Merchant Identification Number (MID) | B2B Finance Glossary

What is a MID?

A merchant identification number (MID) is an individual code assigned to merchants via their acquiring bank (the bank that processes debit and credit card payments on behalf of the merchant). MIDs are issued after a merchant is approved for a merchant account: a business bank account that allows merchants to accept electronic debit and credit card payments from customers directly. To get one of these accounts, merchants must undergo a specific approval process, get a business license, and make an agreement where the business submits to underwriting.

After the business is approved for the merchant account, it receives the MID – critical for identifying the merchant in processing networks and ensuring that funds are properly channeled through the right routes to reach the merchant it belongs to after a customer buys something from a particular business.

Why Do Businesses Need a MID?

MIDs are particularly important because they add an essential layer of security to the online payment process: they make sure that customer payments reach the merchants that they are intended for. The bottom line is that businesses need a MID if they want to accept card payments because it’s impossible to accept transactions through a merchant account without this unique code. Once a business sets up a merchant account, it must get a MID to accept customer credit and debit card payments.

How Do Businesses Obtain Their MID?

Businesses can obtain their MID by opening a merchant account and being provided with the MID code once this process is complete. To open a merchant account, you’ll have to follow these steps:

• Get a business license. One prerequisite for obtaining a merchant account is getting a business license. To do this, your business must form its legal entity, get its Employer Identification Number (EIN), and determine which type of business license it needs. After completing all of this, you can apply for your business license (usually done online through the proper agency’s website).
• Open a business bank account. You can open a business bank account with official business documents (including Articles of incorporation, Articles of Organization, or other documents), EIN, business address, and government ID.
• Understand your business needs. Knowing which type of credit card you want to process is important before you open your merchant account. On top of that, you will need to know whether you’re accepting credit card payments online or in-store, or both. Knowing this information will allow you to effectively plan for exactly what your business needs.
• Compare providers. Make sure you choose the merchant account provider that’s the best fit for you. You can research which providers have the strongest security, enable next-day funding, and offer PCI compliance, robust customer service, and transparent pricing models.
• Complete your merchant account application. After choosing which merchant account provider best fits you and your business, you’ll need to formally apply for your merchant account. This application will require your estimated processing volume, business start date, tax ID, authorized signer information, and bank account and routing numbers.
• Submit to underwriting. Opening a merchant account creates risk for the account provider and the acquiring bank. As a result, the provider will underwrite and assess your business before approving your account application. Providers look for specific red flags such as high-risk industries, signs of fraud, or a business history that is too short.
• Get your merchant account approved. Once all of the above is complete, it will take anywhere from one to seven business days to get your account approved. As soon as your business gets its merchant account, it will be given its own unique MID.

What is the Difference Between a Merchant Identification Number (MID) and a Merchant Account ID?

It can be easy to confuse MIDs with merchant account IDs. Remember, once a business gets its merchant account, it will be issued its MID. A business with different websites, branches, or channels will need an independent MID for each revenue stream since funds will all need to be tracked separately.

On the other hand, a merchant account ID is an identifier that encompasses every branch and channel of a business. This means that multi-channel businesses will have more than one MID but just one merchant account ID – in other words, you will need an independent MID for every stream of revenue in your business, but you will need just one merchant account ID to represent your entire business.