What is a merchant account? A guide for Australian SMBs

Launching your first business? You’re probably wondering what a merchant account is and whether you even need one. If accepting direct card payments from customers is in your business plan, chances are you will need a merchant account – or an alternative service.

In this post, we’re covering everything an Aussie SMB should know about the merchant account, including its benefits, processes, requirements, and fees. We’ll also introduce Wise Business, a cost-effective alternative for Australians trading overseas.

What is a merchant account?

A merchant account is a special type of business account exclusively used to accept card payments. Modern merchant accounts work with credit and debit cards from all the major card schemes – Visa, Mastercard, eftpos, etc. – as well as mobile wallets like Google Pay and Apple Pay.

After receiving a card payment, the merchant account temporarily holds onto the funds before transferring them to the linked business account. But the merchant account doesn’t actually process the payment; the payment gateway handles that step.

Importance of a merchant account for Australian businesses

Aussies aren’t real keen on cash. According to the Reserve Bank of Australia, only 15% of payments were made in cash in 2025,¹ with many customers favouring Tap-and-Go card payments. As a merchant account is required to accept card payments, it’s a non-negotiable for many businesses.

Exceptions exist. Online marketplaces, such as eBay, Amazon, Etsy, and Upwork, handle card payments and transfer funds to your business account, minus any fees. That means you can get paid by card on these platforms without a merchant account.

But if you’re billing cards directly from customers, you will need a merchant account or an alternative, such as a Payment Service Provider (PSP).

Merchant account vs payment gateway

The merchant account receives and holds card payments before transferring them to your business account. But it’s the payment gateway that processes them.

For online purchases, the payment gateway is usually a secure pop-up window where the customer enters card details to finalise a transaction. In physical, brick-and-mortar stores, the best payment gateways are built into the POS machine.

Merchant account vs business account

The merchant accepts revenue. The business account helps you manage it.

The business account is where you store and manage finances. From this pool of liquid capital, you can pay bills, deduct payroll for employee salaries, track expenses, and purchase stock, among other day-to-day business transactions.

In Australia, partnerships, companies, and trusts must open a business account. Sole traders aren’t legally obligated, but the ATO recommends getting one anyway.²

The merchant account is optional. But you will need one, or an alternative, to accept direct card payments.

How do merchant accounts in Australia work?

Here’s how the merchant account fits into the payment process.

1. The customer initiates a payment by tapping their card/phone at a POS machine or by entering their card details into an online payment gateway.
2. A payment processor collects that data and forwards it to the merchant’s bank, which processes the payment.
3. A card network (Visa, Mastercard, eftpos, etc.) sends the transaction details to the customer’s bank.
4. The customer’s bank verifies whether sufficient funds are available and approves or denies the request.
5. Approved transactions are temporarily held in the merchant account.
6. The merchant account transfers the funds to the linked business account, usually within 1-3 business days.

So while the merchant account holds card payments, it doesn’t actually process them.

Merchant account options in Australia

All the big four banks – CBA, NAB, ANZ, and Westpac – offer merchant accounts, EFTPOS terminals, online payment gateways, and other payment solutions. Many of the smaller Australian banks also offer merchant accounts and payment services, including Bendigo Bank, Bankwest, Bank of Queensland, Macquarie Bank, and Suncorp Bank.

Businesses can also select from all-in-one PSPs, such as Stripe, Square, and PayPal. Australians trading overseas could save on foreign exchange fees through a PSP specialising in cross-currency transactions, such as Wise Business.

How to open a merchant account?

Processes vary by bank and PSP. Nonetheless, here’s a rough breakdown of how to set up a merchant account.

1. Select your provider: Analyse your requirements and find a merchant account (or a PSP) that suits your business needs.
2. Submit documentation: Gather and submit the required documents to demonstrate your business's legitimacy and financial viability.
3. Underwriting: Sit tight while the provider reviews your credit history and risk level.
4. Set up: Once approved, set up your POS terminals and integrate your online payment gateway.
5. Trading: Start accepting card payments, remembering to factor merchant account fees into your pricing.

All-in-one PSPs tend to be faster, easier, and cheaper to set up, making them popular with start-ups, sole traders, and low-volume SMBs. Bank-operated merchant accounts may offer lower per-transaction fees, which some established, high-volume brands may prefer.

Requirements to open a merchant account

Documentation requirements vary between providers and businesses. Banks may ask for the following, depending on your structure and circumstances.

