Online Payments

Understanding Internet Merchant Accounts: A comprehensive guide for online businesses

Accepting online payments is crucial for any e-commerce operation. At the heart of this process lies the Internet Merchant Account (IMA), a specialised bank account that enables businesses to process electronic transactions securely and efficiently.

8 min

Written by Access PaySuite.

What is an Internet Merchant Account?

An Internet Merchant Account is a type of bank account specifically designed for businesses to accept and process online payments. Unlike standard business accounts, IMAs are tailored to handle card payments, chargebacks, refunds, and other electronic transactions.

Key Features:

Allows acceptance of credit card payments online
Facilitates secure processing of electronic transactions
Enables refunds and chargeback management
Settles funds to your business bank account

Enables online transactions

Without an IMA, businesses cannot accept card payments via the web.

Enhances credibility

Having a merchant account signals to customers that your business is legitimate and trustworthy.

Improves cash flow

Faster settlement of funds compared to traditional payment methods.

Setting up a merchant account

The process of setting up a merchant account involves several steps:

Choose a provider:
While your business bank may offer merchant services, it’s often advantageous to explore options from specialised online payment service providers.
Application process:
Prepare necessary documentation, including financial statements and business plans.
Underwriting:
The provider will assess your business’s creditworthiness and risk level.
Integration:
Once approved, integrate the merchant account with your e-commerce platform.

Merchant Account vs. Payment Gateway

While often confused, merchant accounts and payment gateways are distinct components of online payment processing:

Merchant Account	Payment Gateway
Receives and holds funds from transactions	Encrypts and transmits transaction data
Provided by acquiring banks	Offered by payment service providers
Necessary for fund settlement	Essential for transaction authorisation

Many providers offer bundled services, combining a merchant account with a payment gateway for seamless online payment processing.

Choosing the right merchant account provider

When selecting a merchant account provider, consider the following factors:

Fees:
Compare transaction fees, monthly charges, and setup costs.
Integration:
Ensure compatibility with your existing e-commerce platform.
Security:
Look for providers with robust fraud prevention measures.
Support:
Evaluate the quality of customer service and technical support.
Global reach:
If you plan to accept international payments, choose a provider with multi-currency support.

Alternatives to traditional merchant accounts

For some businesses, especially startups or those with low transaction volumes, alternative options may be more suitable:

Payment Service Providers (PSPs):
Offer all-in-one solutions that include both merchant accounts and payment gateways.
Aggregators:
Allow businesses to accept payments without a dedicated merchant account, though often with higher fees.

An Internet Merchant Account is a fundamental component of any online business's payment infrastructure. By understanding the intricacies of IMAs and carefully selecting the right provider, businesses can streamline their payment processes, enhance customer trust, and ultimately drive growth in the competitive e-commerce landscape.

Remember, while setting up a merchant account may seem complex, the benefits of being able to accept online payments securely and efficiently far outweigh the initial effort. As the digital economy continues to expand, having a robust online payment solution is not just an option—it’s a necessity for success.