What is an Internet Merchant Account?
An internet merchant account (IMA) is a kind of bank account usually held by a retailer or business which allows the account holder to accept payments by credit card, debit card or bank transfer over the internet.
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Sometimes businesses have merchant accounts with payment service providers (PSPs) like paypal or netbanx. An IMA is vital for any business wanting to conduct business over the internet. An IMA is held with a merchant bank (in this context also known as an 'acquiring bank'). It is the bank's job to transfer money paid from schemes like Visa and Mastercard, into your account.
Not Like a Normal Account
Even though high street banks offer IMAs, they are not like normal bank accounts. The balance in an IMA is cleared at regular intervals by the account provider. The balance will be transfered into the account holder's regular business account. This is known as 'settlement'.
Generally, the more risky the business is perceived as being, the longer it will take for the settlement process to occur - banks want to make sure that the funds have cleared.
Applying for an IMA
If you want to apply for a bank or PSP based IMA the application process is relatively simple. It is generally quicker to apply for PSP based web merchant account than a bank based account. The application can be completed entirely online and is very straightforward to complete.
Since web-based merchant account providers like paypal and CCbill generally have much lower charges for business clients, the potential for increased profits for customers with IMAs is significant.
Bank versus PSP?
There are advantages to having your IMA with a bank but also disadvantages. Banks tend to have higher charges for business customers than PSPs and are generally more reluctant to give accounts to smaller-sized businesses.
PSPs however, like Paypoint, are generally much more favourable to smaller businesses. They will also give you an account much more quickly than a bank, usually within 24 hours.
Banks on the other hand can take longer, sometimes a week to ten days from applying, to give you an account. PSPs are more specialised than banks and focus much more on payments and transactions online.
So if you are a small to medium sized business, looking for an IMA, a payment service provider is much more likely to look favourably on your application than a bank, because that's what they specialise in.
The most obvious advantage to having a merchant account internet version is that it enables you to receive card payments online, quickly and easily. There is no need for cheques, faxes or credit card terminals with an IMA.
Customers like the convenience of being able to pay online instantly, and having this option on your site makes customers more inclined to purchase things at the time of actually visiting your site, if the option isn't there, you might lose their custom.
It also helps to ensure that they will return to your site in the future. Also, web-based merchant accounts are very secure, they have to be because of their reliance on credit and debit card payments, and this gives customers just that little bit of extra peace of mind when they make online payments.
Costs of an IMA & Potential Disadvantages
A bank or payment service provider will usually charge a set-up fee of around £200. On top of that there will be a monthly charge (usually between £15 to £30 a month) and the provider or bank will usually take a percentage of every transaction, usually around 3%.
Potential disadvantages are that you may not pass the payment providers vetting procedure as they have quite strict requirements and also, your website will need to be up and running before they will you to have a full web merchant account.
Apart from that though, the potential benefits an IMA for a small to medium sized business far outweigh the possible drawbacks, in terms of the potential for broadening your customer base, and are a must-have for any company or website that does a lot of online business.
If you are interested in getting an internet merchant account for your business, then simply fill out the form at the top of this page. A member of our team at Expert Market will get in touch with you shortly to discuss different options and prices.