What is a merchant account? A guide for global merchants

A reliable payment system isn't just a back-office function. It's a competitive differentiator. Especially for merchants operating across markets, the ability to accept and process payments efficiently is a make-or-break capability. At the centre of that system is the merchant account.

This guide explains what a merchant account is, how it works, and how to choose the right one for your business. It also unpacks why it matters so much for global merchants.

What is a merchant account?

A merchant account is a special type of bank account that enables businesses to accept payments from customers. This includes cards, mobile wallets, bank transfers, and more.

When a customer pays, the funds are first held in the merchant account. After verification and processing, the money is then transferred to the business's main bank account. It acts as a clearing zone, designed specifically for commercial transactions.

Think of it as the midpoint between your customer's payment method and your bottom line.

How does a merchant account work?

Here's how a card-based transaction typically flows:

1. Authorisation - The customer initiates payment. The payment processor checks with the cardholder's bank to verify the card and confirm available funds.
2. Approval or decline - The cardholder's bank approves or rejects the transaction and sends a code back through the payment network.
3. Settlement - Approved transactions are grouped together and sent to the merchant's acquiring bank. Funds are transferred from the issuing bank.
4. Funding - The acquiring bank deposits the net amount into your merchant account, typically within 1 to 3 business days.

Every payment method—not just cards—has a version of this flow. Merchant accounts are what make these processes possible.

Why merchant accounts matter in cross-border commerce

Selling across borders introduces new variables: local regulations, currency exchange, preferred payment methods, and higher risks of failed transactions.

Here's what a merchant account with global capabilities can offer:

• Local acquiring to reduce cross-border transaction costs and improve approval rates
• Multi-currency support to accept and settle in the customer's or your preferred currency
• Compliance alignment with region-specific rules (like 3DS in Europe or data localisation laws in Asia)
• Broader payment acceptance, including e-wallets and bank apps specific to each country

Without this infrastructure, global expansion can stall at the checkout.

What are the benefits of a merchant account?

A strong merchant account setup delivers real business impact:

Wider payment acceptance

You can accept cards, digital wallets, QR codes, and bank transfers. That means you don't lose customers at the point of payment. In 2023, half of worldwide e-commerce transactions could be attributed to mobile money and digital wallets, which accounts for an exceptionally diverse range of payment methods worldwide, while 22% was through credit cards.

Faster settlement

Funds usually arrive in your account in 1 to 3 days. That speed can be critical for cash flow, especially in high-volume or seasonal businesses.

Lower cart abandonment

By offering familiar, trusted local payment methods, you reduce checkout friction. This leads to higher conversion rates.

Built-in fraud protection

Merchant account providers often include security tools like tokenisation, AI-based fraud detection, and PCI compliance support.

Operational trust

Customers are more likely to buy from merchants who offer secure, well-known payment options. It signals legitimacy.

Red flags to watch for in your current payment setup

If you're already accepting payments, consider whether your setup is helping or hindering growth. Here are warning signs:

• Frequent failed transactions from specific regions
• High fees for cross-border or foreign currency payments
• Manual or error-prone reconciliation processes
• Limited visibility into transaction-level data
• Not supporting popular wallets or payment methods in target markets
• Delayed settlements impacting cash flow

If any of these sound familiar, it might be time to revisit your merchant account structure.

What are the different types of merchant accounts?

Traditional merchant accounts

Set up directly with banks or acquirers. Often used by large businesses that need tailored solutions. These come with lower fees but more rigorous vetting.

Third-party merchant accounts (Payment Service Providers)

Simpler to set up, with built-in tools and bundled services. Best suited for smaller merchants, startups and those who prioritise speed and simplicity.

High-risk merchant accounts

Designed for industries prone to chargebacks or fraud (like travel, adult services, or gaming). These accounts often come with higher fees and strict compliance protocols.