How does a Merchant Account work?

Consumer demands are ever-changing. If you want to continue running your business successfully you need to keep up with these changing consumer demands. These demands have a very broad scope. There should be several variations of a particular product/service offering. Along with that multiple payment options too. While you take care of curating the best offering for your consumers, banks help you create a secure yet flexible payment system.

Merchant Account is a popular financial instrument that allows you to process electronic payments made through Debit or Credit Cards. You can open such an account with any leading bank. Consider the account fees and other facilities when choosing a bank for account opening. Following is a detailed description of how the account works and its role in making your business operations simpler and hassle-free.

Step 1 – card swiped to payment terminals

Once the consumer got all the products, they need they will proceed to make the payment. They will use either their Debit or Credit card to pay. Now depending on the card the consumer will either swipe or tap it on the card machine.

Step 2 – The payment request gets forwarded

Within the same second of swiping or taping the card, your Merchant Account provider will forward the details of the payment request to the card issuing bank. As the bank receives the payment request, they will either accept or reject it. Either way, the data is sent back to your payment terminal. If the payment is accepted, you will see a green tick on your payment terminal screen.

At the same moment, the consumer will receive an SMS of the successful debit of funds from their account. If the payment is rejected, your payment terminal screen will show a payment fail message. The consumer will receive an SMS about the payment request being denied. This could happen either due to insufficient account balance or the wrong PIN being entered.

Step 3 – obtaining the receipt

Once the entire transaction is complete the payment terminal will generate a receipt. Typically, two receipts are generated: one is the merchant copy and the other is the customer copy. You can also check your account statements to see the payments you have received. The account statements are readily available on the bank’s internet banking portal and mobile banking app.

Having a Merchant Account makes doing business easy. You can accept payment of all types from your customers. This has a positive impact on your revenue. The customer doesn’t have to think twice before making a purchase. They know they can finance payments using their card. The account is useful to secure your earnings. Moreover, it ensures all your earnings are in one place and instantly accessible.

Arjit Chalmela is a finance student who loves to write in his free time. He has spent considerable time researching the foreign exchange rate.