What are MIDs in payments?

May 20, 2021 Maxpay Blog
What are MIDs in payments?

Stepping into the card payment world brings up a lot of new financial terms into the merchant’s life. One of them is the Merchant Identification Number. With this article, Maxpay will explore the meaning of the Merchant ID, how exactly it participates in the transaction flow, how to get one, and where to find it if you already have your MID.

Merchant ID explained

Basically, the meaning of MID is merchant identification number. It is a unique authorization number that is provided to the merchant by her or his payment processing provider. MID makes it possible for the merchant to securely accept credit and debit card payments, and process electronic transactions in general. In fact, MID facilitates payment transactions between the consumer and the business. 

Every Merchant ID is utilized to identify a certain business during the MID payment. At the moment when the consumer makes a purchase, the merchant’s number is transferred to third parties that are involved in the MID payment process. Merchant ID also verifies the legitimacy of the business to the consumer’s issuing bank.

The difference between a MID and a Merchant Account ID

Merchant Account ID might seem similar to Merchant ID, but these two banking terms are different. MID is given to each merchant that operates with electronic payments, while Merchant Account ID is issued when the merchant handles various businesses or transaction types within one gateway. For example, sub-brands can have individual merchant account IDs, but still one Merchant ID that is connected to the main brand.

How to get the Merchant ID

To get the Merchant ID a business owner must open a merchant account in the acquiring bank. To open this type of account, the merchant needs to verify the business by submitting valid documents. 

An acquiring bank is a financial institution that provides business owners with merchant accounts. Acquiring banks are responsible for completing the electronic payment processing for businesses. Besides that, the merchant account can be opened by the payment provider service. It is the third-party payment processing service that acts on behalf of an acquiring bank.

Normally, the list of papers would vary depending on the country, financial institution, and the business itself, but there are some common points for every applicant to obtain:

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

If you would like to know more about merchant accounts, their function in the business, and which type is the best one, we have an article covering all of it “Why do you need a merchant account and what you need to know”.

How the Merchant ID is used to transfer funds

Now that we have explained what a MID is, let’s move on and find out exactly how a merchant’s number is used in MID payments. For that, we need to dive into the MID payment processing flow or the transaction process.

  1. When the consumer makes an electronic payment, the credit card data is transferred to the merchant account provider.
  2. The merchant account provider, using the MID number in payments, sends the information to a merchant’s acquiring bank.
  3. An acquiring bank sends a request to an issuing bank of the customer.
  4. The issuing bank verifies the identity and checks funds availability along with payment limits. 
  5. Then the issuing bank approves or declines the transaction and sends this information back to an acquiring bank.
  6. An acquiring bank transmits the data to the merchant account provider.
  7. The merchant account provider puts the transaction funds on the merchant account.

To make it fully clear, an issuing bank is the bank institution that provides customers with payment cards labeled by one of the card associations, like Visa, MasterCard, American Express. Issuing banks enable customers to take part in electronic payment processing, buying products and services online, or performing purchases at retailers.

MIDs define merchants in the complex process of payment processing. Each business owner has an individual code that is moved through third parties and back while the payment is being processed. Without the MID payments can not be accepted, as the business can not participate in the electronic payment process, and so can not receive funds.

Do all businesses need a Merchant ID?

Every business that aims to accept credit and debit card payments absolutely needs a Merchant ID. It is as essential in the electronic payments world as the merchant account itself. Without the MID no payment can be performed or accepted.

How to look up your Merchant ID Number

Well, the Merchant ID is not a secret to the merchant, and to look it up is quite easy. There are several ways to do it.

  1. The merchant statement. The document a business owner receives monthly from his or her provider. Besides MID it includes other identification information like business address, business name, business phone number, and so on.
  2. Online portal. If the provider enables the online account for a merchant, the MID will be mentioned there on the information page.
  3. Application. Again, in the case of the existing service application, the Merchant ID can be spotted there easily.
  4. Card terminal. For retail businesses, a card terminal can be a solution with displaying the Merchant ID on it.
  5. Contract. It is also possible to find MID along with all the other business information in the legal agreement with the processor or acquiring bank.

Can a merchant have more than one MID?

Yes, a merchant can have multiple Merchant IDs. Usually, MIDs are divided between different payment streams, or between several businesses. In the MID payment processing, a low-risk business can benefit from the multiple account system using this division for tax purposes.

For a high-risk business, more than one Merchant ID is generally recommended. As any high-risk business tends to get over a chargeback ratio quite fast and actually lose the merchant account, multiple MIDs for payments can save the situation. Obtaining several Merchant IDs diverse chargebacks and protects from fraud. Also, multiple MIDs help to constantly collect payments, without traffic loss and revenue drops.

What should you do with your Merchant ID number?

The Merchant ID number is often transmitted between different card processing third parties to identify the certain business owner to transfer electronic payments from the cardholder’s account to the merchant’s account. 

This is a highly important code that a merchant can’t avoid referring to frequently. But at the same time, MID must be kept secure to prevent fraudulent actions. The best is to protect it from all unauthorized personnel and other third parties and to give access to the number only in the top necessity cases. 

Contact our sales team today to open a merchant account and get your MID number – all completely online! Open as many merchant accounts as you need, with chargeback tracking, churn control, and many anti-fraud tools!