The Difference between a Retail Merchant Account versus an E-commerce Merchant Account
July 23, 2009 by Admin · Comments Off
There are a few major differences when dealing with a Retail Merchant Account, and an Ecommerce Merchant Account. Both are similar in that, a merchant or seller is able to accept Visa, Master Card, American Express and Interact, as a method of payment for goods and services rendered, but the way they are accepting these transactions is where the differences lie.
Merchant Services applications are always looked at in terms of safety and security. Visa and mc need to take into consideration, when and where the point of sale is taking place, as there are some risk factors they need to take into consideration when adjudicating weather or not the business is fit to accommodate transactions…..these risk factors contribute to the major differences between getting an approval for a Retail account VS. a Ecommerce Account. Let’s take a closer look at these risk factors and the 5 major differences between processing a transaction in a retail environment compared to an online situation.
- Card Acceptance. This is the main driving factor or difference between the two types of transaction processing. Visa and mc consider this a risk factor because in a retail situation, the merchant ALWAYS obtains a signature from the customer directly on the receipt. It is difficult for a customer to reject a fee from a purchase when the merchant is able to supply a signed receipt as confirmation of the transaction. With online processing, the availability of that signature is slim to nil, so Visa and Mc will rely on the solidity of the business profile to reduce or cancel out the possibility of a merchant disputing a fee. So the will scrutinize the business profile more thoroughly, as they do not have the comfort of relying on something like a signed receipt.
- Fulfillment. This is an industry term. Basically this refers to the amount of time between finalizing a transaction for goods and services and when the customer receives those goods and services. for example, If I go for a haircut and pay visa, I have received my service and paid right away….if I purchase a swimsuit online, I make the payment right away (ecommerce billing) but, I do not receive that product for 2-3 or how ever many weeks, whatever the FULLFILLMENT time is….this creates another risk that will be looked at before approval. it is a major difference to pay for something and wait for it, then to instantly have what you’ve purchased.
- Product Availability and Presentation. Unlike walking into a store and picking out your “size and color” when shopping online you are only subject to one form of presentation, usually a picture or image of some kind to represent your purchase. Whereas, in a store you can touch it, feel it, try it on, etc. Digital images are helpful to represent your product type, but there is still a down home difference between being able to see and touch as opposed to a 2-d image.
- Product Type. The internet provides a platform never before available to business. So more “intangible” goods and services now have a home online whereas things like financials services, learning or educational seminars, software sales were vague and expensive to advertise in order to obtain a customer base that kind of thinking is in the past. E commerce is ideal for these types of businesses that differ greatly from retail in that they are providing a service that does not physically exist.
These are just a few prime examples as there are many businesses that thrive online, where as the platform may not be as successful to others. The bottom line is, that the internet is a wildly new exciting tool for businesses to reach out to an audience never before imaginable. Malls will never close, but the internet is competing with how and where our shopping dollars are spent!
Retail Merchant Accounts
September 23, 2008 by Admin · Leave a Comment
Retail Merchant Accounts are for brick-and-mortar types of businesses. They are systems that allow businesses to process credit and/or debit card transactions in real time with instantaneous approvals by swiping cards across the POS Terminal.
Traditionally, Point-of-Sale Terminals similar to the one shown at the side here are used. However, some businesses use a PC Software Solution that is installed on their existing PC Computer with a plug in “card swiper” or plug-in “PIN PAD” to enable the debit option.
Retail Merchant Account Hardware & Equipment Options:
- PC Software with plug in PIN PAD
- Dial-up Point-of-Sale Terminal
- IP Point-of-Sale Terminal
- Wireless/Cellular Point-of-Sale Terminal
Retail Merchant Account Rates
Traditionally, retail credit card processing rates are the lowest rates a business can qualify for, due to the fact that most transactions will be considered “card present” which enables the business to qualify for the “Qualified” credit card rates. These rates are referred to as “Discount Rates” in the industry.
Discount rates can vary from company to company; however most Canadian Retail rates range from 1.69% – 2.5% on a Qualified rate – any higher then that and you will want to get a rate review. On “Mid-” and “Non-” Qualified rates, the rates can vary from 2.0-4% on retail merchant accounts. Again, if you are paying any higher than that, you most likely want to get a rate review on your services.
Your merchant account rates are determined by:
- Average Ticket Price per customer
- Monthly Sales Volume purchased on credit cards
The lower your average ticket price, and the higher the monthly business volume the lower, the rate you will qualify for. What many merchants want to make sure they are asking is not only what the “Qualified” rate is, but as well what the “Mid-Qualified” & “Non-Qualified” rates are.
- Qualified means card present consumer card.
- Mid-Qualified and/or Near-Qualified means any cards that have a rewards plan attached to them.
- Non-Qualified means the credit card was keyed into the POS Terminal instead of being swiped (It doesn’t qualify because the card processing company cannot verify that the card was present, making it a higher risk transaction.)
It is very important that you know your percentage breakdown and understand what ALL your different discount rates/fees will be on your credit card processing before making an agreement. This is a common kiss of death for many merchants: not verifying all their potential charges and/or not fully understanding how their individual business processing will function.
To better understand the in’s and out’s of merchant account services in Canada, we highly suggest you read our free merchant account guide.
