When you open an online store, you may design an ecommerce website, install a shopping cart, and facilitate payment options. On the surface, the process is pretty simple. Your customer visits your online store, puts their items in your online shopping cart, proceeds to checkout, and securely enters their credit card details. Depending on your preference, the customer can either complete checkout on your site or be redirected to the payment processor’s site. Either way, the payment processor ensures the card details are securely encrypted to prevent theft and fraud.
Banks, processors, and networks
Once the transaction is complete, the customer receives a receipt and details about delivery or collection. Beneath the surface, there are several participants in this scenario:
- Customer’s bank, also called the issuing bank
- Merchant’s bank, also called the acquiring bank
- Payment gateway
- Payment processor
- Card Network (e.g. Visa, MasterCard, Amex)
There are two types of merchant banks. In finance circles, a merchant bank is a bigger bank that serves businesses and other banks rather than individual customers. It holds stocks, issues loans, and handles large scale investments.
However, in the case of online business and ecommerce, the merchant bank is the bank of your bank – you being the seller or business owner. It’s more often referred to as an acquiring bank, and its role is to receive cash from your customers. When they pay, the money passes through your payment processor and into your merchant account.
Understanding merchant accounts
A merchant account is your account with your acquiring bank, opened through your payment processor, which allows you to deposit your customers’ credit card payments into your merchant account, allowing your customers to pay you online.
For more information on the functions of a merchant bank, or to sign up for a merchant account, please call (888) 924-2743 or go to Charge.com.