Applying for a direct merchant account is a critical step for businesses looking to accept payments via credit or debit cards. Whether you’re a small business owner or part of a larger organization, having a direct merchant account offers better control over your transactions and can often result in lower fees than using third-party processors. However, the process requires careful preparation and adherence to specific requirements.
What Is A Direct Merchant Account?
A direct merchant account is a specialized payment processing account that allows businesses to accept card payments directly, bypassing third-party processors.
In recent years, Visa’s Acquirer Monitoring Program (VAMP) and Visa Integrity Risk Program (VIRP) have added new layers of complexity to the merchant account application process. These programs monitor fraud and chargeback activity, affecting both merchants and acquiring banks. Understanding these programs and how they apply to your business will ensure a smoother application process.
This guide covers everything you need to know about applying for a direct merchant account, including the necessary documentation, fees, and how VAMP and VIRP fit into the equation.
Looking for a high risk merchant account? Learn more here.
Key Requirements for Applying for a Direct Merchant Account
To apply for a direct merchant account, you must provide various pieces of documentation that demonstrate your business’s financial stability, legitimacy, and compliance with payment processing standards. Here are the key requirements and what you will need when applying:
Business Information
- Legal Business Name: The official registered name of your business.
- Business Address: The physical location where your business operates.
- Tax ID Number (EIN): An Employer Identification Number issued by the IRS for tax reporting.
- Business Structure: Whether your business is a sole proprietorship, LLC, corporation, etc.
- MCC Code: The Merchant Category Code (MCC) used to classify your business type.
Financial Information
- Bank Account Details: Information about your business’s checking account, where funds will be deposited.
- Credit Card Processing History: If your business has processed payments before, provide a record of your past transactions and chargebacks.
- Chargeback History: If applicable, documentation of any chargebacks incurred.
Creditworthiness
- Personal and Business Credit Scores: Both your personal and business credit scores will be evaluated as part of the underwriting process.
- Projected Sales Volume: Estimates of your monthly sales and average transaction amounts, helping processors determine risk and fees.
Business Documentation
- Business License: Proof that your business is legally authorized to operate.
- Articles of Incorporation: Official documents that show your business’s formation.
- Industry-Specific Certifications: If your business operates in a regulated industry (like healthcare or pharmaceuticals), you may need to provide additional certifications or licenses.
Understanding VAMP and VIRP in the Application Process
While the main goal of applying for a direct merchant account is to secure a reliable payment processing system, it’s important to understand the role VAMP and VIRP play in the process.
Visa Acquirer Monitoring Program (VAMP)
The VAMP program is used by Visa to monitor acquiring banks and the merchants they serve. The program focuses on chargeback ratios, fraud activity, and overall payment security. For businesses applying for a direct merchant account, maintaining a low chargeback ratio is essential. If your business exceeds Visa’s chargeback thresholds, it may result in higher fees or even a denial of your application.
Visa Integrity Risk Program (VIRP)
VIRP is designed to ensure that acquiring banks maintain proper oversight of their merchants and adhere to Visa’s fraud prevention standards. Merchants must demonstrate they have strong fraud prevention measures in place, especially if they operate in high-risk industries. Failure to comply with these standards could affect your approval chances for a direct merchant account.
How to Prepare for the Application Process
To ensure the application process goes smoothly and your chances of approval are maximized, it’s important to take the following steps:
Gather Required Documents
Make sure all necessary documentation is up to date and ready for submission. This includes business identification, financial records, and any industry-specific certifications required by your business.
Maintain a Low Chargeback Ratio
Since chargeback rates are closely monitored under VAMP, keeping your chargeback ratio low is vital. Implement clear refund policies and work proactively with customers to resolve disputes.
Be Transparent About Your Business
When applying for a direct merchant account, transparency is key. Be honest about your business history and practices. This helps build trust with payment processors and prevents delays in the underwriting process.
Fees and Costs of a Direct Merchant Account
While direct merchant accounts generally offer lower fees than third-party processors, they still come with associated costs. These fees can vary depending on factors such as industry, sales volume, and creditworthiness. Below are the typical fees you can expect:
Setup Fees
One-time fees for setting up and configuring your merchant account. These can vary based on the complexity of your business.
Monthly Maintenance Fees
Ongoing fees for maintaining your account, including monitoring, reporting, and fraud prevention services.
Transaction Fees
Per-transaction fees that can be based on a percentage of the transaction amount, plus a fixed fee per transaction. These fees may be higher if your business is deemed to be higher risk.
Chargeback Fees
Fees charged for each chargeback processed, which may be higher for businesses with a history of chargebacks.
Early Termination Fees
Penalties for canceling your account before the end of the agreed-upon term, especially if you terminate before meeting the contract’s requirements.
Best Practices for a Successful Application
To improve your chances of a successful application and long-term account approval, consider the following best practices:
Stay Compliant with PCI-DSS Standards
Compliance with PCI-DSS (Payment Card Industry Data Security Standard) is mandatory for all merchants handling card payments. Ensuring that your business follows these security protocols can reduce fraud and prevent penalties.
Keep Documentation Up to Date
Ensure all documentation is accurate, current, and complete. This includes business records, financial statements, and any required certifications.
Be Prepared for the Underwriting Process
The underwriting process can take time, and payment processors may request additional information or clarification during the review. Being prepared and responsive will help expedite the process.
Conclusion
Applying for a direct merchant account involves a detailed process that requires careful preparation and attention to detail. By understanding the documentation needed, maintaining a low chargeback ratio, and ensuring compliance with industry standards like VAMP and VIRP, businesses can improve their chances of securing a reliable and cost-effective merchant account.
If you’re ready to begin the process or need assistance in applying for a direct merchant account, contact us today to learn more about how we can help streamline the application process for you.
