What is a merchant account?

For a business to grow and bring in more revenue in today's world, it needs to accept and process payments coming from electronic payment cards. To do this, you need to open a merchant account, which is one of the types of corporate bank accounts. Opening such an account involves collaboration with an acquiring bank, responsible for facilitating online payment transactions. PayDo offers services for opening a business merchant account, providing access to a European account with a user-friendly API (via Hosted page or Server to Server integration).

For online businesses, having a merchant account and understanding the concept of merchant payments is crucial, despite the additional costs. However, some organizations prefer to avoid this and accept only cash deposits using a standard business deposit account.

How merchant accounts work

Most merchants are well aware of the significance of having a merchant account for the establishment of their business. The market offers a wide range of service providers, with a primary focus on transaction costs, which often influence the selection process. Acquiring banks serve as providers of merchant accounts, simplifying electronic payments for businesses.

Businesses that do not want to accept electronic payments can work with a basic bank deposit account. However, for online organizations electronic payments and therefore merchant accounts are the only option and a necessity.

Merchant acquiring

Once a seller decides to offer online payment options to buyers, they should immediately contact the acquiring bank to open their merchant account. These banks ensure the efficient processing of electronic payments.

The account is opened through the acquiring bank. The seller is required to obtain a detailed account agreement from the bank, which outlines the terms and conditions of the agreement. These conditions may include payment transfer costs, the bank's card processing and network, regular service fees, and commission structures.

Merchant account processing

The process of merchant account processing begins with the company sending card messages to the acquiring bank through an electronic terminal. The next step is establishing connections between the proprietary card processor, the acquiring merchant bank and the card issuer. The latter authenticates the transaction using assertions such as verifying the availability of necessary funds, security, and so on. After authentication through the network processor, the acquiring bank receives confirmation. Upon approval from the acquiring bank, funds are transferred to the seller's account.

Despite the multiple stages of communication involved in merchant card processing, the entire process typically takes only a few minutes. However, it is important to note that there is a fee for this process, which is deducted from the merchant's account. The acquiring bank and the network processor both charge a commission for each transaction. Commission fees usually range from 0.5% to 5.0% of the payment amount. If you want to get a clearer picture of merchant card fees, you'll find it helpful to learn more about PayDo's services. 

In addition to single transaction fees, there are also regular monthly or extraordinary fees for any other services or activities. The first thing you may encounter is the one-time setup fee for creating a new merchant account. Sellers are also required to pay a monthly fee to the acquiring bank to cover any potential risks associated with electronic payments during transactions.

The commission rates vary depending on the service provider. By using a PayDo merchant account, you can be assured that you will not overpay for commissions. However, if you opt for other service providers, it is important to carefully review your contract to avoid being subjected to high fees.