How To Open a Merchant Account in 7 Easy Steps

Open Merchant Account

Opening a merchant account is a fundamental step towards growing your retail business and enabling seamless, secure card transactions.

A merchant account is a type of bank account that enables businesses to accept payments through credit or debit cards in person or over the Internet. This is convenient for both you and your customers.

Setting up a merchant account is also pretty straightforward. All you have to do is follow the steps below.

1. Determine the Ideal Merchant Account Type Based on Your Business Model

Before diving into specific providers, it’s essential to determine what type of merchant account fits your business model best. Common types include:

  • Retail merchant accounts are suitable for physical stores where transactions are processed in person using credit card machines.
  • Internet merchant accounts are designed for online businesses. These accounts handle transactions made through your website.
  • Mobile merchant accounts: If your business operates on the go, this type could be your fit. It enables you to process transactions from anywhere through mobile devices.

Some merchant account providers, such as Square and Stripe, can handle retail, internet, and mobile transactions. This makes them a flexible option for companies that do business in person and over the Internet.

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2. Choose Between an Aggregated, Dedicated, or High-Risk Merchant Account

Understanding your options is a crucial step in choosing the right merchant account. Here’s a snapshot of the three merchant account types:

  • Aggregated merchant accounts: Providers like SumUp, Square, and Stripe pool transactions from multiple businesses into a single merchant account. This makes it easy for small businesses to take credit card payments without the hassle of setting up a dedicated merchant account. These accounts are simple to set up and are usually competitively priced, particularly for small businesses that will process a relatively low number of transactions.
  • Dedicated merchant accounts: Providers such as Clover, takepayments, and Worldpay offer merchant accounts exclusive to your business (read more: Clover review, takepayments Review, Worldpay review). They often provide faster access to funds and have discounted transaction rates for high-volume customers, but they cost more to set up.
  • High-risk merchant accounts: Some industries have a higher risk of credit card chargebacks. If your business operates in a high-risk industry such as gambling, travel, or pharmaceuticals, high-risk merchant account providers like Instabill and ccNetPay may be suitable. These accounts come with higher fees due to the increased risk.

3. Research and Compare Providers

Once you’ve identified the type of merchant account you need, it’s time to research the best UK merchant accounts. Compare providers based on this checklist:

  • Consider the pricing structure, including transaction fees and monthly costs.
  • Review contract terms, including length, early termination fees, and renewal options.
  • Check if the merchant account has integrations for your existing software.
  • Prioritise security measures and fraud prevention capabilities to safeguard customer data and prevent fraudulent transactions.
  • Assess the level of customer support and service provided.
  • Research the reputation and reviews of the merchant account providers.
  • Look for robust reporting and analytics features to gain insights into your business’s transactions and sales trends.
  • Consider scalability options to accommodate your business’s growth and expansion plans.
  • Explore additional services and features offered, such as recurring billing or multi-currency support.

4. Gather the Required Documents

Before applying for a merchant account, ensure you have the necessary documentation. The documentation required will vary based on the merchant services provider, but typically you’ll need the following:

  • Business registration documents (e.g., Certificate of Incorporation, Partnership Agreement).
  • Proof of identity for business owners or directors (e.g., passport, driving licence).
  • Proof of address for business owners or directors (e.g., utility bills, bank statements).
  • Financial statements (e.g., bank statements, balance sheets, profit and loss statements).
  • VAT registration certificate (if applicable).
  • Business plan or description of the nature of your business.
  • Business licences or permits relevant to your industry (if applicable).

5. Choose a Provider and Apply

Once you’ve gathered all the necessary documents, choose a provider that best suits your needs and apply. The application process usually involves filling out an online form with your business information and submitting the required documents.

6. Undergo a Risk Assessment

After submitting your application, the provider will conduct a risk assessment. This process involves checking your credit history, assessing your business’s financial health, and reviewing your sales projections. The goal is to determine if your business presents an acceptable risk for the provider.

If your business slips up, you might be subject to freezes or holds, and those can never come at a good time. Make sure all your ducks are in a row before you undergo the risk assessment!

7. Review and Sign the Agreement

Once the risk assessment is complete, you’ll receive a merchant agreement from the provider. It’s vital to review this document thoroughly, as it outlines the terms and conditions of your account, including fees, responsibilities, and termination policies. Once you’re comfortable with these terms, sign the agreement to set up your merchant account.

Next Steps

After setting up your merchant account, you can integrate it into your business operations. For physical stores, this may involve setting up credit card machines, while online businesses will need to incorporate the account into their payment gateway.

Frequently Asked Questions

What is a merchant account?
A merchant account is a type of bank account that enables businesses to accept debit and credit card payments, either in person, online, or over the phone.
Can anyone open a merchant account?
While anyone can apply, approval for a merchant account depends on factors such as business type, credit history, and financial stability. High-risk businesses might face more scrutiny or higher fees.
How much does it cost to set up a merchant account?
Some merchant account providers charge a one-time setup fee from £50 to £100. Still, many providers charge no setup fees at all, instead making their profits through monthly service and payment transaction processing fees.
Written by:
Richard has more than 20 years of experience in business operations, computer science and full-stack development roles. A graduate in Computer Science and former IT support manager at Samsung, Richard has taught coding courses and developed software for both private businesses and state organisations. A prolific author in B2B and B2C tech, Richard’s work has been published on sites such as TechRadar Pro, ITProPortal and Tom’s Guide.