Aggregate Merchant Account Vs. Dedicated Merchant Account

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AGGREGATE MERCHANT ACCOUNT VS. DEDICATED MERCHANT ACCOUNT

Difference Between An Aggregate Merchant Account Vs. Dedicated Merchant Account

AGGREGATE MERCHANT ACCOUNT VS. DEDICATED MERCHANT ACCOUNTA lot of people want to understand the difference between an aggregated merchant account and dedicated merchant account. It is a common question merchant asks before signing any merchant account agreement for the first time. Understanding the difference helps businesses in choosing the correct payment gateway and merchant account solution.

Before we understand the difference lets first discuss why they are needed.

In the good old days, people had limited aspirations, and they were pretty much comfortable in doing the business by using cash as a reliable mode of payment processing. Business owners used to collect money after each sale and later they used to deposit the funds to the business bank account.

In today’s world, there are many card associations and payment service providers. These payment service providers help businesses accept credit cards. Merchants can now accept payments in store and also online. We all know that creating an online store is very easy these days.

With the help of credit card processing accounts, merchants can generate high volume sales. Merchant service plays a crucial role in the growth of any organization and in a nutshell “without a reliable payment processing option it’s hard for any organization to be competitive”.

Merchants across the globe are switching towards digital payments, and this trend is not going to stop. Governments in emerging economies are also insisting business owners to start using credit card processing options. With this governments can swiftly get more insight of financial transactions at micro and macro levels.

The natural need for a reliable merchant account provider along with the push from governments and financial Institutions have created an urge among the merchants to get connected to payment processing companies. When a merchant starts utilizing a payment processing account, then achieving high sales figures becomes a lot easier. It also helps in maintaining regular cash flow.

Dedicated & Aggregated Merchant Accounts. The Differences

  • An aggregated merchant account is a payment processing solution that is utilized by multiple companies or merchants.
  • A dedicated merchant account is dedicated to one merchant.

Application Process for Dedicated and Aggregated Merchant Account

  • For an aggregated merchant account most of the time the merchant will have to fill an online application form. They may also be asked to upload KYC documents online by the Aggregated merchant account service provider.
  • For most of the Dedicated merchant account solutions, merchants are supposed to send a filled application form with additional KYC documents. Since it is a dedicated solution the requirements of KYC documents may be a little bit more than a regular aggregated or third party payment gateway solution.

Underwriting process for Dedicated and Aggregated Merchant Account.

  • With an aggregated merchant account the underwriting is usually done in a smaller period of time in comparison to a dedicated merchant account.
  • When applying for a dedicated solution merchants may have to wait for a couple of days. The compliance team can also request the merchant for additional documents.

Setup Time Frame

  • With Aggregated payment processing solutions merchants can go live within 24 hours in most of the cases.
  • A dedicated merchant account involves more risk, and that is why merchants may have to wait for a couple of days to be approved. The underwriting team looks at multiple factors that include credit risk and reputation risk. The compliance team may ask the merchant to make modifications on the website. The website must comply with the requirements of Card Schemes and Acquiring banks. Most of the times merchants from High-Risk Industries are unable to get a dedicated merchant account. High Risk Merchant can try to apply with offshore payment processors.

Settlements. Aggregated and Dedicated Solution.

  • A timely settlement is vital for maintaining proper cash flow. With an aggregated merchant account the settlement period may be a little longer. It is because the funds are first settled in the account of the third party processor. The Processing company later forwards funds to the account of the merchant.
  • With Dedicated Merchant Account funds are settled at a faster pace to the merchants business bank account. To reduce the risk factor sometimes processing companies may place a delay(arrear) in settlement (on a case to case basis). The processing company mentions all the terms related to arrears on the merchant account agreement or the term sheet.

The rate of the transaction – The MDR/TDR.

  • Most of the dedicated merchant account solutions have fixed rate for all merchants. This rate is usually displayed on the website of the merchant account provider. It means all merchants pay almost the same transaction fee irrespective of the industry.
  • With dedicated merchant account business owners can negotiate with the processors to get better rates. Rates may vary depending on the industry, Sales Volume, Average Ticket Size. Merchants with goog processing history can expect better rates.

Full Control Vs. Partial Control.

  • With Aggregated solutions, merchants have less control over how the main MID is being used. This is because merchants from various industries use the same solution. This means that if a merchant attracts massive chargebacks this can create challenges for all other merchants.
  • With the dedicated merchant account, the business owner will have more control over the solution. Merchant will be in a better position to manage the account and can also take measures like maintaining a low chargeback ratio.

Integration Process – Connecting Payment gateway to Merchants Website.

  • No matter what kind of account is, the service provider will help you with the API information. The API documentation can be utilized to integrate the payment processing solutions to the business website. Some processors may have ready-made payment gateway plugins.

Approval Time Frame

  • For every business getting started in the shortest time frame is one of the priorities. It is extremely easy to get an aggregated account and sometimes approval may come within 24 hours.
  • If the merchant applies for a dedicated solution then the onboarding time frame can take few days to few weeks.

Underwriting and Onboarding Process

  • The underwriting process for an aggregated Merchant account is a lot simpler than a dedicated merchant account. It means it takes less time to on-board a merchant on an aggregated solution. Please keep in mind that for alternative mode of payments like ach echeck processing the on-boarding process is similar to card process. Off-course ach processors may on-board few merchants that are rejected by card processors.

Risk factors and Risk Mitigation.

  • An aggregated merchant account can be considered slightly risk-oriented. Since the same solution is used by multiple merchants it attracts more risk. The fraudulent activity of other merchants can impact genuine merchants.
  • With a dedicated merchant account, the merchant is 100% responsible for the solution and nobody else uses this account. This ensures that the merchant is in a better position to use it for a long time.
Bankim Chandra

Bankim Chandra

Bankim Chandra is a Merchant Account consultant. He works with merchants globally and helps businesses in getting reliable payment processing solution. He writes extensively on the internet about Payment Gateways, Credit Card Processing, Echeck Processing, Chargeback Alerts, ACH and Business Funding.

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