High Risk Merchant Account: A Business Necessity

A merchant account is issued by independent financial institutions on behalf of issuing banks to businesses for the purpose of allowing credit and debit card payments.

Most consumers currently use debit and credit cards to make the majority of their purchases.  As a result, there is a concurrent expectation among consumers that the businesses they frequent will be in the position to accept their preferred method of payment.  A merchant account addresses this issue.  A merchant account is the means in which a business can facilitate credit and debit card transactions to the satisfaction of their customers.

A merchant account is a line of credit that is issued to a business by an acquiring bank or other financial institution that allows the business in question to accept payment for the purchase of goods and/or services by credit or debit cards.  A merchant account, as such, is not a typical banking account.  In fact, the acquiring bank generally acts as an intermediary between the business and the issuing bank.  An issuing bank is the financial institution that has the primary obligation for any debt incurred from the line of credit (i.e. credit and debit cards) that it extends.

The way it works is that the acquiring bank transacts with the issuing bank on behalf of a business.  The acquiring bank pays the merchant the remaining balance of a transaction from a consumer purchase using a credit or debit card, minus the acquiring banks fees for the merchant account service.  Essentially, the acquiring bank is the middle man in the process.  However, it is the acquiring bank that generally is most accessible to the business that is seeking a merchant account, as this may be the financial institution that an establishment usually banks with.

In fact, in terms of marketing, this is one of the means in which a merchant account is provided to a business.  Usually, the bank that is a business’s primary financial services provider will initiate and subsequently setup a merchant account.  Alternatively, a representative of a bank or other financial institution that provide merchant account services will canvas and solicit their services to targeted businesses.

It should be noted that a merchant account is not always issued or otherwise provided by an actual bank.  There are other financial institutions that can provide a business with a merchant account.  An Independent Selling Organization and/or Member Service Provider can also be registered with Visa or Mastercard.  However, these other financial agencies are required to be sponsored by a member bank; who will in turn, verify that the agency in question is financially stable.  A member bank is one in that has an established relationship with an issuing institution.

While the process may seem somewhat complex, the necessity of the product in question is undeniable.  A merchant account allows businesses the flexibility to provide a wider and preferred means of payment for its products and/or services.  As consumers rely more on credit and debit cards to enact financial transactions, it is incumbent upon businesses to accommodate this trend.  As a result, many banks and other financial institutions provide businesses with a merchant account to accomplish this.   A merchant account is a definite business necessity in the 21st century.

Contact one of our helpful account representatives to assist you in the setup of a high risk merchant account or offshore merchant account for a high risk merchant.