiration date, amount of transaction, etc…) to the merchant account provider.
Lastly, the Merchant Account Provider: A merchant account is no more than an account with a bank or financial institution that allows you to accept payments in the form of credit cards. In most cases, these are not the neighborhood banks but instead are large financial institutions or banks that specialize in dealing with these types of transactions. The payment gateway provides for the transmission of all the necessary information to the merchant account provider who then handles the actual transaction on behalf of the website and the person buying the product and/or service. The merchant account provider then ensures that the appropriate amount of money (less any fees and costs they are due) is deposited into the designated account on behalf of the website (and charges the purchaser's credit card account).
As you can tell from this quick overview, there is an extra hand or two involved with the process for accepting credit cards as a form of payment (crucial to credibility when doing business online). There are generally several things you want to consider when choosing a Merchant Account Provider such as, up-front application fees, on-going fixed fees, fixed transaction fees, rates of discount, termination fees, and of course any other miscellaneous fees. The many varied fees and costs associated with each Merchant Account Provider can total up quickly and eat into the profits, therefore choosing the right Merchant Account Provider is crucial to any online business.
