A merchant account is an essential element of any company accepting online payments. When you apply for a merchant account, you’ll be setting up an arrangement between yourself and an acquiring bank, through which secure online payments are processed.
On the high street, retailers use an electronic point of sale (EPOS) device to swipe credit and debit cards. This is the job that payment gateways do for the eCommerce business.
An acquiring bank enables the eCommerce business to operate in its market, processing its financial debits and credits. Here we look at how acquiring banks protect themselves by credit rating its customers.
Why acquiring banks run merchant account credit checks
Though online fraud is highlighted as one of the biggest problems facing online businesses today, for an acquiring bank perhaps its biggest risk is that of default. A credit check tells the acquiring bank how its eCommerce business customer has conducted its financial affairs in the past, which is considered a good indication of how it will act in the future.
The better credit history you have, the more highly regarded you will be as a business – and this will affect rates and services you are offered by the acquiring bank.
How acquiring banks run credit checks on merchant accounts
In the same way that a bank would run a credit check on an individual, an acquiring bank may use the services of a dedicated credit history company, such as Equifax or Experian. These companies will hold up to six years of financial data on businesses and individuals associated with those businesses (eg directors and owners).
Alternatively, the acquiring bank may run its own credit history checks, though this is less common.
How a poor credit check will affect an online merchant account
If your credit history is very poor, as a worst case scenario an acquiring bank may refuse the application for a merchant account, effectively prohibiting you from trading.
Alternatives if your merchant account application is denied
A poor credit history will highlight you as a high risk merchant, in which case you will need to open a merchant account with an acquiring bank that specialises in high risk merchant accounts.
Foreign merchant account providers may also be more willing to accept your application, and these may also offer wider payment processing ability (for example foreign currencies).
What to do if your merchant account application has been denied
Of course, the best advice is to maintain a good credit history at all times, but if this isn’t the case then the best course to take will be to talk to specialists in the field who will be able to access a number of acquiring banks and advice on the most suitable for your particular business.
If you need to discuss your requirements, North Payments has the experience, expertise, and connections with acquiring banks to help all eCommerce businesses source the most appropriate merchant account.