What's an internet merchant account?

An Internet Merchant Account (IMA) is a vital component of any e-commerce operation. Businesses wishing to accept payments online must have an IMA if they want to accept card payments via the web.

A Merchant Bank (also known in this particular role as an ‘Acquiring Bank’) will issue an IMA. It’s the bank’s job – as an acquirer of funds from card schemes such as Visa and MasterCard – to deposit customer credit and debit card payments made online into your IMA. 

No normal account

Most high street banks offer this service, but an IMA is not a normal bank account. You won’t have direct access to deposit or withdraw funds. Instead, it’ll be managed entirely by the bank or by your Payment Services Provider (PSP).

An IMA is cleared of its balance at regular intervals by the Merchant bank, either under an agreement with you or acting under instructions from your PSP. This clearing process transfers payment funds to your regular business account. This is known as ‘settlement’.

The speed and regularity of settlement will often be dictated by any perceived risk in your business. The riskier the business the slower settlement will be. Understandably, the bank will want to make absolutely sure the funds are cleared.

Two ways to go

Depending on how much time you are prepared to wait and the quality of your business plan, there are two different ways to obtain an Internet Merchant Account:

  • Directly through your bank or any other high street bank. But don’t forget that you will still need to obtain a separate payment solution in order to use it.
  • As part of a complete online payments solution via an independent PSP which can issue you with an Internet Merchant Account on behalf of a preferred banking partner.

In either case, your business will be reviewed and the potential risk in your business plan will be evaluated before you are approved for an IMA.

You will also need to agree fees associated with the account – such as authorisation charges and deductions that cover the risks of accepting card payments.

‘High street banks often have stricter requirements and greater reluctance to service smaller merchants or higher risk business plans’

Bank or PSP?

So which way should you go? Both have their advantages and disadvantages…

It’s logical to speak with your bank first about extending your existing business relationship and combining operational costs. However, high street banks often have stricter requirements and greater reluctance to service smaller merchants or higher risk business plans. Indeed, they will often take more time to review your application, thereby lengthening your time to market.

On the other hand, an independent PSP, such as Pay360, can use its expertise and banking relationships to get you an IMA quickly. A PSP is more specialised than a bank. So, by focusing only on the needs of those wishing to process card payments online, the chances of an application for an IMA being successful are greater – especially for smaller or new businesses.

Shop around

Fees and rates vary depending on the solution and the supplier. So it’s worth shopping around and obtaining several quotes before making a decision. Also, ask if the fees quoted are inclusive of everything you need or whether you will be paying another provider in addition to your IMA provider.

‘It’s worth shopping around and obtaining several quotes before making a decision’

To discuss your options, contact our experts now on 0333 313 7160

What’s expected of you?

Here’s a top line checklist of what you’ll be asked for, either immediately or during review, when you apply for an IMA:

  • Detailed business plan 
  • Live website
  • Description of your product/services
  • Suppliers’ details
  • Delivery process
  • Online terms and conditions
  • Expected revenue, transaction levels, order value, and number of credit card transactions
  • Secure server details
  • Business accounts
  • Current bank details
  • Trading history (if applicable)
  • Details of business owners and/or partners

Too much hassle?

If the work required to obtain an IMA from a bank is one task too many, then consider using a PSP such as Pay360 to arrange it. A PSP can simplify the application process and deal with the bank for you. It all comes as part of a complete online payments solution that includes both the IMA and a Payment Gateway – making the whole process a lot smoother.

Don’t forget your gateway

If you already have an IMA or choose to go direct to a bank for one, then you’ll also need to choose a PSP who can supply your business with the most appropriate Payment Gateway to connect your website with the bank and process payments.