Merchant account forums

To fully harvest the potential within e-commerce you must make a decision as to how and who will facilitate the processing of your received credit card payments.

Each option differs and will better accommodate one business over another. Some providers may reject you, perhaps on the basis of high risk, whereas others will accept you open armed.

Realising the significance of the various service providers will help guide you in the right direction when it comes to making that decision.

This article highlights and compares some of the more generic features of banks, independent sales providers and third party processors, as merchant service vendors.

Applying for a Merchant Service
Banks as big financial organisations tend not to be so interested in startups due to the potential risk involved. Consequently they require detailed company history or business plans amongst other documentation before even considering your application.

Unlike banks, independent sales organisations give startups or high risk companies an extra helping hand in the application process. You are essentially handing over the pitch to professionals who know what the acquiring banks or other affiliated processing institutions want to hear, increasing you chances of acceptance.

Third party processors are by far the easiest and quickest way to start selling online. They demand next to nothing in terms of full proof business plans and rarely reject an application.

Service, Fees and Charges
Processing online credit card payments, in terms of security, is different to offline (in-person) credit card payments and affects the fee structure of a merchant service provided by a bank. Although banks are considered financially reliable, having established traditional methods, their services are less flexible in terms of company specific solutions.

Independent sales organisations make up the vast majority of merchant account/service providers. Unlike banks they cater for companies that require merchant accounts and necessary facilities that participate in all areas of business, including high risk enterprises. As a result services are more flexible. The fee structure is similar but due to the vast range of business solutions, with in the ISO bracket, each charge or fee is heavily dependent on the provider, and the nature of the merchant service.

Third party processors are licensed to process transactions on your behalf but unlike banks and ISO’s they don’t supply you with your own merchant account. Essentially customers can view what ever it is your selling through your website, but if they want to make a purchase it must be done via the licensed third party’s site. As a result you have far less control over the customer interaction with your business. Even the basic interface with your company name, logo, etc. may be compromised and replaced by the third party’s alternative.

In exchange for this processing service merchants pay much higher transaction fees or sales percentages. There are usually no recurring monthly costs as this is a minimal service compared to inclusive packages offered by ISO’s and banks.

In Conclusion
Banks scrutinize the most in the application and award of merchant services limiting their clients to those with ideally existing or established businesses. Independent sales organisations and third party processors on the other hand are far more accommodating, flexible and specifically cater for e-commerce. If you’re high risk or a startup then these are the avenues worth pursuing.

Whereas third party processors offer basic standardized services that limit the merchant’s individuality and control, ISO’s and banks offer more inclusive, personalized solutions.

Banks and ISO’s charge a range of recurring monthly costs in addition to small transaction fees or percentages. Third party processors charge higher transaction fees/percentages but rarely charge setup or recurring costs. In this respect it is important to realize the bigger picture i.e. less initial fees may seem convenient now but you can lose a lot of money from high sales percentages in the long run.