A merchant account is what allows companies to take payment cards (credit, debit, gift, rewards, etc.) from their customers. Merchant accounts are opened and established in two major ways. The first way is when a merchant is in direct contact with a credit card processing firm or its sponsoring financial institution, and the second way is when an authorized agent for the institution originates the account and shepherds it through the application process.
In the second method, the agent firm must be registered with Visa and MasterCard as an ISO/MSP (Independent Selling Organization/Member Service Provider). Actual merchant account management, marketing and processing guidelines, however, are the province of the card associations (Visa and MasterCard). Their procedures, rules and regulations are quite strictly enforced and merchant account contracts specify hefty penalties for breaching the agreements.

Definition of a Merchant Account

“Member” banks that have established relationships with Visa and MasterCard are able to issue merchant accounts directly to companies. A bank may operate only regionally, limiting new accounts to merchants in its geographical area such as merchant accounts in Atlanta Georgia. Such a regional bank may also limit its exposure to businesses with “brick and mortar” retail locations, or companies that have been in business for a certain, minimum number of years. These qualification requirements are entirely up to individual banks, which develop them to reduce risk. Because of changing business and economic conditions, the banks can alter the “rules of the game” as they choose.
As long as they are sponsored by member banks, ISO/MSPs can market merchant accounts, too. Sponsorship means that a bank attests to the financial viability and ethical standing of any ISO/MSP that does marketing on its behalf. The ISO/MSP must pay a registration fee to Visa and MasterCard to use their logos, and are legally bound to adhere to the card association guidelines that regulate how accounts are marketed, opened and maintained.

How to increase small business profit with a merchant account

In addition to the “brick-and-mortar” (onsite) business environment, a merchant account can provide a company with useful, and now almost essential, e-commerce payment processing capabilities. A reputable provider becomes something of a business partner to the merchant account holder, offering assistance in marketing, sales, card processing techniques and equipment selection.
Payment card transactions have proven to be the most popular means of making purchases for consumers worldwide. Without effective payment-processing methods it is doubtful a business could survive in today’s fast-paced, Internet-enabled environment. A reputable merchant account provider can advise a new business on all the various means of processing payments and tailor a merchant account setup that best matches that firm’s current and anticipated needs.