A bank account that permits businesses to accept payments using payment cards is called a merchant account. These payment cards are usually credit or debit cards. A merchant account is established when there is an agreement between a business accepting payment cards and a merchant acquiring bank who will settle the payment card transactions. There are cases where an independent sales organization, a payment processor or a member service provider can become a party to the merchant agreement. A merchant can enter directly or indirectly, into a merchant agreement with an acquiring bank or any member service provider, the agreement contract binds the merchant to follow the operating regulations as established by card associations.
Merchant Account Marketing
There are two basic methods of marketing merchant accounts either through the sponsoring bank or processor, or through an authorized agent for the bank. It can also be marketed by registering with Visa and MasterCard as an Independent Selling Organization or as a member service provider. The details of marketing depend on the issuer of the card such as Visa and MasterCard. These details are enforced by several rules and fines. There are large processors that partner with warehouse clubs in order to promote merchant accounts to their members.
- Bank marketing – A member bank is one that has a merchant processing relationship with either Visa or MasterCard. It can issue merchant accounts directly to merchants. As there are risks of non-payment from some merchants, a member bank limits approval only to merchants within its geographical area. They also approve applications for credit or debit card to people with a physical retail storefront or those that have been in business for more than two years.
- Independent Sales Organization Marketing (ISO) or Managed Service Provider (MSP) – An Independent Sales Organization must be sponsored by a member bank so that it can market merchant accounts. The bank verifies the financial stability and suitability of the company that will market merchant accounts in its behalf. The ISO/MSPs are required to pay a registration fee with Visa or MasterCard and they must comply with regulations in the methods they may use to market merchant accounts and the use of copyrights of said card issuers.
Verification of compliance by ISO/MSPs can be done by checking the website or through other marketing material for a disclosure if the company is a registered ISO/MSP of bank, town or state and if it is insured by FDIC.
More info: Methods of Processing Credit Cards | Price Rates of Merchant Services | Merchant Account Fees
