A merchant ID is a special identification number offered to a business by the acquiring bank when it sets up a merchant account with a payment processor. The MID number is unique to a business and is not connected to any other identification details of the merchant.
The payment service provider may simply refer to the MID as a merchant number. Therefore, you won’t need a MID if you are using third-party apps like PayPal or Stripe. However, if you have a successful business and have been around for a long time and/or have multiple locations, you should have your merchant ID and work with an official merchant service provider.
You can equip your business with the right pricing structures and systems to save your money while giving your customers a better experience with a MID. So let us dive deeper into the merchant ID and know more about its use and importance for a business.
Why do Businesses need a MID?
Your MID makes sure the payment goes through the correct process and reaches your bank account. If your customer pays by debit or credit card, the details are sent to the account provider.
This information is transmitted to the acquirer and then to the issuer. The issuer, i.e., the customer’s bank or the credit card issuing company, checks the availability of the funds and approves or rejects the transaction accordingly.
The merchant’s account provider will transfer the funds to the merchant’s account if all goes well. Your MID ensures that funds are always transferred to you and not diverted or lost during these various stages of the payment card processing flow.
How to get a Merchant ID for your business?
Merchant IDs are issued when a trading account is registered with merchant service providers (MSPs) or acquiring banks. Most vendors choose business types to be accepted for a merchant account as certain industries are considered “high risk.” However, PayPound accepts most types of business, including those considered “high risk” by conventional payment processors.
As an owner of a Merchant Identification Number, it is important to comply with the terms of your MSP to prevent your account from being frozen or flagged. While chargebacks are unavoidable in the industry, excessive chargebacks can affect your merchant account. Therefore, it is important to avoid them whenever possible.
Chargebacks are a normal part of any business (and even more so in retail and other consumer businesses). Still, an unusually high number of chargebacks is usually a sign that a business is taking advantage of consumers, so if you do one regularly, you may lose the right to transact with a large number of chargebacks.
Depending on your transaction history, your MSP may also freeze your merchant account or balance. This can be very disruptive, basically impeding your ability to accept credit transactions.
How to protect your MID from chargebacks?
Dealing with chargebacks as a merchant can be overwhelming, time-consuming, and expensive. Therefore, it is important to take steps to protect your Merchant ID from chargebacks.
Consequences of not processing chargebacks include the possibility of your account being suspended or even your MID being revoked. However, the good news is that, as a merchant, you can take several steps to protect yourself against chargebacks. With the right information, you can better protect your business against unnecessary chargebacks.
Here are the top three steps you can take immediately to protect your Merchant ID from chargebacks:
- Use Card Verification Value (CVV) – serves as a fraud prevention filter that ensures a match between the actual CVV number on the loyalty card and the CVV number entered when paying online.
- Enable address verification (AVS): Address verification helps verify the correlation between your customers’ billing and shipping addresses. This allows you to automatically reject an order if you notice discrepancies between the two addresses.
- Apply 3D Security: This can be used to authenticate your customer’s card issuer.
Can a Business have multiple MIDs?
Some dealers only need a MID; other distributors need multiple MIDs.
Merchant accounts have restrictions on the types of transactions that can and cannot be processed (for example, e-commerce or in person, but not both). They also have limits on the volume of transactions and sales (for example, a maximum of $ 250,000 per month).
This means that as your business grows and evolves over time, you may need different MIDs to handle different processing situations.
For example, if you make any of the following changes to your company, you may need to add more MIDs:
- Your sales volume increases significantly
- They expand their business model (open an e-commerce store, add a restaurant to their t-shirt store, etc.)
- You are changing from national to international sales
- More MIDs offer additional options but also pose greater management challenges.
Some tips to protect your MID
Merchant accounts are highly valuable for any business and also the Merchant ID. If you’re lucky enough to have a MID, you should know the best ways to protect it. Here are some effective tips merchants can follow to protect their MID and payment processing privileges.
- Follow the terms of your contract: Do not use your account for unauthorized activities (e.g., selling different products or services, changing sales methods, etc.)
- Be kind. If your processor asks you to do certain things, make sure you keep your promises.
- Understand and follow all card branding rules. This is especially important if you participate in highly regulated activities such as free trials.
- Avoid chargebacks. Keep risk perception as low as possible. If activity starts to pick up, make a plan to get the situation under control quickly.
MIDs are unique identification numbers that help you receive funds from your customers. Your merchant ID makes your funds secure and ensures they are received in your own account and do not get routed some other way. Every business, whether large or small, should know their MID and take effective measures to protect it to ensure convenient payments for their customers.
Disclaimer: The views, suggestions, and opinions expressed here are the sole responsibility of the experts. No Economy People journalist was involved in the writing and production of this article.