You may have heard that you have to obtain a business or merchant bank account to begin receiving customer payments.

At this point, you could be wondering what a merchant bank account even is.

Depending on your specific circumstances and how you want to conduct business, a merchant bank account could be a key requirement, however, with the right billing partner, it could also be optional.

Here’s some more information to help guide you towards the right solution for you.

What is a merchant bank account?

In general, a business or merchant bank account is a type of bank account that allows your business to accept debit or credit card payments.

When your business uses direct debit to withdraw regular funds from a customer, this money is first deposited into a merchant account where it remains until it is eventually transferred into your business account, normally on a daily or weekly basis.

The purpose of this merchant account is to provide a delay between the transaction of funds between your customer and your business. This helps to mitigate risks by allowing a bit of extra time for disputes.

Does my business need a merchant bank account? 

If your business wants to collect payments from a customer directly via credit or debit card payments, then it is a requirement for your business to have a merchant account. This applies regardless of the type of business you have, whether you’re an online retail business or running a café.

Four potential disadvantages of a merchant bank account 

Having a merchant account offers businesses the opportunity to accept a variety of payment types and increase their global reach, but it also comes with certain drawbacks. 

1. Fees apply to each transaction 

Each transaction conducted through a merchant bank account will incur additional fees for the business. How these fees are charged will vary based on the provider; some charge a flat rate for each processed transaction, while others charge fees based on a tiered pricing model. As the business grows, these fees can often add up to a significant amount of expenses. 

2. Increased dispute potential with customers

Customer fraud is a real risk that businesses have to face — when customers request chargebacks, businesses end up having to bear the cost for a service or product they have already provided. The delay in the transfer of funds between the merchant account and the business bank account can exacerbate this problem by increasing the potential for such disputes to occur. 

3. Possible technical difficulties

It’s not uncommon for payment errors to arise with merchant bank accounts as the funds are transferred to and fro. This not only adds a layer of concern for businesses but also necessitates the time-consuming process of checking for received funds. 

4. Long setup process

The process of applying for a merchant account is generally long and arduous because you and your business have to undergo an in-depth credit check and approval process which requires a lot of time and paperwork. Additionally, the fees, rates and conditions that the bank offers tend to be so confusing that you may not even be sure how much you’re paying for the service.

Can you accept credit cards without a merchant account?

Not many new businesses know this, but yes, you can accept credit cards without having a merchant bank account. Businesses can navigate around the need for a merchant bank account with the help of an automated payment processing solution such as Ezypay.

An automated payment processing solution is a third-party service that facilitates the transfer of funds and information between your customer and your business. If you use one, you don't need to obtain a business or merchant bank account to start accepting recurring debit or credit card payments, because they bridge this gap for you.

Setting up your subscription business with this service is the easiest way to start driving revenue, and avoid the complicated process of obtaining a merchant account. A payment processing solution can be set up and used almost immediately, and it usually provides your business with additional support and services.

So, if you’re looking at accepting subscription payments via direct debit or credit card, it’s definitely worth taking the time to decide which option suits you best.

How to accept payments online without a merchant bank account

Businesses will need a digital storefront, preferably on their own website or platform, such as an app. The main thing that is required is a checkout interface with a payment gateway that can where customers can enter their credit and debit card details.

When customers confirm payment, the automated payment processing solution works to fill in the role of a merchant account by handling the funds transfer on behalf of the business. Payment providers of this service also offer full technical support to help businesses process online card transactions as smoothly as possible without the need for a merchant account.

Ready to automate your subscription billing?

Ezypay can offer businesses an automated payment processing service because they have developed strong relationships with local issuing and acquiring banks and financial institutions in all the nine countries they bill in, which takes the burden off you.

Start collecting automated payments today

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