Types of Merchant Accounts

What is a Merchant Account?

A specific bank account that enables a merchant to accept payment by credit card for goods or services offered through their business. Such credit card payments can only be processed through this type of account.

What is a Direct Merchant Account?

Sometimes referred to as a Dedicated Account, a merchant account solely dedicated to the merchant by the processing bank. In opening a Direct Merchant Account, a merchant acquires a private merchant identification number (MID), and though still processing via a processor’s payment gateway, provides their own customer service and is allowed their own private billing descriptor (name and number to appear on customer’s credit card statement…for IPSP Merchant Accounts, the processor’s name and number would appear). Many Internet merchants find this lowers their chargeback percentage since customers recognize the charge.

Through a Direct Merchant Account, Internet merchants more likely than not enjoy a lower discount rate with the bank and begin to establish their own offshore credit history with the processing bank. It should also be noted that, even though a Direct Merchant Account is essentially an Internet merchant’s own account directly with the bank, they are still able to take advantage of the processor’sinternational payment gateway technology and customer service if they’d like while, at the same time, control their own direct merchant account. A Direct Merchant Account acts as a comprehensive platform enabling Internet merchants to perform a multitude of processing functions, including batch uploads/captures, full control of online credit card transactions, and fraud management.

What is an IPSP Merchant Account?

An Internet Payment Service Provider solution is an Internet merchant account used to process the online credit card transactions of many Internet merchants all processing online credit card transactions under, what can be thought of as, a multitude of sub-merchant accounts. This type of account is usually owned and operated by a processor (we are a certified IPSP). It is ideal for Internet merchants that do not qualify for their own Direct Merchant Account and/or Internet merchants not wishing to setup a corporation with a resident agent in the country of the acquiring bank. This is now required for Direct Merchant Accounts per recent Visa/MasterCard regulations. It is standard for Internet merchants to begin processing with this type of account before acquiring a Direct Merchant Account.

NOTE: We screen and monitor our Internet merchants very carefully so that each and every Internet merchant is not at risk of losing their processing as the result of another Internet merchant’s mistake!

Banking Structure for Processing

What is an International Bank Account?

An overseas bank account, located in another country, which can be used to simply house funds, or to be linked with a company’s Merchant Account in order to receive business revenue.

What is an Acquiring Bank?

Sometimes referred to as the Processing Bank or the Acquirer, the bank that has the relationship with Visa/MasterCard and other credit card acquirers and at which the merchant account is setup to initially receive funds resulting from online credit card transactions of the merchant.

Who is the Processor?

The entity that has an established relationship with the Acquiring Bank. Transactions are processed via the Processor, sent to the Acquiring Bank for authorization, and then settled out to the merchant by the Processor. The Processor underwrites the merchant account in the case of IPSP Merchant Accounts and forwards documents for due diligence to the Acquiring Bank for underwriting in the case of Direct Merchant Accounts? In either case, the Processor supplies the International Payment Gateway and customer service to the merchant.

With IPSP Accounts, the Processor absorbs much of the risk because the merchant is using the Processor’s International Merchant Account and the Processor is paying settlements to the merchant’s corporate settlement account, in many cases, prior to receiving settlements from the Acquiring Bank. For this reason, it is common for Processors to impose high Reserves to cover their potential losses. However, in the case of international merchant accounts, it is common for banks to do this even with Direct Merchant Accounts since it is often times the case they are dealing with higher risk businesses that warrant backup Reserves.

Aspects of International Merchant Accounts

How is an International Merchant Account different from a Domestic Merchant Account?
The transactions are processed through an international bank account. An Offshore Merchant Account is harder to acquire than a U.S. Merchant Account because international banks tend to accept higher risk accounts that domestic banks are not willing to take on. Because of this, the international banks have a very tedious underwriting process. This is not to say that international banks will accept more risk, but they will underwrite accounts considered to be high risk in the industry. Such accounts can range from those simply processing large monthly volumes, those without processing history, and those with a bad rap as with adult, gaming, online pharmacy, telemarketing, and travel.

Corporate Settlement Account for Payouts

What Bank Account should I use with my International Merchant Account?
An already existing U.S. Bank Account can be used to accept the funds resulting from the online credit card transactions of an international merchant account. However, we provide International Bank Accounts to which a merchant can have funds from their online credit card transactions sent as well. These corporate settlement accounts securely hold funds while offering many of the benefits U.S. bank accounts offer, including online banking & international debit cards for easy access to funds.

How often will I Receive Payment for Online Credit Card Transactions Processed Through my Merchant Account?

Funds will be transferred weekly, unless otherwise stated at the time of underwriting, from your merchant account into the account of the bank that you designate for settlement of funds. For Direct Merchant Accounts setup through IBC Merchant Accounts, you will receive Daily Payouts to your Corporate Settlement Account!

Structure for Online Credit Card Acceptance

What Credit Cards and other Payment Methods will I be able to Accept?

A business can accept payment from Visa, MasterCard, and other credit & debit cards through a merchant account. Depending on the processor we send you to, among the cards accepted online are Visa, MasterCard, Maestro, America Express, Diners Club International, Discover, Solo, and JCB credit and debit cards. We will be expanding our services to other types of cards as demand for such increases. We also support Verified by Visa and MasterCard SecureCode, and we can process ACH (check) and E-Check transactions all in real-time as well.

What is a Payment Gateway?

