A guide to merchant accounts for small business

A full guide to setting up a merchant account for your business.

Your business is now ready to start accepting payments. But now what? When it comes to business transactions, a merchant account is a gateway to processing card payments. Payment processors then move the funds between your merchant account and the bank. As we move towards an increasingly cashless society, having a merchant account is essential for businesses planning to flourish. It lets you offer customers convenient payment methods, boosts your professional image and ultimately gives you the opportunity to increase sales. Without a merchant account, you could end up with outdated payment methods that simply don’t work for your customers.

Who needs a merchant account?

If you run a business and want to accept card payments, you need a merchant account. Whether you sell online or from a retail store, a merchant account is key to being able to process debit and credit card payments. Without one, you could be limiting your customer base and missing out on potential sales.

How does a merchant account work?

If a customer comes into your store or goes to your website and wants to make a purchase, they take their card and tap or enter their details. This payment is processed through your merchant account. Behind the scenes, your payment processor then transmits the data to the relevant banks (yours and theirs) for authorisation and completion of payment. In a matter of moments, the money is transferred from the customer’s account to yours.

Why do I need a merchant account?

From appealing to a broader customer base and increasing sales, to streamlining payment processes and improving security, the advantages of having a merchant account are significant. It will help you to remain competitive in a fast-paced marketplace and run your operations more effectively.

What is a merchant?

A merchant is someone who sells goods or services. Regardless of if you’re an ecommerce business or a brick-and-mortar store, if you’re accepting payments from customers, you’re a merchant. Making sure you have the most appropriate merchant account for your particular needs can be hugely beneficial to your operations.

What to consider when opening a merchant account

Types of merchant service providers

There are different types of merchant accounts to suit various business models (like retail stores, websites, pop-up shops, etc.), so it’s important to consider what your business needs before choosing which account is right for you. From online payment gateways to mobile card readers, take a look at the features so you can be sure the account suits your requirements.

Opening a merchant account

To open a merchant account, you just need to get in touch with a reputable payment processor or bank. They’ll ask you for some basic information about your business and guide you through the application process. Once your application has been approved, you’ll be sent the required software or equipment to begin accepting payments. Keep reading for more guidance on opening an account.

Merchant account fees

Merchant account fees vary depending on the type you choose. The fees can include things like monthly service charges and transaction fees. Be sure to plan and manage these costs in order to keep them in check.

Your merchant account: Next steps

So, you now want to go ahead and set up an account, but the thought of adding ‘set up merchant account’ to your to-do might feel a little overwhelming. The good news is that setting one up is quite straightforward.

Understanding merchant account providers

There are different types of merchant accounts out there, including banks and payment processors. Each type has its own benefits and drawbacks, so it’s essential that you do your research to figure out which one will suit your business needs . Take a look at factors such as fees (to make sure there are no hidden costs), features (so you’re not using outdated tech) and the level of customer service you can expect.

Setting up a merchant account

Here’s how to set up a merchant account:

Register your business

Your business should be registered and ready to trade. You can register your business on your country’s government website. Here is where you can start the process for UK businesses. You’ll need to have your key information available, like your business name, address, business type, UTR (unique taxpayers reference) and business bank account details.

The application process

You’ll be asked to fill out some paperwork. The provider will ask you questions about your business (like the information mentioned above) as well as personal information about yourself as the business owner such as your name, home address and government identification numbers. Some providers may also ask you for additional information around estimated monthly sales volume and the payment methods you plan on accepting.

Approval and set up

Once your application has been submitted, your chosen provider will review it and get back to you with a decision. When it has been approved, they’ll help you complete the set up of your account and get everything up and running for you.

What is required for a merchant account?

In addition to the usual business information above, to get started with your merchant account you’ll also need to provide some documents such as proof of identity and any required business licences, so make sure you have these ready.

How much does it cost to set up a merchant account?

The short answer is, it depends. Fees for a merchant account vary based on things like your business type, the provider you choose and sometimes your sales. Generally speaking though, you can expect to pay a set-up fee, a monthly service charge and a small fee for each transaction processed. Be sure to read all the information and ask questions before you go ahead and sign.

Now you know how to set up a merchant account, you’re on your way to accepting card payments. This is convenient for you and for your customers, meaning you’ll have the capacity to increase sales and ultimately, grow your business.

In a nutshell, a merchant account is becoming a necessity for businesses wanting to stay ahead and grow. With benefits like enhancing your customer reach and managing transactions, having a merchant account should be part of your business strategy.

If you’d like to learn more about merchant accounts, you can chat with our friendly V-Hub Digital Advisers for 1-2-1 support.

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