Your Complete A-Z Guide to Merchant Accounts

Your Complete A-Z Guide to Merchant Accounts

12 June, 2023

For the seamless running of a business, cash must flow through it. You have to pay your employees, your vendors, your electricity bills or possibly pay rent for the business space. To fund these expenses, you need revenue. However, it is not as easy as opening a regular bank account. If you want a steady cash inflow system, you need a Merchant Account. Here, we talk more about what is a Merchant Bank Account and why it is imperative you opt for one.

What is Merchant Account?

As a business owner with heavy cash inflow, having a Merchant Account is ideal. A Merchant Account or Merchant Service Account lets you accept payments from your customers via debit cards, credit cards, digital wallets, gift cards, Unified Payment Interface (UPI), QR codes, net banking, etc.

For instance, let us say you own a clothing store. Since cashless payments are becoming the norm, your customers are likely to pay for your product using cards or UPIs. You set up a card payment terminal where customers swipe their cards. Now, where do you think the amount goes? Well, it goes to your Merchant Account. You can receive payments in stores, e-commerce websites, or Point-of-Sale (POS) terminals.

You cannot use a Savings Account in place of a Merchant Account since the former comes with certain limitations on transactions. Conversely, with Merchant Accounts you can conduct higher-value, more frequent transactions . , Also, you can enjoy several features and benefits, such as an overdraft facility, credit cards, internet banking and pre-approved loans with your Merchant Account.

What is a Merchant Card Processor Account?

A Processor Account differs from a regular Merchant Account. A Payment Process Account allows your business to accept credit card and debit card payments. It manages your online card transactions and acts as a mediator between your business and the acquiring bank. Before we proceed, let us look at a few terms you ought to know:

  • Acquiring Bank: An Acquiring Bank or a Merchant Bank is where you open a Merchant Account. The Acquiring Bank settles all payments and collections.

  • Issuing Bank: The Issuing Bank or the Cardholder’s Bank pays the Acquiring Bank.

  • Payment Processor: A Payment Processor is a company that facilitates online transactions between the Acquiring Bank and the paying customer’s bank/creditor.

  • Payment Gateway: A Payment Gateway is a tool that allows the Payment Processor to gather the customer’s credit card or debit card data for transmission.

When a customer makes an online payment, they are required to enter their card details in a payment gateway tool. The tool then transmits data to the Issuing Bank to confirm whether the customer has sufficient funds. If they do, the Issuing Bank transfers the required amount to the Acquiring Bank, and the bank credits the amount to your Merchant Account.

How to open a Merchant Account?

Now that you know what is a Merchant Services Account, here is how you can apply for one.

  • Step 1: Find a suitable Merchant Acquiring Bank.

  • Step 2: The bank will ask you to submit the following documents:

    • Certificate of Incorporation/Registration Certificate/Shop Establishment Act Certificate

    • Goods & Services Tax (GST) Certificate

    • Business Permanent Account Number (PAN)

    • Latest utility bills of your business location

    • ID and residence proof of the authorised signatory

  • Step 3: The Acquiring Bank will conduct due diligence to rule out potential threats. They will check for any previous fraudulent activities or bankruptcy, the years your business has been active, etc.

  • Step 4: Once the bank verifies your details, they will approve your Merchant Account.

HDFC Bank’s SmartHub Vyapar

HDFC Bank offers hassle-free domestic and international payments and collections solutions for various Small and Mid-Size Enterprises (SMEs). HDFC Bank also offers Point-of-Sale solutions, high-value fund transfers, balance and transaction viewing, and more with SmartHub Vyapar. With this holistic platform designed for business owners, you can enjoy seamless, digital payments collections along with a host of valuable business features including easy access to loans, overdraft facilities, and all the arsenal you need to build a growing, thriving business.

Read more about SmartHub Vyapar to grow your business.

Set your business on the path to success. Sign up for SmartHub Vyapar today.

​​​​​​​*Terms and conditions apply. The information provided in this article is generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. HDFC Bank SmartHub Vyapar is available to only Individual & Sole Proprietorship entity and for select Current Account variants only. For other entity types, please connect with the nearest branch.

To Download The SmartHub Vyapar App Click Here.

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