Direct Merchant Accounts and Sponsored Merchant Accounts

Online retail merchants would have to apply for a merchant account if they wish to receive payments for the goods or services they provide. Typically, there are two different merchant accounts that they can apply for, however merchants often get confused when applying for one. We at Awepay would like to give potential online retail merchants a better understanding on the difference between a Direct and a Sponsored Merchant Account.


Direct Merchant Account

All online retail merchants should focus on building their business to meet all the necessary requirements to open a Direct Merchant Account. This account specially caters to the experienced and reliable merchants with good financial and credit record, Merchants in this category often enjoy better Merchant Discount Rates (MDR). Below are some common key points and characteristics of this account;

  1. Higher Sales Volume – Catered for merchants processing larger monthly sales volume or required to process a fixed minimum of volume every month.
  2. Detailed Approval Process – Merchants are required to provide processing history, other detailed documents, and undergo full credit check to prove that they are capable of handling the account themselves.
  3. Total Control – Merchants would typically handle all aspects of the business like support, technical, or fraud related. They would also need a payment gateway to host this account. Other than having full freedom and being fully responsible over their own account, merchants are only required to abide by the regulations of the Card Associations that they choose, e.g. Visa or MasterCard.
  4. Professionalism – Seamless checkout process, personal descriptor on the customer’s card statement

Sponsored Merchant Account

Not all online merchants who wish to accept payment via their website is eligible for a direct merchant account. A direct merchant account has a number of requirements and criteria that not all merchants can fulfil. An alternate option is a Sponsored Merchant Account. This account is set up with the help of a third party often called an aggregator.

This merchant account is typically owned by the aggregator and can board a few merchants at once; however the merchants have to abide by the terms set by the aggregator. Merchants will use the aggregator’s payment gateway to process payments. Rates and fees for this account are usually higher as the risks in new and inexperienced businesses are relatively higher. Below are some of the common situations why a Sponsored Merchant Account is more suitable for these merchants;

  1. Unregistered Business – All major Card Associations will require their merchants to have a proper registered business in their respective countries. Sometimes, certain acquirers do not recognise certain countries for incorporation, thus require the merchant to set up a company in more common regions, such as the Europe.
  2. Terminated Merchant File (TMF) – The applying merchant is blacklisted by Card Associations for processing violations. Being caught for high chargebacks or selling illegal products or services are two of the most common reasons. Merchants are unlikely to get a merchant account until they all matters, investigations, or fines are rectified.
  3. High Risk Business – Applications found to be high risk are often caused by low sales volume, high ticket sizes, products such as medicine and electronics, incomplete terms and policies, and more.
  4. Start-up or inexperienced business – suitable for new businesses and businesses with lower credit support. Merchants often use this account to step foot in the online payment world and to gain experience.


By now, you should have an idea on the difference between a Direct Merchant Account and a Sponsored Merchant Account. While both of these accounts allow you to accept payments online, the way they are implemented and the advantages along with it are different. As many businesses are different, take time to study and seek advice so see which merchant account best fits you. After all, we at Awepay would also like to help your business grow and enhance your customers’ experience.