Many clients come to us with the same question: “
how to accept credit card payments online." Well if you have the same question, then you have come to the right place! In this article, we explain the process of accepting credit cards for your e-commerce business.
How to accept credit card payments online
So you have your website ready, your products in stock, but no way to accept payments from your clients. What you need, is a merchant account.
At this point, let's step back and look closer at what a merchant account is.
Merchant accounts are in reality contracts between a seller (you), and a credit card processing company. The payment processing companies are the ones that offer merchant account opening services. To simplify, a merchant account is a type of bank account, (a payment processing system), that allows online businesses to accept payments via debit or credit cards.
It is a system that manages the transfer of money from your clients’ bank account via their credit or debit card, to your merchant account, which consequently is connected to a bank account.
Is PayPal a merchant account?
Another question we often get is “is opening a merchant account the same as opening a PayPal account?" The answer is no. A PayPal account is not a merchant account.
Paypal is a third party processing service. PayPal accounts are often used by small start-up businesses. When the business eventually grows, they switch to a merchant account. There are a number of advantages of merchant accounts over PayPal accounts, with the most important being:
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Your clients' payment is directly deposited to your bank account whereas with PayPal the money is deposited in your PayPal account. You then have to request a transfer to your bank account, which causes delays.
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Merchant accounts have lower transaction fees.
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Merchant account enable you to show your company’s name on the client’s bill after the transaction.
Of course, PayPal can be a suitable option in the beginning and is good with low transactions and volume businesses. But if you are running a successful online e-commerce business, a merchant account will help you save money and provide great flexibility.
Types of merchant accounts
There are two types of merchant accounts, the International merchant accounts and the European Merchant accounts.
International Merchant accounts are opened and operated by payment processing providers in the US, and to some extend Singapore and Hong Kong. Such accounts are mostly used in these regions only because the merchant accounts are connected to an acquiring bank of the same region.
European Merchant accounts are set-up using an EU acquiring bank and operated at a bank that is either based or operating in the European Union region. It is therefore required that the company must also be incorporated in a country of the EU region. However, your clients may use your account from any location, not just the EU, with no restrictions at all!
We now know what a merchant account is. Now, how do you get one?
Now it’s time to open a merchant account. As the majority of payment processors out there are European based, you also need to satisfy the requirement of having an EU registered company. But don’t worry if you already have a company registered in another a non-EU jurisdiction!
If you have a company that is incorporated in another jurisdiction, we can set-up an efficient structure by registering an EU company, which will act as a collecting agent for your existing non-EU company. Your non-EU Company will have an agreement with the EU Company, where the latter will be offering these services for a fee.
This is a very optimal structure in terms of the benefits you can get with good tax planning. What do we mean? For example, if you register your Company in Cyprus, you can utilise the company as a tax efficient structure and benefit from a long list of benefits such as lowest corporate tax in the EU, over 60 double tax treaties, no withholding tax on interest and dividends paid to non-residents of Cyprus, etc).
But that’s another story. Which is explained right here.
So you have your EU company and your website. What next?
You can either apply directly with the payment processing company for an account, or you can do it through an intermediary company.
Applying for a merchant company through an intermediary company such as ours, will increase your chances of being accepted as we work with many payment-processing providers and can help all kinds of businesses, regardless if it is a low or high-risk business. This means we can try several solutions, until we find the right one for you.
After an initial consultation with us, we will ask you to provide us with the standard required documents (corporate documents, passport copy, recent utility bill, bank reference letter), your website’s URL, business plan and transactions history. Once approval is given by the processor, the merchant account will be opened.
Do you want to open a merchant account and start accepting payments through your website? Now you know how to accept credit card payments online!
Contact us and see what we can do for you.