Requirement of merchant accounts for merchant affiliates

For acquiring a merchant account, there are many requirements and formalities attached. One must understand the use and necessity of such requirements and formalities. A merchant account is an agreement of a financial nature between the bank and you since it is the bank that is providing you with the respective account. And just as the bank does impose rules on other regular accounts like the savings or a checking account, it is bound to impose rules and formalities on merchant accounts as well.

There are three main types of risks that come with merchant accounts. They are:

·         Credit risk – This type of risk is undertaken by the bank when the merchant owes an amount to the bank. It would be surprising to know that this isn’t the most important criteria when it is about accepting or even rejecting any merchant account application. The credit ratings start gaining importance longer you stay in a business.

·         Fraud risk – This type of risk entails faulty processing of credit card transactions which remain unauthorized by the respective holder of the credit card. This sort of a fraud generally takes place with instances of card numbers or stolen cards. Various businesses are much more susceptible to much more severe fraud risks. Merchants engaged in such types of businesses will have to take prudent measures and precautions.

·         Contingent liability risk – This type risk is considered the greatest when it comes to merchant accounts. This includes not only the frauds but all other different types of unforeseen risk associated with marketing and businesses. Certain types of contingent liabilities are associated with certain intangible services. An example of such an intangible and a high risk service would be an online sale with pay-per-view video that is delivered online. Now such a service is highly risky because there is no way that the merchant can provide proofs of every delivery that takes place.

There are certain arenas pertaining to businesses, products or even services for which you would find it difficult to gain a merchant account like employment agencies, airlines, freight forwarding, mortgage brokers, prepaid phone cards, check cashing establishments, collection agencies, hotel reservation services, outbound telemarketing, magazine subscriptions, travel certificates, timeshare organizations and such other arenas.

There are certain other businesses that ideally require undertaking payments higher than any normal setup and transaction fees like online magazines, video gaming, movies and such other fields.

An affiliate program in relation to merchant accounts provides an excellent opportunity for raking in a monthly income. Any high risk business will require a higher setup and transaction fees as compared to other lesser risky ventures. For them, a reserve would be necessary though most merchants look at the reserve as a negative requirement since it can prove to be a safety net for the venture that are under the strain of higher risks. Reserves are generally considered as certain percentages of the monthly charge volume and are prepared by withholding certain percentage of every transaction.