A real-time transaction processing system that operates as a payment service using a secure transaction server on the Internet. Most of the systems our processor’s provide are used to submit, authorize, capture, and settle online credit card transactions without the need for a separate transaction terminal or processing software. However, often times, merchants will already have processing software and/or shopping cart software established for their website. The software is integrated with the processor’s International Payment Gateway. Data entered by the customer online is transmitted to the credit card acquirer. The transaction amount is then authorized by the bank in real-time, and the transaction is settled.

What is a Virtual Terminal?

An online transaction terminal hosted on the International Payment Gateway’s transaction server. Internet Merchants simply gain access to their Terminal by logging in using their web browser. They can then perform live online credit card transactions using their Internet merchant account. The Internet merchant enters a transaction manually and the Virtual Terminal will process the transaction in real-time just like a physical card terminal would. Just as with an automated Shopping Cart, data entered into the Terminal is transmitted to the credit card acquirer. The transaction amount is then authorized by the bank in real-time, and the transaction is settled.

What is a Shopping Cart?

A software program that is integrated with the international payment gateway of a Internet merchant’s website for the purpose of transmitting data from online credit card transactions to the credit card acquirer. The transaction amount is then authorized by the bank, and the transaction is settled just as when transaction data is entered into a Virtual Terminal.

What makes a Shopping Cart different from a Virtual Terminal?

A Shopping Cart does not require the merchant to enter data manually since the data is already entered online into the cart by the customer and transmitted automatically to the bank.

What makes a Virtual Terminal different from a Shopping Cart?

A Virtual Terminal is not integrated with the merchant’s website. Rather, it is a terminal apart from the website that allows the merchant complete access to their account giving them the freedom to charge customers’ credit cards and issue credits back to customers’ accounts manually. If they wish, the Internet merchant can have a Shopping Cart linked to their website for automated charges and still use a Virtual Terminal to enter charges and credits manually.

The key difference is that, with a Virtual Terminal, orders can be taken from pre-collected forms or telephone orders and entered manually. In this case, a Shopping Cart is not used. An Internet merchant is however able to have an automated Shopping Cart and a Virtual Terminal, using both to process their online credit card transactions.

Will the processor you use supply a Shopping Cart with my merchant account, and do I need to have one?

No and No. In most cases, the processors do not supply Shopping Carts with their accounts. They only supply the International Payment Gateway with your merchant account so you can process orders online. If you do not sell numerous different products, or if you are just providing a service for a fee, then you probably do not need the extra convenience of a shopping cart. In that case, you can use a Virtual Terminal to enter orders manually in your online terminal separate from your website. For instance, you would retrieve customers’ credit card information from a secure form on your website, and then enter it manually in your online terminal. If you would like customers to enter their credit card information themselves, but do not feel the need for a Shopping Cart, you can even have a hyperlink “Pay” button, similar to a “PayPal” button, which directly links to your Virtual Terminal for customers to still take advantage of real-time processing without the integration of a Shopping Cart. If you choose to use a Shopping Cart Program or Software Package that you already have setup, we will let you know whether or not it’s compatible with the International Payment Gateway the Processor will supply with your account.

Will the processor you use supply a Virtual Terminal with my merchant account?

In most cases, a Virtual Terminal will be supplied with your Internet merchant account. However, in some cases, after underwriting a particular account, the Processor determines that Virtual Terminal access would warrant too much risk.

Does my Shopping Cart Software have to be compatible with the Processor’s Payment Gateway?

Yes. If you will be using a Shopping Cart with your website, the Shopping Cart Software you use must be compatible with the Processor’s International Payment Gateway in order for the Cart to function properly. There are usually over 100 popular Shopping Cart Technologies that are compatible with any given International Payment Gateway, so there is usually not a problem with Integrating the Shopping Cart and International Payment Gateway. If there is, the Processor’s have technical staffs on hand to assist you or your technical assistant(s).


Rates and Fees

What is a Discount Rate?

The processing fee associated with a Merchant Account. It is the percentage of the gross transaction amount that the bank/processor deducts prior to transferring the deposit into your bank account. Typical Discount Rates offshore range from 3 to 10% of credit card transactions, depending on your type of business and various other factors determined by the specific bank and/or processor at time of underwriting. High volume and/or low risk accounts may qualify for lower Discount Rates. Already well established businesses with good processing history can also qualify for a lower Discount Rate.

What is a Per Transaction Fee?

The fee associated with each transaction processed through a Merchant Account. It is a nominal amount charged on each transaction. Typical Per Transaction Fees through International Banks range from USD 0.35 to 1.00 of each transaction.

What is a Chargeback?

A credit back to a cardholder’s account, which occurs when a cardholder informs their credit card issuer, acquiring bank, or the processor that a particular charge was not authorized or that goods or services were not delivered or provided as promised. If a customer alleges the goods or services paid for were not delivered or provided, then the merchant has seven days on average to produce evidence proving the goods or services were delivered or provided or that the cardholder’s account was credited. A high Chargeback history can often times result in a Processor holding funds and, in excessivecases, closing the Merchant Account. Excessive is usually considered to be over 2.5% by a standard Processor using international banks. Typical fees range from USD 25 to 40 per Chargeback.

What is a Reserve?

A given amount of money held by the Processor to guard against excessive chargebacks and other potential financial risks. Most Offshore Processors processing credit card transactions for higher risk Internet businesses generally impose a 5 to 10% Reserve for six months. This is called a Rolling Reserve because each month after the sixth month, the first month’s Reserve is paid out to the merchant while the lot of the Reserve ‘Rolls’ into the seventh month.

Does IBC Merchant Accounts charge an Application Fee for its Merchant Accounts?

No. There are no upfront application fees until your application is approved for processing. Once approved, the cost includes setting up the account with the acquiring bank and the Payment Gateway.