If you are looking to accept credit cards at your business, you will likely come across a merchant aggregator or payment aggregator. Or simply, aggregator. In this post, I will explain what an aggregator is and how it differs from a traditional merchant account.
What is a Merchant Aggregator?
Merchant aggregators are organizations that provide credit card processing services. They are just like acquiring banks and Independent Sales Organizations (ISO’s) in that they allow businesses to accept credit card payments from their customers. Some examples of aggregators include Square, Stripe, and PayPal.
Although there are not many of them, hundreds of thousands of businesses use aggregators today. Possibly millions. However, they do not provide a real merchant account to their customers.
How are Merchant Aggregators Different?
In my previous post, I explained how acquiring banks maintain all merchant accounts (read here). Just like ISO’s, merchant aggregators must partner with an acquiring bank too.
Acquiring banks and ISO’s assign businesses a unique Merchant Identification Number (aka “MID”). Therefore, the business owns the merchant account. Credit card processing started with this structure. Hence, why they are called traditional merchant accounts.
With a merchant aggregator, the aggregating company owns the merchant account rather than each business. Every business processes their credit card sales through the same merchant account that the aggregator controls. You can think of this as an umbrella merchant account.
This one-to-many merchant account structure is the main difference between aggregators and traditional merchant accounts. However, there are a few other areas that differ too.
To be continued…
In this post, I wanted to introduce merchant aggregators briefly. They have become increasing popular today. There are pros and cons to this method of processing, though, which I will discuss in another post. However, first, you need to know more about the application process and pricing models before we dig any deeper.
In my next post, I will explain what you need to apply for a merchant account. Thanks for reading!