Merchant codes are here to stay, businesses must keep up

Ms Sumayah Kyewalyanga, digital payments manager, mobile financial services, MTN. 

What you need to know:

As e-commerce becomes inescapable, the merchant code has emerged as a new enabler for digitising businesses. But how does a merchant code work and should you get one? Ms Sumayah Kyewalyanga, digital payments manager, mobile financial services, MTN demystifies the merchant code which is issued by telecom companies.

Following the digital rush by businesses into e-commerce occasioned by Covid-19 and the anticipation of vibrancy of the economy since its re-opening, we explain the merchant code which is issued by telecoms and how businesses can benefit from it.

1. It is a common phenomenal at fuel stations, retail shops and supermarkets to see a number highlighted as a merchant code. What is a merchant code and how does it work?

A merchant code is a unique digital identifier that MTN uses to recognise the different businesses that have signed up or been on boarded to accept mobile money payments in exchange for their goods and services. The merchant code, used through MTN’s MoMo Pay service is a six digit code that we use to identify businesses and that is what the customer uses to pay for the goods and services.

2. How does the merchant code work for a business?

The merchant code enables businesses to collect digital payments in exchange for goods and services instead of cash and any other modes. Using MoMo Pay, a customer simply dials *165*3# enters the business’ merchant code, enters the amount due and authorizes the transaction by entering their mobile money pin and the business receives the money in their wallet.

3. What is the benefit of having a merchant code?

The merchant code comes with advantages for the businesses. For instance, it provides convenience to your customers. Customers do not incur any cost while using MoMo pay. The merchant code also improves efficiency by eliminating challenges of small change commonly referred to as “balance” which is one of commonest problems for businesses. If someone is paying for one litre of fuel at Shs4,510; there is no need to look for change or holding up the queue. This means as a business, you are able to serve your customers better, faster and more conveniently at no cost to the customer.  It also reduces the risk of carrying cash for large businesses that deal with large sums of money such as security. Having a merchant code for the business also eliminates the costs for those that need bullion vans to take the physical cash to the bank since the money is sent to their wallet which can be pushed to their bank account digitally.

4.  Push money into your account? What do you mean and how does this happen?

As a business, when you sign up for the merchant code, one of the requirements is your preferred bank account. This allows us to link the business wallet to your bank account such that you can transfer your mobile money collections to your preferred bank account at any one time without having to physically walk into the bank or send anybody. This means you are able to do all your transactions digitally or virtually.

5. Who is eligible for a merchant code?

You can get a merchant code as an individual, Small and Medium Enterprises (SMEs) or Medium and Small Enterprises (MSMEs). Our economy has a number of informal businesses such as the rolex person, a market vendor, food stalls downtown among others, all these can also get a merchant code. So, the merchant code is not a preserve for big businesses.

6.  How can one register or sign up for the merchant code?

We have two avenues of onboarding. You can come through as an individual, the Small and Medium Enterprises (SMEs) or Medium and Small Enterprises (MSMEs).

Informal businesses such as the rolex person as mentioned earlier can become informal merchants. Informal merchants only require a national identity card and an MTN number.

We create for you another wallet on your existing MTN number.  This means there is no need for you to get another number or change anything; we are just adding you another wallet to enable you collect the e-payments such that you separate your business money from your personal money. This is very critical for financial management. If you want to grow your business, you need to have good record keeping.

7. What does it take for a formal business to acquire a merchant code?

Formal is any business entity registered through the proper channel such as Uganda Registration Services Bureau (URSB). It could be an Non-Government Organisation (NGO) or a limited company among others.  Formal businesses are required to submit documents of registration, certificate of incorporation, the proprietor and directors’ national ID, Tax Identification Number (TIN) certificates, form 7 and 9. You avail these and your bank account details.

8.  Are there any costs to using the merchant code?

For customers paying for goods and services, it is free of charge. Informal businesses are also not charged. However, for informal businesses to withdraw money out of the ecosystem, they need to use our over 200,000 existing agent network and the normal charges of withdrawal will apply. Rather than incur charges, I would encourage informal businesses to utilise the money whilst in the eco system through making payments to for example their suppliers. There are over 60,000 merchants on the MTN network, meaning informal businesses can also conveniently make payments using MoMo Pay. Making a payment makes them customers so they would not incur any cost.

For the formal businesses, there is a minimal cost that we charge for the convenience. You are able to push your money to the bank which would have otherwise been at a very high cost either in form of having a bullion van or transport and security and even time wasted.  I should also explain that in addition to the benefits of using a merchant code to receive payments, businesses have an opportunity to generate more income through other revenue streams provided by the MoMo Pay service.

9. Expound on the additional revenue streams.

There is a high number of people in Uganda who cannot read and write. So through assisted payments by a merchant to customers such as buying airtime, data, paying for bills, school fees etc, they are able to earn a commission. We are paying you to assist customers thus giving you another revenue stream to earn more money.  Merchants are trained because unlike the customers, you get a different menu when you dial *165*3#. You will have all these payment options and the ability to assist others to pay bills from which you will earn commission instantly.


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