What is a merchant account? The business benefits & how to open one

Key takeaways:

• A merchant account acts as an intermediary between the customer and the business, and holds a customer’s funds once a transaction is processed.

• Most merchants need a business bank account for regular operations and a merchant account to accept and hold digital payment funds.

• You can open a merchant account in days after you select a provider and submit the required documents.

A business merchant account is a key part of getting paid in a world where digital transactions dominate. With 90% of consumers¹ preferring digital payments, delayed settlements and fragmented systems can lead to lost revenue and slower growth. The ability to move funds quickly and securely isn't just a convenience, it is a measurable advantage for any business that wants to stay competitive. A merchant account provides a secure place to hold card payments before funds are transferred into a business bank account. When paired with a payment service provider, it simplifies the way payments are accepted, tracked, and settled.

This article breaks down what merchant accounts are, how they work, and when businesses need one. It also outlines the steps involved in setting up a merchant account, how to choose the right provider, and how full-service platforms like Airwallex can make the entire process easier.

What is a merchant? 

A merchant is an individual or business that sells goods or services to customers. This includes everything from small market stalls to large retailers and online stores. Merchants can accept payments in person, through their website, or using digital platforms. To complete transactions, they typically rely on tools like point-of-sale systems, card readers, or online checkout solutions.

What is a merchant account?

A merchant account is a type of account that allows businesses to accept debit or credit card payments. When a customer makes a card purchase, the funds are deposited into the merchant account, then transferred to the business’s regular bank account.

This full process is facilitated by a payment processor, which ensures the transaction is secure and that funds are correctly routed. Merchant accounts are essential for businesses that want to accept card payments in-store, online, or over the phone.

The merchant account doesn’t process the payment itself. That said, you can partner with an end-to-end service, like Airwallex’s Payment Links and Plugins, which covers everything from payment initiation to confirmation in one place.

Traditional banks also offer merchant accounts for businesses, but they’re less likely to manage processing. You may need to work with a separate payment gateway and payment processor to accept digital payments.

Merchant account vs. business bank account

Merchant accounts and business bank accounts serve two very different purposes, but they work hand in hand. A merchant account holds customer payments temporarily after a transaction is approved. A business bank account, on the other hand, is used to manage overall finances, like paying bills, covering wages, tracking ongoing expenses, or maintaining net working capital.

Both are essential tools for most businesses, particularly those accepting digital or card payments. A business bank account is typically required in order to open a merchant account.

Here’s how the two compare at a glance:

How do merchant accounts work?

Once a customer initiates a purchase and submits their information to a payment gateway, a payment processor collects and shares that data with the merchant account’s bank.

This bank requests authorisation from the customer’s bank, which then sends the payment to the merchant account. From there, the merchant account holds the funds until the account holder transfers the payment into the primary business bank account.

So, while the merchant account communicates with the customer’s bank and holds the payment, it doesn’t actually process payments itself.

Keep in mind: Your merchant account isn’t free. The merchant acquirer that provides the account will charge bank fees once the transfer deposits into the account. You might also owe processing fees to cover other provider services if you don’t partner with an all-in-one solution like Airwallex.

Do you need a merchant account?

Yes, most businesses that accept card or other electronic payments (such as credit cards, debit cards, mobile wallets, or online checkouts) require a merchant account to process those transactions. This typically includes any business selling goods or services beyond cash-only, in-person sales.

But not all businesses need to set up a separate merchant account from scratch. Many modern payment service providers offer a bundled solution that includes the merchant account, payment gateway, and processing tools. This can reduce complexity, lower costs, and speed up settlement times.

For example, platforms like Airwallex combine these services in a single interface, making it easier for businesses to start accepting payments without managing multiple vendors.

Here’s a breakdown of the main types of merchant service providers:

• Payment processors: These facilitate card transactions between customers and businesses. Airwallex falls into this category.

• Point of Sale (POS) system providers: These offer in-store payment systems that may include software, hardware, and payment processing.

• eCommerce platforms: These help online businesses accept payments through website integrations and digital checkout tools.

When evaluating whether a merchant account is needed, it helps to consider how payments are accepted (online or in-store), what currencies are supported, and how fast funds need to be available. For global or digital-first businesses, all-in-one solutions are often more efficient than managing a traditional standalone merchant account.

What to look for in a business merchant account provider

When comparing providers, consider the following:

• Fees including setup, monthly and annual costs, chargeback fees, batch fees, and early termination charges

• Services offered such as payment gateway and processing in addition to the merchant account

• Security including encryption, fraud prevention, PCI compliance, and tokenisation

• Reputation based on online reviews and industry recommendations

Once the right provider is selected, it’s time to organise the required paperwork and submit the application.

