What is a Merchant Identification Number?

2021 is on track to be a banner year for new business starts in the U.S., marking a new record for business formation. There was nearly a 23% increase in new businesses starting in 2021 compared to the prior year. As these new businesses start, they have to contend with new consumer spending habits. Many don’t like to use cash much. In fact, three out of ten customers don’t even use cash in any given week. The new norm of doing business is drifting towards cashless, touchless transactions. As a result, any new merchant starting a business today will have to quickly adapt to these changing trends and learn about the merchant account system.

The merchant payment processing system is a vast infrastructure that facilitates transactions and payments accurately and safely. It is composed of consumers, issuing banks, acquiring banks, merchants, payment processors, and a host of other third-party vendors that provide tertiary services such as data encryption and security. A critical part of this system is built around the Merchant Identification Number (MID) The MID allows the system to identify a merchant, and securely route the funds due to that merchant through the correct payment network, promptly.

Given its importance, we looked into the detail of what is a MID, why businesses need one, where they can access their MID, and how to avoid any confusion around this vital information.

What is a Merchant Identification Number?

A MID is usually a 15-digit unique identifier assigned to merchants by their merchant service provider. The MID is submitted along with the cardholder data used to process a transaction.

The MID is a form of an address of the merchant in the payment processing system. Needless to say, this MID is as important to a business as is a home address to a person. The number should be safeguarded and shared with only those parties that require it. Otherwise, merchants may be opening themselves up to risks of security and theft.

Why does my business need a Merchant Identification Number?

Merchants should treat their MID as a form of a bank account number. It is the MID that is used by various parties to identify a merchant that helps ensure that the funds due to that merchant are routed accurately.

How do I get a MID?

Merchants don’t have to perform any additional tasks to get their MID. All that is required is to first complete the application process for a merchant account with an acquiring bank, this is where Host Merchant Services can help.

The business owner will be required to complete paperwork that would be then vetted to verify the business exists and is legitimate. The merchant will be required to submit documents such as their Tax Identification Number (TIN), details about the ownership of the business such as the principal owners, and any additional pertinent information required to verify the existence of an entity.

It is important to note that merchants that work with payments platforms such as Square and PayPal for payment processing. Since these platforms don’t require a merchant account to receive payments, there is no need for a MID.

How is a Merchant Identification Number different from a Merchant Account ID?

Although the names sound identical and can cause confusion, the merchant identification number is not the same thing as the merchant account ID. A merchant account ID is assigned to various units or divisions of a business that has different business types with different types of transactions. From a payment processing perspective, as these different business segments may have different risk profiles incurring different rates for payment processing, they have separate identifiers known as merchant account ID.

The merchant identification number would be the same for the entire entity, for all its business divisions.

Where can you find your Merchant Identification Number?

Since MID are not public information, there is no central public repository of merchant identification numbers that anyone can search for. Keep in mind that this is a key identifier enabling the processing of transactions and receiving funds, so keeping this information private and secure is in the merchant’s best interest.

So how would a merchant access his MID when required? Below are some areas one can start looking;

  • Merchant Account Statement – The merchant statement issued by your payment processor should have a 15-digit number listed on the top-right corner.
  • Bank Account Statement – Since MID is included in the processing of a transaction, along with cardholder data, this information usually appears on debit and credit line items from your payment processor on merchant’s bank statement, starting with the header MTOT or BTOT.
  • Point of Sale Terminals – most POS procured from your merchant payment processor will often include the MID in the inventory tagging of the terminal, usually found on the side or at the bottom of the POS terminal.
  • Merchant Service Provider – If all else fails, a merchant can simply call up his payment processor and ask for the information.

More businesses started in 2021 than in any year before on record. This is at a time when the global economy is experiencing tremendous shifts in consumer purchasing preferences. Customers growingly prefer shopping at home from the convenience of their smart devices. The preferred mode of payment is anything but cash, be it a credit or debit card, their mobile phone, or their smartwatch.

These newly formed businesses will have to successfully navigate the complex field of payment processing and learn how this system of payments, refunds, chargebacks work. They need to understand which card network they should be on, which Point of Sale (POS) devices they would need, who to process payments through, and how this is all brought together by a Merchant Identification Number (MID). This is one piece of identification that all merchants need to have a merchant account set up. 

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