The Benefits of Having Multiple Merchant Accounts
If your business receives electronic payments from customers, you might want to consider opening a second merchant account. Two merchant accounts (or more) means less risk, more payment processing capabilities, and fewer restrictions. This means you’re able to serve more customers more effectively and earn more revenue.
1. Mitigates Risk
Merchant account providers reserve the right to cancel your account at any time without warning. This may happen for a number of reasons:
- Your chargeback ratio is too high
- The merchant service provider has detected suspicious activity related to your account
- Your business or industry has been deemed high-risk
- The merchant has been forced to scale back or cease operations
If a merchant services provider decides to cancel your service, they’ll typically serve you with immediate notice. That means you’ll be unable to process any more payments from customers, thereby sacrificing revenue and possibly the reputation of your business…
…unless you have a second merchant account to fall back on.
This is the No. 1 reason why it’s in your best interest to establish multiple merchant accounts. It’s the most effective way to mitigate your risk and ensure that your business remains up and running in the event of an unexpected drop-off.
2. Fewer Declined Transactions
If a customer’s transaction is declined due to an invalid currency or payment method, you can pass that transaction to your backup merchant account for processing. With more approved transactions, you can ensure maximum revenue and greater customer satisfaction.
Many merchants use Unicorn Group for this purpose. Unicorn Group accepts 164 currencies—including alternative payment methods—allowing you to process payments from almost every country on the planet through your payment gateway. So even if you love your primary payment processor, you can use Unicorn Group for backup merchant services.
Maybe you love your primary merchant provider because they offer record-low transaction fees. For high-risk businesses especially, these merchant providers are worth hanging on to. But if they don’t offer all of the payment options you need, a backup merchant makes sense. Even if the transaction fee is higher, you can redirect just those transactions that are declined by your primary merchant. You still keep your monthly fees relatively low, but you’ll be able to accommodate more customers than you could with a single merchant account.
3. A Lower Chargeback Ratio
Too many chargebacks can put your merchant account in jeopardy. But if you divide those chargebacks between multiple merchant service providers, you have a much better chance of remaining below your maximum chargeback threshold. You’re essentially dividing the risk.
Your chargeback ratio is the percentage of transactions for which the customer demands a refund through their bank. So if you make 100 sales and two of those customers successfully dispute the charges with their respective banks, you have a 2% chargeback ratio.
Payment processors frown on chargebacks because they’re expensive to resolve and because too many chargebacks may signify fraud or vulnerability on the part of the merchant. To keep your merchant account in good standing, you want to prevent your chargeback ratio from remaining at 1% or above. If the ratio gets too high, one of three things may happen:
- You may be charged higher fees for merchant services
- Your merchant account may be suspended or limited
- Your merchant account may be terminated
One of the easiest ways to minimise your chargeback ratio is to divide your sales among multiple merchant accounts. If one of your accounts gets close to the danger zone, you can redirect your higher-risk transactions (such as those originating in high-fraud countries) to your second account until things balance out.
4. Higher Transaction Limits
When you’re operating multiple merchant accounts, there’s virtually no limit to the number of sales you can process in any given month. This is important because some acquiring banks impose monthly transaction limits on merchants.
If you exceed your limit, you may face costly surcharges or declined transactions. Staying within your limit, though, can be difficult with one merchant account if you process high transaction volumes or are trying to scale up your business.
Global retail e-commerce sales are estimated to exceed €5.4 trillion in 2023, and even small businesses are reaping the rewards as more consumers shop online. Setting up multiple merchant service accounts ensures that you can keep up with growing sales numbers.
How to Set Up Multiple Merchant Accounts
When establishing a second or third merchant account, you have two options:
- Try to set up a new merchant account ID with your existing provider
- Seek the services of a new merchant provider
Option 1 is the easiest way to go if you’re just trying to establish unique accounts for different sectors of your business—like having a different account for each retail store or each website under your corporate umbrella.
Option 2 is highly recommended for anyone looking to protect their business from the pitfalls described in this article (transaction limits, high chargeback ratios, etc…). This will offer you the maximum protection and assurance.
For instance, if you have two merchant IDs with the same payment processor and one of those IDs is flagged for suspicious activity or excessive chargebacks, the provider may suspend all IDs associated with your business. This can’t happen if your merchant IDs are managed by two or three unrelated providers.
Remember, the goal is to mitigate risk.
If you want to set up a second merchant account, the first step is to find a provider that offers reasonable rates. Explain to them what you’re trying to achieve, whether it’s to diversify your payment processing or simply redirect your declined transactions. The provider should be able to help you set up your account in a way that’s most advantageous for your business.
Don’t Put All of Your Eggs in One Basket
Payment processing is generally straightforward but there are a few unavoidable risks. Certain transaction types could get declined, your chargeback rate could creep too high, or you could reach your monthly processing limit before the end of the month.
Having two or more merchant accounts with different providers can help you spread the risks around and ensure that you always have an account to fall back on if something goes awry. When you consider the benefits against the costs, it’s easy to see why so many successful businesses are opting for multiple merchant accounts.
