In the modern age, every business would like to accept debit and credit cards and other forms of electronic payments both in person and online. In fact, this is a key factor in increasing and maintaining sales as many customers tend to no longer carry paper money and cashless transactions are gaining favor across the globe. If you are willing to add this payment option to your payment ecosystem, a merchant account will be essential.

A merchant account is a bank account that enables a business to accept and process credit and debit card payments. It is typically created through an agreement between three parties (the accepting business, the merchant acquiring bank, and the merchant account service provider) and holds the merchant accountable for complying with regulations set by the card associations.

Once you create an account, your company becomes a merchant, which is a business that accepts credit and debit card payments processed by merchant account service providers and merchant acquiring banks. Merchants are categorized based on the risk associated with fraud and chargebacks, which can affect the likelihood of opening a merchant account and incur higher fees and result in stricter terms.

A merchant account service provider is a very important partner because its primary function is to act as an intermediary between the bank, your business, and your customers. This includes processing debit, credit, and other electronic payments, as well as handling and storing your customer data in accordance with relevant regulations.

Debit and credit cards are processed as follows:

If you trade in Europe, you will need a European merchant account, which is necessary to provide safe and secure digital payments to European customers.

Benefits of a European merchant account:

• Provide local and most convenient payment methods for European customers

• Increased regional sales due to convenience of payment products and services

• Ability to process transactions from all over the world

• Secure transactions that comply with data protection and other relevant regulations

• Higher card approval rates

• Lower exchange fees

• Cost-effective payment processing

• Higher throughput

• High-risk businesses have a greater chance of obtaining merchant accounts in Europe than in non-European countries

Things to consider before choosing a merchant account service provider:

• Pricing structure (fixed percentage, tiered pricing, or other)

• Transaction fees (if the business is considered high risk, higher transaction fees will be charged)

• Administrative expenses

• Customer support, including language and time zone

• Hardware supply and maintenance

• How the software integrates with other systems you use

• Service providers’ understanding of European regulations

• Level of security and compliance (data protection, etc.)

• The service provider’s understanding of your industry and specific business needs

• Currencies accepted and processed

• The language in which the service provider can provide products and services to your customers

• If your processing volume starts to grow significantly, scalability

• Contract duration

Merchant acquiring bank

A merchant acquirer is a bank or financial institution that accepts credit and debit card payments and processes those payments on behalf of businesses. In other words, a merchant acquirer allows companies that sell products or services to accept card payments from card schemes such as Visa, MasterCard, and American Express.

How it works:

• Merchant signs agreement with bank

• Merchant acquiring bank provides credit line to merchant

• The merchant acquiring bank exchanges funds with the issuing bank on behalf of the merchant

• The merchant's acquiring bank transfers the merchant's daily sales transactions, minus applicable fees, to the merchant.

Merchant Account Service Providers in Europe

To set up a merchant account, you can either enter into an agreement directly with a merchant acquiring bank or find a merchant account service provider who will offer a variety of solutions, including coordinating multiple merchant accounts in different countries.

Merchant Account Service Providers, or PSPs, work with merchant acquiring banks to ensure transactions go through smoothly and offer a variety of payment processing tools. They have the power to make your customers’ payment experience so convenient and easy that they’ll keep coming back.

In the EU and EEA, payment service providers are regulated by the Payment Services Directive (PSD), which aims to promote competition and enhance the security of the digital payments market.

Merchant Account Service Providers offer the following payment products and services:

• E-commerce (selling and buying products and services online, with an ecosystem that includes web stores and accepting credit and debit card payments online)

• Payment gateway (software that integrates into your e-commerce store, on top of a credit card terminal, enabling you to accept and process digital credit and debit card payments)

• Credit card terminal (a device that allows customers to pay by swiping, inserting, or touching a credit or debit card)

• Contactless payment devices (using Near Field Communication or Radio Frequency Identification to enable contactless credit or debit cards, Google Pay, Apple Pay, and other similar mobile payments)

• Virtual Terminal (a software application that enables merchants to accept credit or debit card payments without presenting the card)

• Point of Sale (PoS) system (installed somewhere in your store where customers buy products or services)

Additional features include reporting dashboards, data exports, and invoicing.

The most well-known merchant account service providers include Stripe, Square, PayPal, Worldpay and SumUp.

Merchant Demand

First, your company must be registered as a European company and have a physical address in Europe, as well as provide evidence of sufficient funds to support the processing volume.

Merchant acquiring banks and merchant account service providers will consider the following information:

• Business establishment time

• Bankruptcy history

• Past credit problems

• Previous merchant account

• Susceptibility to credit card fraud

Required files:

• Registration Documents

• An application form containing information about the business and its owners and directors

• Business license (if your business requires a license)

• Descriptions of products or services sold by the company, including marketing materials

• Billing, Shipping and Return Policy

• Proof of address in Europe

• The company’s business bank account details, including bank statements for the previous months

• The company's recent payment processing history

• Identity document of the account signatory

How to open a merchant account in Europe

The process for opening a merchant account can vary depending on the parties involved, but some of the steps are standard. Typically, applications are reviewed within five business days.

To open a merchant account, please follow these steps:

• Obtain a trade license if applicable

• Opening a business bank account

• Determine your business needs and your customers' demands for payment options, including the credit card brands and payment modes you plan to accept

• Prepare the required documents

• Find and compare merchant acquiring banks in the country of your choice

• Find and compare merchant account service providers in Europe

• Apply for an account with the merchant acquiring bank

• Obtain approval from the merchant acquiring bank

Although opening a merchant account in a European bank requires considerable effort due to the increased requirements placed on businesses, our team at   is well prepared to assist you in the most efficient manner. We have eight years of experience in assisting clients with opening bank accounts in Europe. We leverage on our extensive network of partners in the European banking industry to provide the companies we serve with the most appropriate and cost-effective solutions to improve their operations.