- December 8, 2018
- Posted by: ipaytotal
- Categories: best high risk merchant account provider, Dedicated Merchant Accounts, E-Commerce, Fraud Prevention, high risk merchant account application process, high risk merchant account instant approval uk, online payments
Most people don’t understand the difference between an aggregate merchant account and a dedicated merchant account. It’s a very common question merchants ask before consenting to any merchant account arrangements for the first time. However, understanding the difference between them helps organisations to choose the right payment gateway and merchant account solution.
Why you need an aggregate or dedicated merchant account
In the past, people used to do business by using cash as a reliable method of payment processing. Entrepreneurs would gather the money after every sale and then deposit the funds into the business bank account. Now, there are many card associations and payment service providers who enable organisations to acknowledge credit cards. So, merchants would now be able to accept payments both in-store and online.
With the assistance of credit card processing accounts, merchants can generate high-volume sales. A merchant service plays a vital role in the development of any business, and it also helps to maintain regular cash-flow. Without a reliable payment processing choice, it’s difficult for any merchant to be competitive.
What is a dedicated merchant account?
A dedicated merchant account is similar to your own internet-based bank account, set up especially for your online business. In other words, it’s an account that the provider has exclusively established for the merchant.
With a dedicated merchant account, a retailer can discuss rates for the company’s sales. The rates usually rely on the number of sales volumes you have and the kind of items you sell. So, a dedicated merchant account has authority over your money.
Here at iPayTotal, we give businesses a dedicated merchant account after an intensive check of their background. We guarantee 100% security before offering a retailer a dedicated account.
MID is an acronym for Merchant Identification Number. A business with high volume and low chargebacks can be issued with a direct MID merchant account. Approved merchants will receive a custom descriptor so that the account is uncapped, allowing the merchant to process unlimited volume.
Merchant acquiring banks approve and assign MIDs themselves to certain businesses. These merchants will then receive a special and private MID. Unlike aggregate accounts, MIDs are set up by a payment service provider.
Dedicated merchant accounts are more difficult to become approved and set-up fees can be expensive. The merchant usually requires high volumes and low chargebacks in order to acquire a direct MID. In exchange, the approved merchant will obtain a custom descriptor.
A dedicated merchant account is the way to go since the merchant doesn’t need to worry about other bad merchants affecting his or her business. Unfortunately, direct MIDs can be much harder to obtain than aggregate accounts at high risk.
What is an aggregate merchant account (AGG)?
Also known as a shared merchant account or third-party payment aggregation (TPPA), an aggregate merchant account is the one in which an acquiring bank places high-risk merchants on the same account. With retail, low and some high-risk merchants have their own custom merchant accounts. Aggregate merchant accounts host several merchants, who also share one billing descriptor.
Usually, an AGG works out well for merchants who are unable to qualify for MIDs by not meeting the volume requirements or by having a history of high chargebacks. The underwriting is very liberal and fast.
It is very common for a merchant to start with an AGG and then move to a MID, after becoming established. The disadvantage of using an aggregate merchant account is that the merchant has less control over the period the money takes to complete the transaction process.
However, owing to the difficulty and expensive cost in obtaining a direct high-risk MID, some merchants only have the option of starting with an aggregate merchant account.
Businesses that should choose an aggregate merchant account
As mentioned before, aggregate merchant accounts are for merchants that struggle to maintain their own merchant accounts or the ones with high chargebacks. These merchants share an account with a large merchant portfolio until they’re mature enough or have enough credit card processing to acquire their own MID.
Merchant discount rates are favourable to this portfolio because the account is protected from chargebacks and high credit card processing volumes. So, third-party merchant accounts are better suited for the following types of businesses:
- New businesses with no credit card processing history
- Merchants with high chargebacks, refunds, and returns
- High-risk businesses
- Merchants that are consistently averaging more than 1% in chargebacks a month
- Terminated Merchant File (TMF) and CIRF merchants
- Merchants under the Visa/MasterCard chargeback reduction programme
- Merchants that are not incorporated within a jurisdiction.
Aggregate merchant accounts are great for small to medium-sized businesses since they tend to have lower or no set-up monthly fees. So, sub-merchants only pay when they process payments.
Making the right choice for your business
Not every merchant can obtain a dedicated merchant account since they need a bank that supports their type of business. However, if you manage to acquire this type of merchant account, it’ll be better for your business since you gain more freedom. If you end up deciding for an aggregate merchant account, which is quicker to set up, be aware of the risks involved.
At iPayTotal, we provide both dedicated and aggregate merchant accounts, which give us the ability to set up and open an account for your business, no matter the situation in which your business is currently. Security, fair fees, competitive rates and quick approval are some benefits you’ll receive with us.
Contact us today to start the process and obtain the best offers in the market. Our team is ready to know more about your business and answer any questions you may have so that you can register for an aggregate or dedicated merchant account for your business.