Main Merchant is online

Product Description
This digital document is an article from Black Enterprise, published by Thomson Gale on June 1, 2006. The length of the article is 678 words. The page length shown above is based on a typical 300-word page. The article is delivered in HTML format and is available in your Amazon.com Digital Locker immediately after purchase. You can view it with any web browser.

Citation Details
Title: Enter the middleman: alternative onlin… More >>

Enter the middleman: alternative online payment options take the pain out of e-merchant accounts.: An article from: Black Enterprise

I have read the worse of the worse stories about Paypal, Authorize.net and a few other merchant services. Where can I find a low-risk online merchant service with maximum credibility and hopefully one that is local to North Carolina. (if not then which ever)

The merchant insists on charging full City+State tax rate for my online purchase, but I happen to live outside of city limits, and so should only pay the state rate and no city tax.
It’s an ongoing problem that continues despite several people having drawn it to the merchant’s attention on various occasions.
I will try to get a refund (after the fact) by calling and writing to the merchant. But clearly they won’t fix the underlying problem, so I think it should be brought to the attention of the appropriate regulatory authorities. Whom should I contact?

I dont trust paypal, i have bad experience with them even though their comission was reasonably low.

I want to be able to accept credit cards. Take down my clients card number and be able to charge it online w/out a card reader. I also don’t want to use paypal or goggle. And the rate should be the same for personal cards as well as business credit cards. Thanks for the help.

The process of setting up online payment may appear confusing at first, but the hard work is choosing the right service provider.  In my search I spoke to everyone from sales agents to bank representatives and I now have a collection of contracts with very tiny print.  I put together a summary of the process, things to watch out for, and a comparison of rates. I hope this helps.

How it works: Credit Card Payment Flow

Customer enters payment information into our secure site (aka Shopping Cart/Checkout).

The payment details are sent to the Payment Gateway for approval. Gateway forwards the transaction to our Merchant Bank. Our Merchant Bank forwards the transaction to the Credit Card Issuing Bank for verification. Credit card bank verifies transaction and sends response code (Approve, Deny) back to our Merchant Bank. Our Merchant Bank forwards the response to the payment gateway. Payment gateway stores the results and response back to our online store. Payment information is displayed to the customer; i.e. “credit card was charged”, “credit card was denied”, etc.

This process happens in a matter of seconds.

Where Do We Get a Merchant Account?

Banks. Most banks use First Data Corporation network for their credit card payment process. FDC network clears about 80% of all credit card transaction. Here’s a list of banks that are FDC Alliance Partners.

Merchant Service Providers (MSPs). I refer to them as Vendors in this article. Advantages of MSP over Banks:

MSP have many bank affiliates and third-party account database, which mean higher approval rates (especially if your business is considered high risk). MSP will make recommendation on the best suited solutions or packages. Banks are limited on options. Better chances of negotiating lowers rates and contract terms with vendors than at a bank.

What are the requirements?
Requirements vary depending on the provider and the amount of risk they are willing take. Three vendors told me they only needed a Tax ID or SS#, business checking account, and an address (which is not completely accurate). I later found out that the vendor submits our application to the underwriter and the underwriter will request additional information for approval. Most underwriters will ask for both application and website information as follow:

The Applicant & Business Info:

Applicant must be a principal owner of the business Business License (Tax ID) or DBA (SS#) Checking Account Address Driver’s License and Contact Info of Principal Credit check – for new business, the personal credit history is a influential element

On the Website:

Must be a live site Company name or DBA name on the site Shows Product and Price Terms of Service Return/Refund Policy Shipping Methods Privacy Policy Contact info for support (email, form, etc.) Working Shopping Cart/Check out page Secure

Alternatives Service Providers
Alternative payment service such as PayPal, Google Checkout and Amazon FPS are becoming more and more popular with new small businesses. These companies provide packages that fit most business model, they are simple to implement, low cost, and you can get started almost immediately.

RATING AND RATES

Read the Tiny Print
Vendors use the same pool of financial institutions and gateways. It is a very competitive and lucrative market. They make money from markups to the fees, and additional service charges. In my talks with vendors, only if asked, did a few of the reps disclose the additional costs. One rep told me to read the contract carefully, but he can’t give me the contract or discuss rates until he has my application.

Varying fees and rates can be applied to specific card type (MC, Visa, AMEX, Discover, personal, business, and rewards card). The industry term for this is Qualified vs. Unqualified cards (unqualified having the higher unadvertised rates of course). Read your contracts carefully, especially the footnotes.

What’s important?
Keep in mind rates are not fixed, most companies can change the rate with 30 days notice. Finding a service provider with a solid reputation, flexible policy, provides good customer service, and 24/7 technical support is more important than the fees. An indicator of a good vendor is transparency into their company and if they ask in-depth questions about your business.

New Business Recommendation
For new a business with unknown sales volume, the per transaction rates may not make a difference early on. I might go with PayPal or Google Checkout for a few months just to collect some information around sales. Because there is no start-up cost, no monthly fees, an immediate sign up and use process, and low development time, there is very little risk and out-of-pocket cost. The only disadvantages are that customers will be redirected from your site during the transaction and the possible perception of not being as ‘professional’. That said, until you understand your volume, the flexibility and ease are the way to go.

Typically, the first question that merchants ask when they contact a merchant service provider to inquire about a merchant account service is regarding their rates and fees. Then they would call another and ask the same question. Perhaps many would also go online and search for the lowest possible merchant account pricing. There might be a definite answer to be found and, if one could go through the pricing pages of all individual merchant account providers, the answer could emerge. I have seen adds for 1.59% eCommerce merchant account rates and probably this is the lowest one I’ve encountered. Now, in order to make an informative decision, it is important that you understand exactly what is being offered at the advertised rate.

