Finding An Internet Merchant Account: A Guide For Small Businesses

Even though the number of internet merchants has grown over the years and online sales are booming, many traditional merchant account providers are still focused on in-person transactions and the tools brick-and-mortar business owners need. But as an online merchant, your needs are very different. An internet merchant account, or online merchant account, focuses on eCommerce tools and services.

At the very least, this includes a payment gateway. Some online merchant account providers may also offer you an option for online store software. Additionally, you should expect your internet merchant account to integrate with leading software vendors in the eCommerce space, including online store builders, subscription software, and marketing tools.

Internet payment processors come in two different varieties: full merchant account providers like the kind described above and third-party processors (also called aggregators or payment service providers) like PayPal, Stripe, and Square. Our Square review showcases a payment service provider with much to offer a budding online merchant.

Both merchant account providers and third-party processors can make for great online payment processors, and both are well-represented among the best credit card processors overall. However, it’s still important to know the differences between the two, as these differences will determine which option is the best fit for your business.

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Setting up an account with a third-party processor is simpler and quicker than setting up a full merchant account. That’s because third-party processors aggregate all their merchants into one huge merchant account instead of giving each merchant their own account.

Merchant accounts offered by direct processors provide a higher level of account stability due to the extensive underwriting and risk assessment you undergo to get your merchant account.

With third-party processors, you undergo very little underwriting beforehand. Therefore, the processor scrutinizes your individual transactions much more intensely, making it more likely that you’ll experience an account hold or termination. Our tips can help you minimize the risk of experiencing this, though.

The flip side of this is the cost advantage of third-party processors for new businesses. These processors typically offer flat-rate pricing and pay-as-you-go agreements. There are few (if any) monthly or annual fees to pay, and you don’t need to meet a monthly minimum in card transactions, making it easy to start taking card payments with no business history.

With your own merchant account, you’ll usually pay monthly and potentially annual fees, you’ll need to process at least $5K-$10K per month in card transactions, and the pricing is not normally flat-rate (though it may be). Your rates may vary depending on your business model and industry.

Some merchant accounts (particularly high-risk specialists) require you to sign a multi-year contract. Still, above that $10,000/month mark, merchant accounts do offer cost savings, and as your sales volume increases, you’ll qualify for even more discounts.

When you use a third-party processor, a payment gateway is usually included. With full internet merchant accounts, you may have a choice of several gateway options depending on the features you need. Authorize.Net is one of the most widely available (and widely compatible) payment gateways, but it’s not the only option.

In many cases, your merchant account online will offer its proprietary gateway to ensure a seamless experience.

Some providers will include the gateway as part of your standard online merchant account fees; others will tack it on as a separate charge. Additionally, some internet merchant accounts might charge a fee for a gateway only if you opt to use something other than their proprietary product.

While you’ll need to accept credit and debit cards, these days, that’s not enough. There are other payment methods your customers may want to use, and if you can accommodate them, it will be to your benefit.

From mobile wallets on the web (such as Apple Pay and Google Pay) to PayPal payments to ACH payments to Click To Pay to cryptocurrency, the more payment methods your payment gateway and processor support, the better.

Some internet merchant accounts only accept payments in USD. If you expect to be able to attract any international business, that won’t be good enough. Thankfully, many providers can set you up with a multicurrency eCommerce merchant account so that you can expand your global reach. Just know that you’ll likely pay currency conversion fees (if they aren’t passed to your customers).

PayPal and Stripe do very well in this regard, and Stripe supports many localized payment methods across Europe and Asia.

Some processors offer dynamic currency conversion (also referred to as localized currency displays). That means your website will automatically convert the price from your default currency to whatever currency is most common in the customer’s region. This improves the shopping experience for international customers, potentially increasing your sales.

An online store builder/shopping cart integrates with your website to facilitate eCommerce. The shopping cart enables your customers to look through your available products, select different product options (size, color, etc.), select the quantity, and more. Most merchant accounts can be integrated with major eCommerce software platforms, but if you can find one that includes a good online store platform already, you’ll save money.

Other features your merchant service provider may offer include a customer credit card vault that allows you to store your customers’ card information securely while keeping it off your own equipment and customer subscription management tools. Stripe is an example of a processor with built-in subscription tools and a card vault.

You can also opt for a third-party provider to get recurring billing functions.

Of course, as we detail in our guide to processing payments online, you don’t need an online store website to conduct eCommerce, but once your online selling ambitions grow to the point where online invoicing and/or social media selling isn’t enough, it may be time to build that eCommerce site.

Processors with integrated developer tools (such as Stripe) allow developers to use APIs (application programming interfaces) to integrate the payment platform using various programming languages. For businesses with developer talent, integrated developer tools can help you build custom solutions for your eCommerce outfit. Third-party processors typically excel in this area, but online merchant account providers can hold their own, and many gateways offer tools to help with customization as well.

Good customer service and support availability are crucial in an internet merchant account. Your ability to do business relies on all your systems working correctly 24/7, so reliability and quick response times are crucial. Do some research on providers to weigh the experiences of other online merchants when dealing with any issues that pop up, and make sure that the available support channels align with your preferences.