Streamline payment processing by choosing a provider that combines merchant accounts with broader financial solutions.

Merchant account fees

Merchant accounts often charge per-transaction fees and monthly account fees. Additional fees may include:

• A one-time setup fee (commonly $50–$200)

• Monthly or annual service fees

• Chargeback fees for disputes or payment reversals (often $25–$50 per case)

• Minimum monthly fee if a certain transaction volume is not met

• Early termination fees

Fee structures vary based on industry, business size, and transaction volume. Comparing options is important. Some platforms, such as Airwallex, offer transparent pricing and combine merchant accounts with payment processing tools to reduce hidden costs and simplify setup.

How to open a merchant account

Opening a merchant account is more involved than setting up a regular business bank account, but the process is straightforward when broken down into steps.

1. Research providers: Look for providers that suit the type of business, industry, and payment methods needed. Some offer just the merchant account, while others bundle it with processing tools and a payment gateway.

2. Compare fees and features: Review account setup costs, monthly fees, chargeback fees, and whether the service includes fraud protection and PCI compliance.

3. Check integration options: Make sure the solution works with existing systems, such as an eCommerce platform or POS setup.

4. Gather required documentation: This typically includes business verification, bank account details, identification, and transaction history.

5. Submit the application: Apply through the provider’s website or portal. Approval times can vary depending on the provider and risk profile.

Many businesses now opt for full-service platforms that include a merchant account as part of a broader solution. This can help simplify operations and avoid the need to work with multiple vendors.

Required documents needed to open a merchant account

To open a merchant account in Australia, providers typically ask for a combination of personal, business, and financial documentation. These requirements help verify the identity of the business and its owners, assess risk, and comply with local regulations.

Here’s what is usually required:

• Business bank account details, including an account statement or a document showing the account name and BSB

• Australian Business Number (ABN) and, if applicable, an Australian Company Number (ACN), along with business registration information

• Proof of identity for company directors or business owners, such as a driver’s licence or passport

• Business address verification, such as a utility bill or lease agreement

• Financial history, which may include credit checks and recent business bank statements

Some providers may also request additional details such as website URLs, product descriptions, or forecasts if the business is new or high-risk. Always check the specific requirements for the provider being considered.

Payment service provider vs. merchant account provider

A merchant account provider offers just one part of the payment infrastructure: a place to hold card funds before they land in a business bank account. It does not handle authorisation, processing, or settlement.

A payment service provider (PSP) combines these elements into one platform. This typically includes:

• A merchant account to receive funds

• A payment gateway to authorise transactions

• A processor to move the funds securely

This bundled approach simplifies setup, reduces third-party fees, and removes the need to manage multiple providers.

Airwallex is a payment service provider that offers more than just payment acceptance. It also includes Virtual cards, Expense Management, and global Business Accounts, giving Australian businesses more control over incoming and outgoing payments from a single platform.

Get more than just a merchant account

A merchant account is only one piece of the payment puzzle. Airwallex brings everything together with a single platform that includes a merchant account, payment gateway, and processor.

With Global Accounts, businesses can receive and hold funds in multiple currencies, pay suppliers directly, and settle without unnecessary conversions.

Additional tools like Expense Management, Virtual Cards, and Bill Pay help reduce admin, improve visibility, and streamline operations.

See how Airwallex supports businesses in Australia and beyond.

Business merchant account: frequently asked questions

What is the difference between a merchant account and a payment gateway?

A merchant account holds customer funds temporarily before they are transferred to a business bank account. A payment gateway authorises transactions between the customer's card and the business. Most businesses need both to accept payments online.

Can I open a merchant account without a business bank account in Australia?

No. A valid Australian business bank account is required to receive cleared funds. It must be registered under the same legal entity as the business applying for the merchant account.

Do all businesses need a merchant account?

Most businesses that accept card or online payments do. However, some payment service providers (like Airwallex) bundle the merchant account with other services, so there is no need to set one up separately.

How long does it take to get a merchant account approved?

Approval times vary but typically take between one and five business days. Some platforms offer faster onboarding if documentation is complete and the risk profile is low.

What fees are involved in maintaining a merchant account?

Fees vary by provider and may include setup fees, monthly service charges, per-transaction fees, and chargeback costs. Some providers offer better rates when services are bundled together.

How does Airwallex compare to a traditional merchant account provider?

Airwallex combines a merchant account with global business accounts, payment gateways, expense tools, and more. This allows businesses to manage international payments, reduce admin, and avoid unnecessary conversion costs, all from one platform.

Sources:

1. https://www.mckinsey.com/industries/financial-services/our-insights/banking-matters/consumer-digital-payments-already-mainstream-increasingly-embedded-still-evolving