For merchants with more than one website, multiple merchant accounts are a necessity. While it would be simpler for all parties to use one processor for a number of websites, the nature of online commerce and the way it works ensures that multiple merchant accounts for multiple websites is essential.
The reasons why multiple businesses can’t operate under the same merchant account are numerous. Here’s a quick rundown of why these accounts are necessary.
For one, each business represents a different level of risk for an acquiring bank. Depending on the product, service and payment acceptance setting, businesses applying for a merchant account are placed into one of a number of risk categories. While face-to-face operations are deemed one of the lowest risk ventures, online merchants are already placed into the higher risk categories due to their online payment acceptance setting (ie. not being face-to-face).
Customers also tend to be very wary of a DBA (Doing Business As) name on their bank statement that doesn’t match the merchant they have ordered from. Let me paint a picture: if Business A is the main holder of the merchant account but Business X, Business Y and Business Z all operate under the single account, customers who purchase a product from Business Y will see Business A on their bank statement. If Business Y hasn’t made it clear that it operates in partnership or as a subsidiary of Business A, customers will question where a purchase from Business A has appeared from.
Compound that with working in a typically high-risk industry – travel, call centres and subscription-based services all tend to have high chargeback rates – and this risk level is raised even higher.
If a range of businesses from low-risk to high-risk were all operating with the same merchant account, the biggest high-risk business would adversely affect the others. If chargebacks and customer disputes were to reach an unmanageable level at this business, the single account would be closed and all firms would pay the price. With multiple merchant accounts for multiple businesses, any damage is limited to the business holding each dedicated merchant account.
Furthermore, as banks link high sales volumes with high risk, it makes sense to spread out sales across multiple merchant accounts. By spreading out monthly sales volumes with multiple accounts, businesses can lower their risk factor.
Lower price potential
With a single merchant account, businesses have to negotiate a single processing price for all of their websites. However by opting for a single account, it is likely the acquiring bank will charge a high price based on the level of risk delivered by the highest-risk business.
With multiple merchant accounts, businesses can negotiate the processing rates for each one of the sites and businesses could get better prices for their lower-risk operations, thus helping them save money instantly.
Businesses can also avoid significant profit losses if an acquiring bank or processor experiences any downtime. With multiple merchant accounts (using different processors), only one brand will be affected by downtime instead of a whole business. This way, losses are minimised.
In addition, having a merchant account for each brand makes it easier to track sales. With a single merchant account, tracking sales as well as refunds and chargebacks for each individual website may be tricky and time-consuming.
The benefits of having multiple merchant accounts are clear. More than one merchant account is extremely useful if a business is operating several ecommerce websites as a dedicated merchant account for each can reduce risk and potentially lower a firm’s financial expenditure.