What Do I Need to Open a Merchant Account?
If you’ve decided to set up an e-commerce merchant account in Europe, it’s time to gather all of the necessary documentation to have your application processed so that you can start accepting credit card payments and enjoy world-class merchant services. While the requirements for each merchant account provider vary, there are several documents that merchants will need to open a merchant account and others that are handy to have on hand in case they are requested during the underwriting process.
To collect all of the basic information needed to open a merchant account, you will usually be asked to fill out a merchant account application form. As most applications are processed electronically nowadays, the merchant services provider will either send you the application form via email or it will be available to download directly from their website and fill out digitally or print and scan.
To open a merchant account, every merchant will need to provide basic information about their business. This shows merchant account providers that your business is legitimate, that you are following all applicable laws and allows the provider to withhold any relevant tax payments on your behalf.
Business Number and Business License
A business license demonstrates that your business is registered in the relevant national business registry. Whether you’re a sole trader, freelancer, partnership or corporation, you should already have a business license or be in the process of obtaining one.
Taxpayer Identification Number
Every European country has some kind of taxpayer identification number (TIN) or employer identification number (EIN) system that businesses use to track their tax payments and fill out an annual tax return. On your application, you should provide your business TIN if you have one or your personal TIN in the case of sole traders and unincorporated partnerships.
Value-Added Tax Number
In Europe, every business is required to have a value-added tax (VAT) number with which they collect and pay sales tax on eligible sales. If you weren’t assigned a VAT number at the time of registering your business, you will need to apply for this separately before applying for a merchant account.
European businesses that ship goods outside of the European Union are required to obtain an EORI (Economic Operators Registration and Identification) number that they will use to fill out import and export documentation. If you are involved in imports and exports, you will be asked to provide an EORI number in your application to show that you comply with import and export laws.
Certificate of Incorporation
Limited liability companies will have a certificate of incorporation that describes their business activities, outlines their articles of incorporation and lists their shareholders and board members. When applying for a merchant account, incorporated companies will need to provide their certificate of incorporation along with their business license.
Proof of Your Business Address
Almost all European countries require businesses—including e-commerce businesses—to have a physical presence in the country where they operate. To demonstrate that your company has a physical presence in Europe, you may be asked to provide:
- A rental or lease contract or title deed
- A recent electricity, internet, telephone or water bill
One person in your business will be the main signatory of the merchant account. This person will need to provide their government-issued identification document for the merchant account provider to verify their identity and prevent an unauthorised person from making changes to the account.
Contact details could include:
- Landline and mobile phone numbers (business and home)
- An email address
- A home or mailing address
- Your business address
These will help your merchant account provider verify your identity and contact you in the event of a query or emergency for something relating to your merchant account.
For the underwriting process, the merchant account services provider will view and analyse your e-commerce website to assess whether your website is secure, well designed and easy to use. Many merchant account providers make it a point to contact applicants through the contact details provided on their website to make sure your customer service is satisfactory.
Information about your Business
In addition to your business documentation, most merchant account providers will want to know what industry you’re in, what you do and what differentiates you from your competitors. New businesses (less than one year old) may be asked to provide a business plan along with their application.
No matter how well-established or well-known your business is, you will be asked to provide detailed financial statements to show that you have enough capital and turnover to support your requested processing volume. Typically, demonstrating a higher processing volume will allow you to negotiate lower transaction fees.
Business Bank Account Details
To deposit your payments once they are cleared, you will need to provide the details of your business bank account with a reputable financial institution. You may enter the information manually or provide a bank statement or voided cheque.
Financial statements that show proof of income, capital, turnover and profitability should be recent (from the last three to six months) and include all of the types of financial statements that are relevant for your businesses. Depending on your business, financial statements could include:
- Bank statements
- Statements showing credit card transactions
- Balance sheets
- Cash flow
- Profit and loss statements
- Income statements
Some merchant account providers may also ask for your credit history. Others will look this up themselves. In the latter case, you may be asked to provide permission for this with a signature.
E-commerce businesses may be asked to demonstrate that they are PCI data security standard-compliant to ensure their customer payments are secure and won’t be compromised by hacking and fraud. At a minimum, your website will need an SSL (secure socket layer) certificate.
Whether or not you already have a secure payment gateway, merchant account providers like Unicorn Payment will help you integrate their secure PCI-DSS-compliant global payment gateway into your website. After the payment gateway is installed, you will still be responsible for maintaining PCI-DSS compliance on your site.
Additional Documentation that could be Requested
For merchant account providers, underwriting a new merchant is all about assessing risk. If your business, industry or payment processing history indicates a higher-than-usual level of risk, you may be asked to provide supporting documents to help the merchant account provider properly assess the risk.
As mentioned earlier on, new businesses will typically need to provide documentation to explain their business model, which industry they are in and to show how profitable they expect to be. These documents could include:
- A business plan
- Financial forecasts
- Any available payment processing history
- Marketing material
- Any current business contracts
A High Chargeback Ratio
A high rate or number of chargebacks is risky for a merchant account provider because they may be held financially liable if you become insolvent. If your payment processing history shows a high number or percentage of chargebacks, you may be asked to provide an explanation along with evidence that you are bringing your chargebacks under control.
Merchants in high-risk industries (those who sell 18+ products, concert tickets, airline tickets and those who ship to high-risk countries) will typically be looking at high-risk merchant accounts with higher fees and stricter terms. While high-risk merchant account providers may or may not require additional documentation, you should be prepared to provide any documents that would help you negotiate lower fees or waive the requirement for a rolling reserve.
Thorough Preparation = Faster Approval
The list of things you need to open a merchant account may seem long, but once you’re set up, you can be confident that your merchant account provider will provide you with the best possible service.
Moreover, having all of your business and financial documentation ready to go at the start will ensure the quickest and most streamlined approval process for a merchant account. The sooner you are approved, the sooner you can accept credit card payments and start growing your business.