• Business account statement, showing the account number, BSB, and cash flow
• Australian Business Number (ABN) and Australian Company Number (ACN) (for companies)
• Proof of identity, such as a driver’s license and passport, for you and any company directors
• Proof of business address, such as a lease agreement or electricity bill
• Financial records, such as previous bank statements, profit and loss statements, and tax returns
• A business plan, especially when opening your first credit card merchant account
• Processing history if switching providers, such as old credit card statements
• A company website showcasing your products, pricing, and business details
• Partnership/trust deeds or an ASIC Certification of Incorporation (for companies)

Types of merchant account fees

Merchant accounts come with numerous fees to consider when comparing providers. Fees may vary by provider, industry, business size, or your monthly transaction volumes.

• Setup fees: A one-off fee to open a merchant account online or in person
• Monthly minimum fees: You may have to spend a minimum amount on processing fees per month; otherwise, you pay the difference.
• Monthly/annual fees: Ongoing fees to keep the account open.
• Per-transaction fees: Many providers charge a percentage of the total transaction amount, plus a small flat-rate fee.
• Batch fees: Payments are processed in batches, and some providers charge a fee per batch.
• Exit fees: Long-term contracts often involve exit fees if you close the account early.
• Chargeback fees: The merchant may pay a fee if a transaction is reversed due to a customer dispute.

Banks generally charge higher start-up and ongoing fees, but lower per-transaction fees, making them popular with established, high-volume businesses.

PSPs often bundle a merchant account into an all-in-one payment processing solution, with low or no setup and monthly fees, but higher per-transaction charges. This fee structure, combined with a less stringent underwriting process, makes PSPs popular among start-ups and small businesses.

Ways to accept payments without a merchant account

Merchant accounts are only needed for direct card payments. If you’re happy accepting indirect card payments or relying on card-free methods, then you could make do without one.

Indirect card payments

Indirect card payments typically involve third-party platforms that process card payments on the business’s behalf. When running an online store on eBay, Etsy, or Amazon, for example, you can accept card payments indirectly – the platform acts as an intermediary. The same applies to freelancers using platforms like Upwork or Fiverr.

Non-card payments

Businesses don’t need a merchant account to accept bank transfers, including PayID. Other options include BPAY, which facilitates bank-to-bank transactions, Buy Now, Pay Later (BNPL) services such as Afterpay, and cash.

Payment Service Providers (PSPs)

PSPs may offer their own built-in merchant accounts or act as intermediaries, enabling businesses to accept card payments without a bank merchant account. As PSPs are cheap and easy to set up, they’re popular with freelancers, start-ups, and low-volume businesses. Payment solutions vary by provider, but common examples include payment links, QR codes, invoices, and online payment gateways.

Challenges of accepting international card payments

When accepting international card payments, businesses pay a higher per-transaction fee, typically 3-4%, plus a flat fee of around $0.30. This international fee is predictable, allowing businesses to build it into their pricing.

The foreign exchange rate, on the other hand, usually includes a hidden markup. Some providers charge up to 5% above the mid-market exchange rate, which is the “real” FOREX rate you see on Google.

Such markups increase the cost of accepting international card payments. Plus, businesses often won’t know the FOREX fee until the transaction finalises.

Wise Business: Simplify how you accept global payments

Expanding a business globally opens up exciting opportunities, but also new challenges like receiving payments across borders. Hidden foreign transaction fees and hefty currency conversions involved with international payments can eat into your profits and time.

Wise Business serves as a cost-effective solution where you can receive money from around the world at the speed and price of local payments.

Transform the way you receive payments with Wise Business:

• One-time fee of 65 AUD for local account details in 8+ currencies, including AUD, NZD, USD, and more—no recurring fees
• One account to hold, send, and convert money with no hidden fees or exchange rate markups
• Create and send professional invoices directly to your customers through Wise Business
• Create payment links to request money in specific currencies
• Seamlessly receive payments from customers, online sales, or PSPs like Stripe and Amazon.
• Wise is safe and secure - Trusted by 13 million people and counting

Sign up for the Wise Business account! 🚀

This general advice does not take into account your objectives, financial circumstances or needs and you should consider if it is appropriate for you.

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FAQs

What is a merchant account?
A merchant account is a type of business account used for accepting card payments.

Do I need a merchant account?
If your business accepts direct card payments from customers, you will need a merchant account or an alternative service.

How can I save on accepting international card payments?
Wise Business can help your business save on cross-currency transactions with low pricing and access to the mid-market exchange rate.

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Sources

1. Reserve Bank of Australia: Cash use survey
2. ATO: Before you start a business