What Is a Merchant Account and Why You Need One
Accepting electronic payments is no longer optional for most businesses. Whether customers pay online, over the phone, or through recurring billing, a merchant account is the infrastructure that makes those payments possible.
In this guide, we’ll explain what a merchant account is, how it works, and why it’s especially important for organizations operating in regulated or compliance-heavy industries.
What Is a Merchant Account?
A merchant account is a specialized type of bank account that allows businesses to accept electronic payments such as:
credit cards
debit cards
ACH and eChecks (in some setups)
When a customer submits a payment, the funds are temporarily held in the merchant account while the transaction is authorized and settled. Once processing is complete, the funds are transferred to the business’s primary bank account.
Merchant accounts serve as the bridge between:
payment networks (Visa, Mastercard, ACH)
acquiring banks and processors
the business receiving funds
Why Do You Need a Merchant Account?
A merchant account enables businesses to:
accept electronic payments securely
reduce reliance on checks or cash
offer online and mobile payment options
process recurring or scheduled payments
maintain compliance with payment regulations
Without a merchant account, businesses are limited to manual payment methods that slow down cash flow and increase administrative burden.
How Merchant Accounts Work (Step-by-Step)
While the technical details vary, most merchant account transactions follow this flow:
A customer submits payment information
The payment is routed through a processor and acquiring bank
The transaction is authorized or declined
Approved funds are temporarily held in the merchant account
Funds are settled and deposited into the business’s bank account
This process typically takes anywhere from same-day to several business days depending on payment type and settlement method.
Merchant Accounts for Regulated Industries
Not all merchant accounts are created equal — especially for organizations operating in regulated or high-scrutiny environments such as:
law firms
debt collection agencies
financial services providers
healthcare-adjacent billing organizations
Why regulated industries face stricter requirements
Payment processors evaluate risk differently when transactions involve:
recurring or installment payments
ACH debits tied to consumer authorization
sensitive personal or financial data
regulatory oversight (NACHA, PCI, Reg F, etc.)
As a result, regulated businesses often experience:
enhanced underwriting
stricter documentation requirements
closer monitoring of disputes and returns
limitations on payment methods or workflows
Choosing a merchant account provider familiar with these requirements helps prevent operational disruptions and compliance issues.
How Merchant Accounts Work With ACH
While merchant accounts are commonly associated with card payments, many modern setups also support ACH and eCheck transactions.
ACH introduces different considerations
ACH payments offer lower fees and are ideal for recurring payments, but they also involve:
return codes (such as R01, R03, R17)
longer dispute windows
strict authorization and formatting requirements
delayed settlement compared to cards
Because ACH errors are often caused by invalid or misformatted data, merchant accounts that support ACH work best when paired with:
validated account entry
structured payment workflows
clear authorization capture
documented audit trails
For regulated industries, this combination helps reduce failed payments and compliance risk.
Modern Payment Portals vs. Traditional Merchant Accounts
A merchant account alone is no longer enough for most organizations.
Traditional approach
Many businesses still rely on:
manual data entry
emailed payment links
disconnected billing tools
These methods increase the risk of:
invalid payment data
ACH returns
authorization disputes
consumer confusion
Modern approach
Today’s payment environments combine:
a merchant account (to process funds)
a secure payment portal (to collect data correctly)
validation and guardrails to prevent errors
centralized communication and tracking
Payment portals act as the consumer-facing layer that ensures payment information is entered accurately and securely before it ever reaches the merchant account.
This structure dramatically improves payment success rates and reduces operational friction.
ACH vs. Card Payments: Choosing the Right Mix
Most regulated organizations benefit from offering multiple payment options.
ACH works well for recurring or scheduled payments due to lower fees
Debit cards are often preferred for one-time or urgent payments
A hybrid strategy allows consumers to choose the method most likely to succeed
Merchant accounts that support both methods — when paired with structured workflows — provide the greatest flexibility and reliability.
Compliance and Authorization Considerations
For regulated industries, merchant accounts must support:
clear consumer authorization language
secure handling of bank and card data
audit-ready documentation
traceability across payment attempts
compliant communication workflows
Failure to meet these standards can result in:
increased disputes
payment reversals
processor warnings
regulatory scrutiny
How the Right Merchant Account Setup Reduces Risk
When paired with modern tools and workflows, a merchant account can:
reduce ACH return rates
improve payment completion
lower cost-to-collect
streamline compliance oversight
improve consumer trust
Solutions designed for regulated industries — such as HealPay’s Merchant Services combined with HealPay Hub — are built specifically to support these outcomes.
Bottom Line
A merchant account is more than a way to accept payments — it’s a foundational component of your payment, compliance, and consumer-experience strategy.
For regulated industries, pairing the right merchant account with secure, structured payment portals and workflows is essential for reliable revenue and long-term operational success.