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Merchant account

B2C business involving online sales of goods and services, including business structured through non-resident companies, demands using contemporary e-commerce solutions to accept payments. First of all, this is about such a specific sort of banking products as merchant account.

The case is that the money paid by a customer from his bank card do not go directly to seller’s current account, but are credited to a special merchant account – a type of account designed to receive payments made from customers’ bank cards. Only afterwards, provided that certain conditions are met, the money will be credited to the seller company’s bank account.

Merchant accounts can be opened to legal entities only.

Advantages of merchant account

  • Simple and prompt settlements with customers, possibility to sale goods and services via Internet 24 hours a day, 7 days a week;
  • Customers can pay for goods and services on company’s website using bank cards, and the company can easily accept payments from around the world;
  • Customers (buyers) enjoy lower costs of transfers to merchant account than costs of standard bank transfers;
  • Using his personal profile, a holder of merchant account receives all details of the payments made, can control the dynamics of sales and upload statements;
  • Security: providers apply technologies that fully comply with contemporary online payment security requirements (Verified by Visa, MasterCard Secure Code and two-factor authentication) that allow to neutralize fraudulent activities (anti-fraud system);
  • If an acquirer has multicurrency processing facilities, money from a holder’s card may be credited to merchant account without conversion, and therefore, without additional expenses.

How to open a merchant account?

Opening a merchant account in a foreign bank (or payment system) is a complex procedure (sometimes even more complicated than opening a current account), as far as an acquirer bank must understand in details to whose benefit it will withdraw money from customers’ cards, and understand the nature of business of its clients.

This is caused by the fact that (as in the case of other banking services) acquirer bank is concerned about probable risks, considering, in particular, the necessity of massive processing of incoming payments from third parties. Besides this, banks are accountable to their regulator (in regards to compliance with licensing requirements), to their partners – international payment systems (e.g. Visa and MasterCard) and, finally, they take care of their reputation in market.

One of the main risks for acquirer bank in the said context is the risk of excessive chargebacks. To protect against such risks banks use two following methods: a) when opening a merchant account, a client makes one-time insurance deposit for a definite period or for entire period of activity on the account (e.g. 10% of a declared semi-annual or annual turnover); or b) a part of money received to merchant account is “frozen” for a definite period, and only then is transferred to company’s disposal in full.

Chances for successful opening of merchant account increase if:

  • an applicant’s business is publicly known enough, transparent, is not categorized as a high-risk, has positive history in the same or similar market sector (is not a start-up);
  • a company has active high-quality website with the relevant content and exhaustive information for users;
  • a company have already been selling its products through well-known online markets or through its own resource;
  • a company submitted a complete set of due diligence documents (as per the bank’s requirements), including those related to owners of business;
  • a company submitted a detailed business plan;
  • both applicant company and acquirer bank are incorporated in the same country;
  • a company has already been the bank’s customer on e-commerce products.

A website of a company applying for merchant account opening must have SSL certificate, full information on goods and services, contact details of the company, policies of delivery and return of goods, means of communication, customer support service, as well as comply with other requirements (depending on a specific bank in which a merchant account is planned to be opened).

The following online businesses are usually categorized by banks as high-risk (for purposes of opening a merchant account): hosting services, websites with paid content (online cinemas, television), web advertising, gaming and gambling, betting, online dating, marriage agencies, forex, payment systems etc. Applicants with these or similar activities face maximal requirements to due diligence information and documents which are subject to in-depth analysis.

Financial services like payment systems or settlement aggregators must have a relevant license issued by a recognized regulator (e.g. in EU countries), as well as KYC (“know-your-customer”) and AML/CFT (anti-money laundering) internal procedures and regulations.

Activities that most likely will be rejected include sale of copyright items (including software) without proper agreements with owners, ICO and crypto-currencies, crowdfunding, philanthropic projects, electronic wallets, online converters, materials that may be interpreted as propagating violence, ethnic tension, terrorism etc.

After bank’s approval (allocation of merchant account ID), a merchant account is linked-up and integrated into client’s infrastructure, the client gets necessary means to operate the account and can start accepting card payments through his company’s website.

We offer consultations on opening a merchant account in a foreign bank, assistance in choosing a relevant bank and processing company for your activity, as well as support of application for opening a merchant account.

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