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What is a Merchant Account?

Lauren Valensky
19 Apr 2024

Processing credit and debit cards requires a merchant account. What is a merchant account and how does it function, you ask?

With electronic payments now taking precedence over cash, as a business owner, it's important to adapt to this new consumer trend.

Unfortunately, though, accepting debit and credit cards can't be done with a simple swipe. Businesses are required to work with a payment processor and obtain a merchant account.

While payment processing may be self-explanatory, you may be left wondering what exactly a merchant account might be? Fortunately, we've got the answers here at Epos Now. 

What do merchant accounts do?

In short, a merchant account is a type of business bank account that allows companies to accept credit and debit card payments. When a customer makes credit card payments or debit card payments, the funds are transferred from their bank account into the merchant account.

While businesses cannot accept digital payments without one, you actually have no control over the merchant account that's attached to your business, which in many ways makes life much simpler for you, though it’s still useful to know what it does.

Rather, it’s a holding place for electronic payments during the settlement period [1]. Once settled, the funds are then sent to your business bank account, a process that typically takes 1-3 working days.

What are the benefits of POS merchant services?

Of course, not all merchant accounts are equal. A good merchant account provider will offer businesses the perks of payments flexibility and other benefits including:

Fast and secure payments: 

One of the primary benefits of merchant account services is the assurance of fast and secure payments. When businesses use a merchant account, they can rely on efficient payment processing systems that ensure transactions are completed swiftly and without compromising security. This benefit is particularly important in today's fast-paced business environment, where customers expect seamless payment experiences. By using merchant account services, you can streamline your payment processes, reducing transaction times and enhancing overall customer satisfaction.

Increased sales: 

Another significant advantage of utilizing POS merchant services is the potential for increased sales. Accepting card payments, whether credit or debit cards, expands a business's customer base by catering to individuals who prefer cashless transactions (which is now most customers). This convenience factor often translates into higher sales volumes, as customers are more likely to make impulse purchases or larger transactions when they can easily pay with their preferred payment method.

Improved cash flow: 

POS merchant services contribute to improved cash flow for businesses by expediting the transfer of funds into their merchant accounts. Unlike traditional payment methods that may involve delays in processing and clearing transactions, merchant accounts streamline the flow of revenue, allowing businesses to access their funds within a few days. This accelerated cash flow enables companies to manage their finances more efficiently, meet operational expenses promptly, and seize growth opportunities without liquidity constraints.

Flexible payment options: 

Another reason you need a merchant account is the flexibility they offer in accepting various payment methods. From credit and debit cards to e-checks and mobile payments, businesses can accommodate diverse customer preferences, enhancing convenience and satisfaction. This versatility in payment options not only caters to different demographic segments but also positions businesses as technologically adept and customer-centric.

Protection: 

Most reputable merchant account providers offer chargeback protection, shielding businesses from financial losses due to disputed transactions or fraudulent activities. This proactive measure not only mitigates risks but also instills confidence in businesses to conduct transactions securely and efficiently.

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Why do businesses need POS merchant accounts?

With this in mind, why can't merchants instantly deposit digital payments to their bank accounts? 

In short, it’s a merchant's best interest to keep these funds in their account for a few days. Let's look at a few key reasons why this may be:

  • To avoid chargeback fee: If a customer does not receive their product or is unhappy with the quality, they may file a chargeback. By keeping the funds in the merchant account, businesses can avoid having to pay chargebacks out of their own pocket.
  • To improve cash flow: As mentioned before, one of the benefits of merchant accounts is improved cash flow. By holding onto the funds for a few days, businesses can avoid having to front the money for purchases.
  • To take advantage of float: When businesses deposit checks into their account, they usually have to wait a few days for the funds to clear. This isn’t the case with merchant accounts. Since the funds are transferred electronically, businesses can save time, taking advantage of the float and using the funds right away.

What are the merchant account fees?

Once you set up your payment processing, you can expect to pay a monthly minimum fee as well as individual transaction fees. It's also worth bearing in mind that companies charge various rates. 

Here at Epos Now, we think payments should be unproblematic. With our integrative app, you can access everything from a single portal, accepting payments at one fixed rate, as well as offering customers their preferred payment option.

