How to Get a Merchant Account Through a Bank?

Mastering Online Transactions: How to Secure a Merchant Account Through Your Bank

In today’s digital landscape, accepting customer payments seamlessly is no longer a luxury, it’s a necessity. A merchant account acts as the bridge between your business and the world of electronic transactions, enabling you to receive credit card, debit card, and other digital payments.

But navigating the process of acquiring a merchant account, especially through a bank, can seem daunting.

This comprehensive guide will equip you with the knowledge and steps required to secure a merchant account through your bank.

We’ll delve into the essential prerequisites, application procedures, documentation needs, and helpful tips to ensure a smooth journey.

Understanding Merchant Accounts

Before diving into the nitty-gritty, let’s establish a clear understanding of merchant accounts. A merchant account acts as a specialized business bank account that facilitates the acceptance of electronic payments.

When a customer makes a purchase on your website or swipes their card at your store, the funds are routed through the merchant account processing network. This network involves several players, including:

• Merchant (you): The business owner who sells goods or services and desires to accept electronic payments.
• Acquiring Bank: The financial institution that provides you with the merchant account and processes your transactions. They essentially act as the middleman between you and the payment networks (Visa, Mastercard, etc.).
• Payment Processor: The company that handles the technical aspects of your transactions, such as encrypting card data and ensuring secure communication between your website or point-of- sale system and the acquiring bank.
• Issuing Bank: The financial institution that issued the customer’s credit or debit card.

Benefits of Acquiring a Merchant Account Through Your Bank

While numerous payment processing companies offer merchant accounts, securing one through your existing bank can offer several advantages:

• Streamlined Process: Banks often have established workflows for existing business clients, potentially making the application process faster and more efficient. You may benefit from dedicated account managers who can guide you through the process.
• Potential for Competitive Rates: Your established banking relationship might grant you access to more favorable pricing on transaction fees and monthly statements. Negotiating power can be advantageous, especially for businesses with high transaction volumes.
• Consolidated Banking: Having your merchant account and business checking account under one roof simplifies financial management and record-keeping. Reduced paperwork and easier reconciliation of transactions are significant benefits.
• Enhanced Security: Banks typically have robust security protocols in place, offering peace of mind regarding sensitive customer payment information. Compliance with industry-standard security measures like PCI DSS (Payment Card Industry Data Security Standard) is often built into their offerings.

Eligibility for a Bank Merchant Account

While banks generally cater to established businesses, eligibility requirements can vary depending on the institution. Some common factors that banks consider include:

• Business Structure: Sole proprietorships, partnerships, corporations, and Limited Liability Companies (LLCs) are typically eligible. However, some banks might have restrictions on specific business structures.
• Business Age & History: Banks may prefer businesses that have been operational for a specific period, often a minimum of one or two years, and have a demonstrably positive track record. A history of profitability can strengthen your application.
• Industry & Risk Factors: Certain industries, such as those dealing with adult content, online gambling, or businesses with a high chargeback rate, might face stricter scrutiny or even rejection. Understanding your industry’s risk profile is crucial.
• Creditworthiness: Banks may assess your business and your personal credit history as part of the application process. A strong credit score for both the business and the owner can significantly improve your chances of approval.

Steps to Secure a Merchant Account Through Your Bank

Now that you understand the process and benefits, let’s delve into the steps involved in securing a merchant account through your bank:

1. Research and Compare: While your existing bank might seem like the natural choice, it’s wise to explore other banks offering merchant accounts. Compare fees, terms, and features to find the option that best suits your business needs. Consider factors like transaction fees (percentage-based, flat fees, monthly charges), early termination fees, and PCI compliance costs.

2. Gather Your Documentation: Acquiring banks require various documents to assess your business and mitigate risk. Common requirements include:

   • Business registration documents (e.g., business licenses, articles of incorporation)
   • Business bank account information
   • Tax ID number (EIN)
   • Proof of business location (utility bills or lease agreement)
   • Voided check
   • Financial statements (past tax returns or business plans)
   • High-risk businesses might need additional licenses or permits.

Present a Strong Business Plan: Even if not explicitly required, having a well-crafted business plan can significantly improve your application’s appeal. The plan should:

• Demonstrate Market Viability: Clearly outline the products or services you offer, your target market, and your competitive advantage. Explain how accepting electronic payments will enhance your customer experience and boost sales.
• Project Future Growth: Include realistic financial projections for your business, including anticipated transaction volume. This helps the bank assess your risk profile and potential profitability.
• Highlight Management Expertise: Briefly showcase the experience and qualifications of your team, particularly those managing finances and operations.

3. Contact Your Bank: Reach out to your bank’s business services department to inquire about their merchant account offerings. Schedule a consultation to discuss your business model, transaction volume projections, and any specific needs. This personalized approach allows you to build rapport with the bank and address any concerns they might have.

4. Complete the Application: The acquiring bank will provide a merchant account application form. Fill it out accurately and comprehensively, ensuring all details align with the supporting documentation you provide. Pay close attention to any questions regarding chargeback history, business practices, and fraud prevention measures.

5. Underwriting Process: Banks assess the risk associated with your business before approving a merchant account. This might involve a credit check, business verification, and an evaluation of your projected transaction volume. Be prepared to answer any questions or provide additional information requested by the bank’s underwriters.

6. Approval and Setup: Upon approval, the bank will guide you through setting up your merchant account and integrating it with your website or point-of-sale system. This might involve training on using the payment processing platform and understanding features like recurring billing or chargeback management.

Additional Tips for a Smooth Application Process

• Maintain a Healthy Business Bank Account: A positive track record of responsible banking activity with your chosen bank can strengthen your application.
• Minimize Chargebacks: Having a high rate of customer disputes or chargebacks can negatively impact your eligibility. Implement clear return policies and robust customer service to minimize disputes.
• Consider Alternative Options: If your bank application is rejected, explore options with payment processors that cater to high-risk businesses or startups. However, be prepared for potentially higher fees with these providers.

Final Thoughts

Securing a merchant account through your bank can streamline your online payment acceptance process and offer several advantages.

By understanding the eligibility requirements, gathering the necessary documentation, and presenting a strong business case, you can significantly increase your chances of approval.

Remember, thorough research, proactive preparation, and clear communication with your bank are key to successfully navigating the merchant account application process.

With a well-established merchant account, you’ll be well-positioned to accept electronic payments securely and grow your business in the thriving digital marketplace.