Merchant Agreement
A merchant agreement is a contract governing the relationship between a business and the merchant acquiring bank it partners with. This partnership entails obtaining information from the merchant’s payment gateway technology, communicating with card issuers through the acquirer’s network, receiving authorization, and settling the transaction in the merchant’s account. The fees merchants pay for electronic payment processing services vary based on online and brick-and-mortar transactions. Merchant agreements highlight copious rules, including the following requirements: The merchant must accept all valid cards issued by the payment network. The merchant must prominently display the logos of the payment cards it accepts. A merchant agreement is a contract establishing the parameters of the relationship between a merchant acquiring bank and the business it serves. A merchant agreement is a contract governing the relationship between a business and the merchant acquiring bank it partners with.
What Is a Merchant Agreement?
A merchant agreement is a contract governing the relationship between a business and the merchant acquiring bank it partners with. This document details the full range of electronic payment services that the merchant acquiring bank agrees to provide.
In most cases, such banks are responsible for facilitating every aspect of the electronic transaction process. Merchant banks frequently also serve as credit card providers for both open loop and closed loop merchant cards.
Acquiring Bank Relationships
Acquiring bank relationships make it possible for merchants to conduct sales of goods and services using electronic payment transaction methods. This partnership entails obtaining information from the merchant’s payment gateway technology, communicating with card issuers through the acquirer’s network, receiving authorization, and settling the transaction in the merchant’s account.
The fees merchants pay for electronic payment processing services vary based on online and brick-and-mortar transactions. Merchants are generally required to pay comprehensive fees to the acquirer for each electronic transaction, which covers both the acquirer’s fees and the processor's fees. Acquirers typically also charge a monthly fee for the settlement and bank account services they provide for merchants.
In cases wherein merchants disallow electronic payments and only accept cash, they will generally set up a standard bank account, that has its own set of requirements and contractual provisions.
While merchant agreements typically apply to vendors of goods or services, they can also touch upon foundations and charitable institutions.
Rules and Requirements
Merchant agreements highlight copious rules, including the following requirements:
Related terms:
Acquirer
An acquirer is a company that acquires rights to another company or business relationship through a deal. read more
Authorization Only
An authorization only transaction is one in which a pending transaction is placed on the account of a card user, which is settled at a later date. read more
Brick-and-Mortar
The term "brick-and-mortar" refers to a traditional business that offers its products and services to its customers in an office or store, as opposed to an online-only business. read more
Checking Account
A checking account is a deposit account held at a financial institution that allows deposits and withdrawals. Checking accounts are very liquid and can be accessed using checks, automated teller machines, and electronic debits, among other methods. read more
Credit Card Authentication
Credit card authentication is one step in the electronic process of completing a purchase with a credit card. read more
Mastercard
A Mastercard is any electronic payment card that uses the Mastercard network for processing transaction communications. read more
Open Loop Card
Any charge card that is widely accepted at a variety of merchants and locations is considered an open loop card. read more
Processing Date
After a customer makes a credit or debit card purchase, the specific day the transaction is processed by a merchant is called the processing date. read more
What Is a Settlement Bank?
A settlement bank is the last bank to receive and report the settlement of a transaction between two entities. read more
Per-Transaction Fees
A per-transaction fee is an expense a business must pay each time it processes an electronic payment for a customer transaction. read more