Types of Merchant Account
As may be deduced, merchants are those who sell products or services, and most merchants in many countries have a merchant account, unless they deal out of a collapsible table on the street. These merchant accounts allow a business entity to accept cashless payments via credit cards, debit cards or other forms of accounts that facilitate payment. Of course, merchants with poor credit standing may find it difficult to get a finance company to trust them with such transactions.The acquisition of a merchant account involves some charges by the merchant account provider, usually on a per-item percentage basis. Some merchants append such charges as an add-on to the sale price of charged items, but many incorporate the costs into the price of the item or service and provide discounts for cash purchases. It is a case of half-full-half empty perception, but in reality the charges are often passed on to consumers.
There are three types of merchant account available: the retail merchant account; the mail order-telephone order (MOTO) merchant account; and the Internet merchant account. The retail merchant account types have the lowest transaction fees but most transaction restrictions. It usually requires the card to be present during the transaction and physically “swiped" on a merchant provider terminal. These are usually found in restaurants, groceries and appliance stores.
The MOTO merchant account types do not have physical presence restrictions because all transactions are over the telephone, and have higher transaction fees than retail merchant accounts because the risk of fraud is higher and not easily proven. Fore example, credit card owners may claim no such transaction was made with their knowledge and dispute the purchase as the card was not verified physically by the merchant. This is widely used by mail-order and infomercial companies.
The Internet merchant account has become increasingly used by many merchants, even those who conduct regular transactions but also have web-based services, and exclusively by purely web-based companies. The transaction fees are similar to MOTO accounts although the payment structure is slightly different, including usually a virtual terminal such as PayPal and a shopping cart application.
Also, the security factor is of major concern what with the proliferation of identity theft and fraud for web-based transactions. Legitimate businesses usually ensure that their merchant account provider is registered by a reputable payment verification provider that assures their clients of the inviolability of sensitive financial information. One example of this kind of service is VeriSign.