Epos Now Payments is seamlessly integrated into your retail POS or hospitality POS system, helping you to take control of your finances, so you can focus on running your business. With our POS software, you can also maximize the effectiveness of Epos Now Payments and enhance your experience with our wide range of compatible partners via POS integrations available in our AppStore.

How do you obtain a merchant account?

If you're interested in obtaining a merchant account, the typical procedure is as follows:

  • Scan the market for an appropriate merchant account services provider. It's crucial to do your research since certain companies can have fluctuating percentages. 
  • Fill out an application with your provider of choice. Be sure to collate all of the required information and documentation beforehand, ready to use and wait for your application to be approved.
  • Once you're approved, you'll need to set up your payment processing equipment. This may include a POS system, credit card terminal, or virtual POS terminal.
  • Finally, you'll need to activate your account and start processing payments. Once your account is up and running, you can begin accepting credit and debit card payments from your customers.

However, with Epos Now's Merchant POS services, there's no lengthy setup or complicated pricing. The onboarding process is simple: apply for payments via your Epos Now account, complete the security checks so we can validate your details, and you're ready to take payments!

Payment processing services made simple

Take integrated payments at one fixed rate, with no hidden fees - anywhere, any time.

Keep a firm hand on your finances with an award-winning POS system.

While there’s a myriad of existing merchant solutions, POS systems are one of the simplest ways to process card transactions for both customer and merchant.

Point of sale transactions sync seamlessly with your system and are processed through a plug-in card terminal to accept credit, debit, and contactless payments (even with the physical card not present). 

The terminal will not only process the payments, but it will communicate with your POS system so you have accurate financial records. If you want to sell online, you will need to link your payment gateway with your store. When a customer completes a purchase, the payment gateway will collect their card information and facilitate the transaction. 

Financial management is a huge part of running a business, but it doesn't have to be stressful and time-consuming. Let your point of sale system handle things like reviewing sales, bookkeeping, and accounting tasks. Epos Now's state-of-the-art POS systems for businesses in various industries. 

  • Receive, create and send invoices using simple templates and a built-in VAT calculator.
  • View detailed reports on profit margin, cash flow, and other expenses.
  • Access multi-award-winning inventory management systems that sync online sales and in-person sales for the most up-to-date stock levels.

Final thoughts

Understanding what a merchant account is and its role in helping with electronic payments is crucial for businesses looking to adapt to modern consumer trends. As a merchant account provider, Epos Now offers comprehensive solutions that enable businesses to accept payments seamlessly, unlocking a range of benefits for both merchants and customers.

By leveraging POS merchant services, businesses can enjoy fast and secure payments, increased sales opportunities, improved cash flow management, flexible payment options, and enhanced protection against fraud and chargebacks. These advantages not only streamline operations but also contribute to a better overall customer experience, driving business growth and sustainability.

As businesses navigate the complexities of payment processing, choosing the right merchant account provider becomes paramount. Epos Now simplifies this process with integrated solutions that empower businesses to accept payments efficiently, manage finances effectively, and focus on what truly matters — running and growing their operations.

Whether you're a retail establishment, hospitality venue, or online store, partnering with a reputable merchant account provider like Epos Now ensures that your payment processing needs are met with reliability, security, and ease of use. Embracing modern payment technologies through POS solutions sets businesses on a path toward success in today's digital economy, where convenience, speed, and trust are key drivers of customer satisfaction and loyalty.

Liked this blog? Check out our additional resources to dive deeper into payment trends and find the most cost-effective credit card processing for small businesses:

  • Explore the latest insights and trends shaping the payment landscape. Visit Payment trends to stay informed and make informed decisions about your payment strategies.
  • Discover which credit card processing options offer the best value for small businesses. Visit Which credit card processing is cheapest for small business? to compare rates, fees, and features to optimize your payment processing costs.

At Epos Now, we're committed to empowering businesses with the tools and knowledge they need to thrive in today's competitive market. Explore our resources and take your payment strategies to the next level!

If you'd like to know anything else about Epos Now Payments, get in touch.

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