According to a recent study, India is well on its way to becoming a digital payment economy – 65% of all payments will be conducted digitally by 2026. As digital payments emerge as the preferred mode of payment for Indian consumers, businesses must respond to the demand by offering varied payment options – QR codes, credit and debit cards, UPI, et al. For accepting digital payments, it is crucial for businesses to open a merchant account.
This bank account acts as a crucial middleman between customers and businesses by facilitating digital payments through various modes. Given the rapid rise of digital payments in India, an absence of a merchant account means risking your business’ health and success. In other words, a merchant account is a must-have for Indian businesses today, whether you are a budding startup or an established firm.
In this article, we shed light on everything you need to know about opening a merchant account.
What is a Merchant Account?
A merchant account is a type of business bank account meant for businesses to accept multiple modes of digital payments – debit cards, credit cards, UPI, etc. This account serves as a key link between the customer’s account and the business’ current account. Since customers today no longer prefer to carry cash, digital payments are the norm. Businesses that fail to offer customers the convenience of digital payments risk losing potential customers.
How it Works
When a customer swipes their card to pay a business, the card processor relays the transaction details to the business’ merchant account. The merchant’s bank then confirms the availability of sufficient funds with the customer’s card-issuing bank. Subsequently, the transaction is approved and the funds are deposited to the business’ current account. Some banks even allow for an auto-settlement of funds to your current account on the next working day.
Who Can Apply for a Merchant Account?
Merchant accounts are commercial accounts meant to facilitate smooth business transactions. The following entities are eligible to open a merchant account in India:
- Individuals
- Limited Company and Limited Liability Partnership
- Partnership
- Sole Proprietorship
- Clubs, associations, societies, and trusts
While this is a general list, be sure to check the eligibility criteria of your preferred bank for a smooth account opening process.
How Can You Apply for a Merchant Account?
To apply for a merchant account, visit your bank’s official website and follow the instructions illustrated on the page. While the process may vary across banks, customers are usually asked to fill in their details and furnish the following documents as part of the process.
- Photo ID Proof
- Address Proof
- Pan Card
Be sure to refer to your chosen bank’s official website to gain an exhaustive list of all documents required. This will help facilitate a smooth application process and ensure you don’t experience unnecessary delays.
How Much Does It Cost to Open a Merchant Account?
You can open a merchant account for free with most leading banks in India to help manage all your business transactions in one place. That said, there are other charges that you should examine to make a well-informed decision. These include transaction charges, account maintenance charges, and other miscellaneous charges.
Since these charges vary across banks, read the fine print before signing up for a merchant solution that meets your needs.
Final Thoughts
As digital payments become embedded in present-day commerce, merchant accounts are essential for businesses. Leading Indian banks today offer a smooth, easy, and convenient way of opening a merchant account. Choose a feature-rich account to offer a smooth payment experience to your customers and take your business to new heights.
