What are MIDs in payments?

Entering the card payment world introduces a slew of new financial terms into the merchant's vocabulary. The Merchant Identification Number is one of them. This article will go over the meaning of the Merchant ID, how it works in the transaction flow, how to obtain one, and where to find it if you already have your MID.

Merchant ID explained

The term MID stands for merchant identification number. It is a one-of-a-kind authorization number provided by the merchant's online payment gateway service provider. MID enables merchants to securely accept credit and debit card payments, as well as process electronic transactions in general. In fact, MID streamlines payment transactions between consumers and businesses.

During the MID payment, each Merchant ID is used to identify a specific business. When a consumer makes a purchase, the merchant's number is transmitted to third parties involved in the MID payment process. Merchant ID also verifies the business's legitimacy to the consumer's issuing bank.

The difference between a MID and a Merchant Account ID

Although Merchant Account ID and Merchant ID may appear to be the same thing, they are not. MID is assigned to each merchant who accepts electronic payments, whereas Merchant Account ID is assigned when the merchant handles multiple businesses or transaction types within the same gateway. Sub-brands, for example, can have individual merchant account IDs, but only one Merchant ID that is linked to the main brand.

How to get the Merchant ID

To obtain the Merchant ID, the business owner must first open a merchant account with an acquiring bank. To open this type of account, the merchant must validate the company by submitting valid documentation.

An acquiring bank is a financial institution that offers merchant accounts to business owners. Acquiring banks are in charge of completing businesses' electronic payment processing. Aside from that, the payment provider service can open a merchant account. It is a third-party payment processing service that acts on an acquiring bank's behalf.

Normally, the list of papers would differ depending on the country, financial institution, and business itself, but there are some points that every applicant should obtain:

• Business bank account
• Business license
• Taxpayer ID number
• Physical business address
• Financial statement
• Application form

How the Merchant ID is used to transfer funds

Now that we've explained what a MID is, let's look at how a merchant's number is used in MID payments. To do so, we must investigate the MID payment processing flow or transaction process.

1. When a customer makes an electronic payment, the credit card information is sent to the merchant account provider.
2. Using the MID number in payments, the merchant account provider sends the information to the merchant's acquiring bank.
3. An acquiring bank sends a request to the customer's issuing bank.
4. The issuing bank verifies the identity and checks the availability of funds as well as payment limits.
5. The issuing bank then approves or declines the transaction and forwards the information to an acquiring bank.
6. The data is sent to the merchant account provider by an acquiring bank.
7. The transaction funds are placed on the merchant account by the merchant account provider.

To be clear, an issuing bank is a financial institution that issues payment cards labelled by one of the card associations, such as Visa, MasterCard, or American Express. Customers can participate in electronic payment processing, buy products and services online, or make purchases at retailers thanks to issuing banks.

In the complex process of payment processing, MIDs define merchants. Each business owner has their own code, which is passed through third parties and back while the payment is processed. Payments cannot be accepted without the MID because the business cannot participate in the electronic payment process and thus cannot receive funds.

Do all businesses need a Merchant ID?

A Merchant ID is required for any business that wishes to accept credit and debit card payments. It is as important in the world of electronic payments through best online payment gateway as the merchant account itself. No payment can be performed or accepted without the MID.

How to look up your Merchant ID Number

The Merchant ID is not a secret to the merchant, and finding it is simple. There are several options.

The merchant statement

The document that a business owner receives from his or her provider on a monthly basis. Aside from the MID, it contains other identification information such as the business address, business name, business phone number, and so on.

Online portal

If a merchant's online account is enabled by the provider, the MID will be displayed on the information page.

Application

Again, in the case of the existing service application, the Merchant ID is easily visible.

Card terminal

A card terminal that displays the Merchant ID can be a solution for retail businesses.

Contract

The MID, along with all other business information, can also be found in the legal agreement with the processor or acquiring bank.

Can a merchant have more than one MID?

Yes, a merchant can have more than one Merchant ID. MIDs are typically divided between different payment streams or between multiple businesses. A low-risk business can benefit from the multiple account system in the MID online payment gateway India by using this division for tax purposes.

More than one Merchant ID is generally recommended for a high-risk business. Multiple MIDs for payments can save the situation if a high-risk business quickly exceeds its chargeback ratio and loses its merchant account. Obtaining multiple Merchant IDs diversifies chargebacks and protects against fraud. Additionally, multiple MIDs aid in the continuous collection of payments while minimising traffic loss and revenue drops.

What should you do with your Merchant ID number?

The Merchant ID number is frequently transmitted between various card processing third parties in order to identify a specific business owner in order to transfer electronic payments from the cardholder's account to the merchant's account.

This is an extremely important code that a merchant must frequently refer to. However, MID must be kept secure in order to prevent fraudulent actions. It is best to keep it safe from unauthorised personnel and other third parties, and only give access to the number in extreme emergencies.