Establishing a Merchant Account
 

I hope this can help people out there. Establishing a merchant account can be anywhere from a smooth and easy process to a nightmare. Where it falls is both the product of the merchant account provider and the merchant themselves. The better the communication between the two the smoother and faster the process is. Here at IPS we do everything possible to expedite the application process. With that said, there is a detailed checklist that we provide in our application package, it is important that the merchant works diligently to provide everything possible on that list. When the application is filled out the merchant should be as forth coming as possible so we can properly asses which provider is best for the merchants business model.

Applying for a Merchant Account
An account can be opened in as little as four hours or as long as a few weeks depending on when the application is submitted, the underwriting guidelines of the processing bank, the type of risk the business has and whether or not it will be done domestically or offshore. If the merchant does everything expected of them the application process should not take longer then that without a clear and legitimate reason. If your application is taking two weeks to be approved and you?ve had little to no communication with your sales agent the service of that agent is not to the standards of IPS. You should consider canceling your application and contact an agent from IPS.

Establishing a third party account will vary from provider to provider as each has its own criteria and verification process. Your account can go live anywhere from immediately to several days or weeks. Also, the services made available to you may depend on verification of your business or personal information.

For planning?s sake the process setting up of a merchant account should be started two or three weeks before you expect to ?go live?. This will allow for unexpected delays and testing of the account and gateway.3



Contracts
All merchant account providers require that every business sign a contract when establishing their merchant account. At the very least this contract will specify what the merchant's responsibilities are as well as those of the merchant account provider. This ensures that the merchant account provider has as much protection as they can from loss due to risk and other factors. (See "Security and Risk" below to see why this is the case).

Another important factor specified in some contracts is the length of term of the contract. Some contracts require the merchant honor their contract for a set period of time. Failure to complete the contract will result in a penalty being assessed also known as a cancellation fee.

Personal Guarantee
When applying for a merchant account most small and medium-sized merchants will notice that a personal guarantee is required to establish the merchant account. A personal guarantee basically says that if the business cannot fulfill its obligations to the processing bank then the processing bank can legally pursue the guarantor to fulfill those obligations. This basically means if your business owes the processor money and it does not or cannot pay then the bank can come after the guarantor seeking those funds.

The reason why the processing bank does this is because of the high risk they are exposed to due to the nature of their business. If a new merchant commits fraud or just mismanagements their business and merchant account, the processing bank can be on the hook for a large sum of money. Naturally they wish to protect them from this scenario as best they can. By having the owner put their personal assets behind the business they mitigate this risk.

It is important to remember that the merchant, processor and bank are all on the same team. We all work together to make sure that each others interests are protected. Many merchants make the mistake of thinking the bank and processor are the adversary which leads to making issues that can be handled simply more difficult than they needed to be. If everyone involved knows all the facts we can work together to resolve the issue. This leads to a long standing business relationship instead of costly interruption to merchants business having to reapply and get approved elsewhere.

Look for my next article explaining the security and risks of merchant processing in a little more detail. If you have any questions please contact me directly.

Regards,

Keith
[email protected]
O.800.439.1974 ext.122