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Published 11 June 2024
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How to Open a Merchant Account

Once you’ve launched your business, you’ll need to open a merchant account to be able to take card payments. We explain what’s involved, where you can get this type of account, and what documents you’ll need to provide.

If you want your business to be able to take card payments, opening a merchant account needs to be at the top of your agenda. 

That’s because, without one, it’s not possible to process credit or debit card payments, either online or in store. A merchant account is an account that temporarily holds customer funds while the bank conducts all the checks necessary to approve the payment. 

So how do you open a merchant account? There are many providers that offer merchant services and there is more than one type of merchant account, each offering different qualities and benefits.

In this article, we’ll explain where you can open a merchant account, what information you need to be in possession of before you do, the key steps, and the length of time it takes to set one up. 

» MORE: What is a merchant account?

Where do I open a merchant account?

There are two types of providers that allow you to open merchant accounts: a payment services provider (PSP) or an independent sales organisation such as your acquiring (merchant) bank.   

PSPs operate what are called aggregate merchant accounts. These are essentially master accounts that pool the funds of multiple sub merchants, and charge a low, flat fee for the use of their services. This, and the fact that the PSP manages most of the admin work and takes on much of the risk, makes aggregate accounts a popular option for small businesses.

Alternatively, you could choose to open a dedicated merchant account with your acquiring bank, where you’ll gain access to tailored features, special rates for high sales volumes and more personalised support. You will have to undergo an underwriting process so that the bank can ensure it is not taking on unnecessary risk by working with you. Dedicated merchant accounts are typically used by larger businesses that need to process a lot of transactions.  

Can I open a merchant account online? 

Yes, it’s possible to open a merchant account online. Both PSPs and merchant services banks offer online application processes that just require you to enter a few details about your business to get started. 

What do I need to open a merchant account?

Application requirements vary between providers, but you will probably need to have at least some of the following information to hand:

  • Your personal details: This includes your name and contact details. 
  • Your business details: This includes its trading name, location and the sector you operate in. 
  • The kind of solution you need: For example, do you need to take payments online, in store or both?
  • Your processing volume/ card turnover: This can be an estimate and will help the provider find the right solution for your needs.
  • Average transaction value: This helps the provider understand what level of processing capacity you’ll require.
  • A business plan or trading history: This will show that your business is viable, especially if yours is a start up. 

Three steps to opening a merchant account? 

Now you have all the necessary information to hand, here’s your step-by-step guide to opening the right merchant account for your needs:

Step 1: Choose a provider 

As discussed earlier, if you’re a smaller business with a relatively low transaction volume, your best bet is to choose a PSP. That way you’ll be able to take advantage of their simplified application process and low flat fees, and often include additional features such as fraud prevention. If you’re a large business with more specific needs, you might prefer to partner directly with an acquiring bank. 

Choosing just one PSP or bank to partner with from among the many providers can be a hard decision, but it’s worth taking the time to research which one might best suit your needs. Look for a provider that can handle your expected transaction volume, is competitively priced, and provides the features and functions you need to achieve your goals.  

Step 2: Fill in the application form

It should only take a few minutes to complete the application form of your chosen provider. If you’re opening a merchant account for the first time, you’ll likely have to estimate or provide a forecast of your expected sales and average transaction value. If you don’t have much of a trading history, the bank or PSP may need to look at your business plan in order to approve you for a merchant account. This allows them to check that your business is financially viable and does not expose them to unnecessary risk.  

Step 3: Wait for approval

The provider will use the information you’ve provided to decide whether or not to approve your business. As long as you’re eligible, and you’ve been accurate and truthful in your application, you should succeed. 

If your business is particularly risky, or if you have a poor credit history or have previously been bankrupt, you may find it harder to get approved. It is still possible to get a merchant account, but you might just have to pay higher fees to make up for the increased level of risk. You may have to open a high-risk merchant account. Fees can be renegotiated, or you can switch to a regular merchant account, once you’ve been trading long enough to show that you’re financially sound. 

How long does it take to open a merchant account? 

Generally, the newer your business or the riskier it is, the longer it will take to open a merchant account. It could even take a few weeks. If you have a solid trading history, and you’re relatively low risk, you could set up a merchant account in a few days or less.  

What happens after I open a merchant account?

After you’ve opened your merchant account, you’re ready to start accepting card payments. 

If you haven’t already done so, now’s the time to get the other equipment or features you’ll need to complete your payments set-up. If you’ve partnered with a PSP to accept online payments, you’ll find that many integrate multiple features and functions into one payments’ package, acting as a gateway, processor and acquirer all in one. They also usually provide additional services, such as security, revenue optimisation and alternative payment methods. 

If you run a business from a retail location, you’ll need to invest in the physical elements of your payments system, which could include a card reader, POS terminal and other accessories. 

Image source: Getty Images

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