Internet Merchant Accounts – What You Need to Know!
September 27, 2008 by Matthew Hunt · Leave a Comment
There are three main components to make a E-commerce Payment Processing Solution work.
- Shopping Cart
- Payment Gateway
- Merchant Account
The Shopping Cart
The Shopping Cart is the Database that enables your customers to choose what products they would like to purchase on your website. When they are ready to purchase a item they will click on the shopping cart icon, which will lead them to your Secured Gateway Page. Most Web-hosting providers offer and shopping cart feature that can be provided for your website.
WARNING: Before choosing your shopping card service provider, make sure you know who your ‘Gateway’ and ‘Merchant Account’ providers will be and that they approve your shopping card service. I have seen many frustrated Small business owners design their sites and make their agreements with a shopping cart service only to later find out that the shopping cart service is not a approved vendor from the ‘gateway’ provider. Not usually an issue because most ‘gateway’ services approve many shopping cart service providers, but it is always better to work backwards before implementing into your website.
The Payment Gateway
The Payment Gateway is the component that provides the secure credit card processing. The Gateway will check to make sure the credit card information is correct and processing the order securely. Usually handled by the Merchant Account Provider depending on what Shopping Cart System you are using. Gateway services usually have a monthly fee of $20 – $60 a month depending on the service provider and sometimes a transaction fee too.
The Merchant Account
Merchant Accounts are your own specific account numbers that have been set-up to track and your processed payments for your credit cards, such as, Visa, Master Card, & American Express. Rates can vary on E-commerce Merchant Accounts from as low to below to 2% to as high as 4%. (High-risk accounts can be as high as 4-12%). Discount Rates are traditionally higher then their sister retail rates due to the fact that cards are not present for the transaction and it creates a higher risk for credit card fraud. In the industry this is called ‘Non-Qualified’ rates.
What You Must Have On Your Website Before A Payment Processor Will Accept Your Internet Merchant Account Application?
If your website is not built then there is no point in submitting an application for internet merchant accounts. You also need to have the following clearly listed on every page of your website particularly on the check-out pages:
- Privacy Policy
- Terms of Use
- Refund Policy (you don’t have to provide refunds, you must state what your policies are.)
- Shipping Policy and costs (it is not enough to simply state there are shipping costs – you must show exactly how much.)
- Your whois info must match the same information on your application
- Your contact numbers found on your website must match the same contact numbers as on your application
- Your business must not fall under the ‘restricted list‘ of business models
- a SSL Shopping cart
Now your site may not be ‘live’ yet, but you must provide a guest login so the merchant account underwriters can review your site for the above aspects. If your credit checks and you meet all the requirements above you have good chances at getting approval. Now you approval may be conditional on ‘going-live’. What this means is they will approve your account and give you all the goods to connect your merchant account to your gateway and shopping cart, but will not deposit any monies to your account until you show them this all ‘live’.
Canadian Internet Merchant Account Services
September 27, 2008 by Matthew Hunt · Leave a Comment
There are basically 2 types of internet merchant accounts.
- Third Party Payment Processors – like PayPal, Google Checkout, 2CheckOut, etc.
- True Merchant Accounts – through a Bank or a Merchant Account ISO
Side Note: Google Checkout is currently not available to Canadians
Third Party Payment Processors:
- Do not perform credit check
- Rates are not negotiable
- They can not be used with a separate processing gateway
- The Third Party Processor’s name appears on your customer’s credit card statement
- You can discontinue the relationship at any time without incurring a penalty
- It can take up to one month to receive any deposited funds
- Discount rates can be as high as 6% and $1 per transaction
- Purchasers have to go to a separate site for payment processing
- Promotes Third Party Processor’s business
True Merchant Accounts Processors:
- In applying for a True Merchant Account you’ll undergo a full credit check
- High risk businesses will pay much higher rates (usually 4%-12%)
- Rates are somewhat negotiable
- A Merchant Account can be used with a separate processing gateway (Most of the time, but some providers do require certain security standards and will only approve certain gateway providers.)
- Your Business Name appears on your customers statements
- You may be locked into a multi year contract (usually 3 years)
- Funds are usually deposited into your bank account within 1-3 business days
- Discount rates can be lower then Third Party Processors (usually 2-3%)
- Purchasers don’t have to go to a separate site for Payment Processing (major benefit – less shopping cart abandonment.)
- Appears more reputable & have ownership of the relationship with your customers right down to purchasing
Both Third Party Processors and True Internet Merchant Account Processors have their ‘pros‘ and ‘cons‘. Most Internet start-ups do not survive beyond two years. If you are only testing the waters then you may want to just start out with PayPal, where you will have no contracts and approvals are instant.
For those that are committed to building an online business then you will require true internet merchant accounts and the savvy merchants will offer both – they will let their clients choose which way they’d prefer to check-out. There are no rules saying, you can only have one type of processor when it comes to internet merchant accounts.