Generally, when you see a card processing rate that is substantially lower than the rest on the list, you will be well advised to read the fine print notes that are likely to accompany the add. In the above example, a 1.59% processing rate will apply to debit card transactions which make up a small percentage of the overall card volume. What you really need to know is what the credit card payment processing rate is. Here the rates will be above 2% and I am yet to see one lower than 2.15%. You will need to make sure that your merchant processing provider does provide separate rates for debit and credit cards, in order to take advantage of the lower debit card acceptance cost.

Keep in mind that the payment card processing rate is just one component of the processing cost, although the most important one. Also be advised that your pricing model may provide for different processing rates for the different types of credit cards. Some types of business-to-business, commercial and rewards credit cards will be processed at substantially higher rates.There are a host of other fees and charges and you will need to be aware what all of them are and make sure that the low card rates are not offset by high charges elsewhere. There are tools available out there to help you estimate the overall cost of credit card processing for business.

Merchant accounts that allow business owners to accept a variety of customer preferred payment methods have become commonplace in traditional business settings. Even small businesses, such as fast food providers, convenience stores and kiosk sized retailers have accepted the fact that allowing for multiple popular payment options is a wise decision. Far few consumers are carrying cash these days, and even those who are often prefer the safety and security of paying via credit card or check, if for no other reason than to have an accurate, detailed account of each purchase. Slowly but surely, online vendors are realizing this as well.

The popularity of Paypal, a service which requires consumers to set up accounts similar to an online banking institution, kept many online businesses from opening merchant accounts for the benefit of their customers. Disadvantages to using the Paypal system were soon evident, however, as bad experiences with the system were publicized by both merchants and consumers. The stigma of a flawed system was not the only consideration for Internet shoppers and online businesses, however. Many consumers were unwilling to use a system that required setting up an account, memorizing yet another password and using a third party to transmit credit card or bank account information. The level of convenience available to consumers declined sharply as a result of having to navigate a completely new and often confusing separate web site in order to make a simple transaction. On the merchant side of the equation, the realization that Paypal offered no additional fraud protection and charged rates very similar to and often higher than merchant services providers has caused many to second guess it’s usefulness. Of particular concern is that there is simply no way to determine the amount of lost sales due to consumer hesitation aimed at opening a Paypal account.

Consumers generally feel more comfortable using payment formats that mirror those used by their neighborhood retailers. When purchasing small items especially, many will not go through the trouble of spending an additional five to ten minutes online in order to purchase an item that only costs a few dollars. While the prices of these items may be small, the losses incurred by business owners who don’t offer a tried and true merchant account system can be substantial.

A merchant account is necessary to have an easy access to enable your business to accept the payments made through online credit cards, and to process transactions immediately. The system facilitates an easy and economical method to process credit cards online.

Basically, merchant account solution is a kind of service offered by nine banks, which are better known as acquiring banks. Besides this, there are online processors that offer you Internet merchant accounts facility. It is better if your existing bank deals in providing the merchant account services, nevertheless you can seek the help of others’ banks to avail the same service as well.

How to Establish an Online Merchant Account?

If you want to establish an online merchant account, you have to get an approval from the acquiring bank. In order to get the approval, a business entity has to submit certain information including the history of the business, performance, other accounts of the business, financial status details, estimated transaction values, frequency of transaction, nature of the business, supplier details and many other such information.

After providing the above mentioned details, an acquiring bank will collect the relevant facts and verification of the collected data takes place after that. The setting up of a merchant account usually takes between one to four weeks. Sometimes, the time period can extend due to some unavoidable reasons.

However, it is always better to check the processing details of the merchant account solution so that your business does not have to suffer a lot. This is simple because of the fact that some merchant accounts providers make false promise to their potential customers to setup their accounts within one day and businesses have to face financial loss. Search carefully so as to choose the best option and to avoid any kind of misleading offer.

When developing a home based business using the internet for sales of products or services, it would be to your advantage to learn how to use a online merchant account. The first step is to acquire a online merchant account so you need to have some knowledge how the system works.
When looking at the different online merchant accounts available, compare prices that include the discount rates and the transaction fees. The discount rate includes a charge for the percentage of the volume of the sales. The transaction fees are a flat amount charged per transaction. Be aware that some online merchant account companies will try to persuade you to use them by having a lower discount rate but will make up the difference in a higher transaction fee.
Your decision to be with an online merchant account company will be based on the volume of activity of sales from your business. If you have a large volume of sales, you will want to look for a company that has a lower discount rate and perhaps a higher transaction fee.If you can estimate that you will have a lower monthly volume, you will want to look for a company that has a lower transaction fee and a little higher discount rate.
When you are ready to sign the contract with the merchant account company, take your time to read the contract carefully. Study the requirements for the length of the contract and for any hidden fees. See if the contract has any consideration for a review of the discount rate based on the volume improvement of your business. In the contract see if there is any consideration for discounts for a low risk business.
It is helpful for you to look for a local online merchant account company. The advantage is to have easy access to your merchant account provider as they may be more attuned to giving you personal attention. Make certain that your business is ready for a merchant account and that you have the volume of sales to support it. You don’t want to be facing monthly fees if you don’t have the income stream available.
There are many advantages to having a merchant account as the average household has several credit cards and some consumer seems to like to take advantage of this method of delayed payment.