What is a merchant account?

A merchant account is a specialized account used in the payment acceptance process. It temporarily holds funds while card transactions are authorized, cleared, and settled, before those funds are paid out to your business bank account.

Credit card merchant accounts are different from business bank accounts. They’re often hosted by the acquiring bank, which is responsible for clearing funds and facilitating the final settlement. 

Merchant accounts are an important part of payment processing.

Merchant accounts play a central role in both the authorization and settlement phases of every transaction.

1. During authorization, the acquirer sends a request via the card network to the customer’s bank.

2. If the request is approved, the payment is authorized and the customer’s funds are earmarked.

3. During settlement, funds travel through the card network into a merchant account.

4. The acquirer processes the funds and sends the money to your business bank account.

   

Read next: How merchant services work

There are two main routes to setting up a merchant account: 

Option 1: Apply for a merchant account with an acquiring bank

Option 2: Set up merchant account with your payment service provider

Both have their pros and cons. Here’s what to consider with each approach.

Option 1: Setting up a merchant account through an acquiring bank

You can stay in full control of the process by setting up a merchant account directly with an acquiring bank. 

Pros of setting up a merchant account through an acquiring bank:

• Low fees for high sales volume

• Personalized customer support

• Offered to high-risk industries

Setting up an account with a bank can take anywhere from a few days to a few weeks. Acquiring banks often conduct an underwriting process to minimize the risk. This process usually requires you to share information about your business, such as your legal company name, company tax ID, and business bank account details. 

Option 2: Setting up a merchant account with your payment provider

Some payment providers offer merchant accounts to their customers without doing an underwriting process. This is generally a faster way to set one up. Since payment providers already have access to your payments data, it’s easier for them to assess the risk.

Some of the pros of using a payment provider include: 

• Fast application process

• Simple flat-rate pricing structure

• Flexible contracts

However, not all payment providers are built equally. Make sure to look for payment providers that have a proven track record, can handle the scale of enterprise payments, and which have a global footprint that matches your business needs. You’ll also need to assess the fee structure, and see how it integrates with the rest of your payment stack. 

Choosing the best merchant account provider depends on your business model, where you sell, and how complex your payments and reporting needs are. Every business is different, and you need to consider where the merchant account fits into the full payments picture. 

While your provider should support you through the process, there are a few criteria to evaluate: 

International presence

Depending on your business setup, you may need multiple merchant accounts. You need one for each legal entity through which you process payments. Typically, businesses have one account per region, but some businesses disregard region and are purely based on legal entities.

If you’re a large international brand, look for a provider who can handle international complexity. Evaluate providers on whether they offer multi-currency merchant accounts and forex merchant accounts. You should look at this in line with the rest of their international offerings. 

Channel coverage

You may need to set up different merchant accounts for different payment methods. We also recommend creating separate accounts for different channels. This will help you separate fund flows and reporting, plus it lets you choose different access setups. 

You’ll likely want to create:

• Online merchant accounts

• ACH merchant accounts

• POS merchant accounts

Payout speed and cash flow requirements

You won’t be able to access money while it’s held in a merchant account. It can take up to five business days for the bank to process the payments and deposit the funds into your business bank account.

Payout speeds vary by provider, region, payment method, and risk approach, and it’s a decision that matters a lot to your finance team and overall cash flow. Some providers may let you request instant payouts. Others may take a few days to process your payments.

Integration and operational fit

Implementation matters. If you’re processing millions, you can’t afford for your merchant account to be unstable, or for there to be hiccups between the merchant account, payment processor, card networks, and banks. 

Consider how your merchant account integrates with the rest of your business, particularly your payments tech stack. Ask about integrations with your point of sale system and website. Alternatively, look for a provider that offers the full payment processing workflow in one system. 

Security and compliance

Every part of payment processing needs to be secure. Look for companies that have strong reputational standards when it comes to security, and ask how they maintain them. If you’re working internationally, you may be subject to different compliance laws, depending on your region. Regardless of where you operate, you should look for PCI DSS compliance. 

Security also comes down to system architecture. If your entire payment processing workflow is contained in one unified system, it means there are fewer points of potential failure. 

Merchant accounts cost money to manage, and merchant account fees can get complex. There’s rarely one set fee, and they differ depending on whether you choose an acquiring bank or use an aggregated merchant account from your payment provider. 

With an acquiring bank, the most common pricing model is charging a percentage per transaction volume. Sometimes the acquiring bank also charges a setup or contract termination fee.

Payment providers often bundle merchant account costs into one fee. While pricing models vary, fees often include:

• Processing costs: Interchange and scheme fees plus the provider’s markup.

• Platform and gateway fees: Costs tied to using the payment platform or gateway layer.

• Dispute and refund fees: Chargeback handling, retrieval requests, and refund processing can all affect total cost.

• Cross-border and currency costs: If you accept international payments, FX and cross-border fees can materially change merchant account costs.

• Risk and fraud tooling: Some tools are typically included. Others, like 3D Secure and fraud prevention, may be paid add-ons that are worth the extra investment.

If you’re evaluating providers, ask what they do to help reduce the overall cost of payments. Their support team should work with you to optimize your entire payment funnel for the right balance of conversion, authorization, security, and cost.

We make it easy for you to get started with a merchant account. You automatically get a merchant account when you start accepting payments with us. 

Once you're set up, you get personalized customer support and can lower your fees for higher sales volumes.

Merchant accounts are part of our unified payments platform. As a payments provider, we handle the entire payment processing workflow, from gateways to payouts. We also act as the acquiring bank. All of your data is handled by our team, which makes setup fast. The entire tech stack was built and is managed by our skilled engineers, so there are zero third parties that can slow down your payments. 

Curious about how our banking license makes managing your merchant account easier? Learn more about Adyen’s banking licenses, or get in touch with our team to get started.