This article provides an overview of merchant accounts.
Internet Merchant Facilities (IMF’s) are required for anyone looking to accept payments in an e-commerce environment (this includes online retail, billing systems, recurring transactions and so on) and are different to traditional merchant facilities in that they consider additional risk factors inherent to online shopping and card not present transactions. These risks are also reflected in the pricing structures of these types of facilities and also undergo a different and more stringent application process.
Do I need an Internet Merchant Facility?
An internet merchant facility will allow you to process payments via the internet in a secure environment. With the reported occurrences of fraud on the rise, providing potential customers with this option is not only preferable, it is required. Obtaining this service for your business will not only streamline the payment process, it will afford you and your customers with fraud protection, give you full-time payment support, and in many cases offer alternate payment methods that make your business even more appealing.
So what fees can you expect?
Most banks have a similar pricing structure with some differences around monthly fees and establishment costs. There are a number of other fees associated with an IMF and are explained as follows:
- Establishment Fee (also known as setup fee) – This is usually a one time cost charged by the bank to establish the facility
- Annual Cost – This is an annual cost charged by the banks for holding an IMF. Some banks may charge this as a monthly fee rather than an annual lump sum
- Monthly Fee (known as a licence fee) – This is a monthly cost charged by a Bank for the service provided on the online merchant facility.
- Merchant Service Fee (MSF) – This is a percentage (%) charged by a Bank per transaction. This is the most important fee that should be negotiated.
- Minimum Monthly MSF – This fee is charged by a Bank only when the revenue generated by the Merchant Service Fee (%) is below a certain value. All Banks charge this fee which is usually between $20-$30, however if the revenue created from the MSF exceeds the minimum MSF, then the Minimum fee is not charged.
- Transaction Cost – Some banks charge this, while others just stick with the MSF. This can vary from $0.10 to $0.30 depending on bank and includes approved, declined and pre-auth transactions.
- Chargeback Fee – This is a bank issued fee charged only when a customers processes a chargeback.
- Termination Fee – This is a fee charged by the bank for the closure of an internet merchant facility.
Merchant Service Fees in more detail
There are two ways which a bank will offer merchant service fees. There is the blended rate which is the most common rate offered to merchants and is a flat rate for all credit card transactions.
The other option is a split MSF which takes into consideration the number domestic vs premium/international credit card transactions processed by the merchant. Split merchant service fees will offer the merchant separate rates:
- Standard Visa/MasterCard Rate – This covers all standard domestic credit card transactions
- Premium Visa/MasterCard Rate – This covers premium and corporate credit card transactions
- International Card Rate – This covers all international credit card transactions
Premium and International rates will tend to be higher than the standard card MSF and it is recommended you understand what your split will be to find the most suitable Internet Merchant Account for you business.
How do I apply for and Internet Merchant Facility?
In order to apply for an IMF you will need to contact your bank or business banker direct, or ask your gateway to get you in touch. Whichever path you take, it helps to be prepared with a few essentials that will help you speed up the process and hopefully lower the fees.
These essentials include:
- Description of business – What do you sell or what is your service? what is your experience in this industry?
- Anticipated transactions – How many transactions per month are you looking to process and what is the average transaction amount?
- When is payment made? Are you accepting payment before goods are shipped or service is performed or after? This is also referred to as Merchant Prepayment Exposure.
- Terms and conditions – Every bank will want to review these.
- Refund policy – These are a must for every IMF.
- Business plan – This is important for new business. Established businesses can get away with providing their settlement account details to show trading history with the bank.
- Financials – Some banks might require last 2 years financials as a part of their application process.
- Security – Details of what you are currently using to keep your payment page secure eg. SSL.
- Website url for review by the bank.