Merchant account forums

Three Main Account Providers

In order to accept credit cards over the Internet you need a license to trade and the ability to process transactions. There are several alternatives that can be split into three categories that provide the means to process credit cards online:

• Banks
• Independent Sales Organisations
• Third Party Processors

The service offered is circumstantially based on you, your business and the account provider. This article gives a basic illustration of the pros and cons of the three options in order to guide you and your business in the right direction. Whether a start up or an existing online merchant there are always alternatives.

Banks
Most banks offer merchant accounts. If you already have some form of existing business account then no doubt you will have received a leaflet or brochure offering their services.

Assuming you do not already have a merchant account for offline business, this service will include the license to trade online as a minimum. Usually but not always it will also provide the processing facilities required to get you up and running online (such as payment gateway software).

However, if you already have an offline merchant account through a bank it doesn’t necessarily entitle you to accept all forms of electronic/card payments or to even do business over the Internet. Processing online credit card payments, in terms of security, is different to standard credit card payments and thus affects the fees and rates involved.

In the same vain banks as big financial organisations tend not to be so interested in start ups due to the potential risk involved. Banks tend to require a detailed company history or business plan amongst other documentation before even considering your application. At the same time they are considered a stable and reliable vender, hence the scrutiny.

Independent Sales Organisations
If you are a start up company with little or no history then an ISO or a MSP (merchant service provider) is perhaps a more realistic option than your bank. Regardless, the point is ISO’s are specifically geared towards soliciting merchants for merchant banks (acquiring banks). ISO’s tend to offer more complete or turnkey solutions so you to have to shop around for a merchant account and a credit card processor individually.

Essentially an ISO is an intermediary between you and the acquiring bank to whom they pitch your company for approval from an underwriter. Although this option involves another stage in the application process you need less paperwork in addition to the fact that you are handing over the pitch to professionals. Therefore you are far more likely to get accepted, purely because ISO’s know what the banks want to hear.

Third Party Processors
By far the easiest and quickest way to start trading online third part processing involves next to nothing in terms of full proof business plans and usually requires little or no start up fees. Essentially you do not need your own merchant account so If you have had problems attaining a one through a bank or an ISO then it’s worth considering a third party processor.

These organisations are licensed to process transactions on your behalf in exchange, in most cases, for a considerably higher transaction fee or sales percentage than that of banks and ISO’s.

Instead of having customers pay through your website they will often be redirected to the third party processors online shopping cart to make the purchase. In essence you could say that they are in fact the merchants, you just receive a large portion of the sales.

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 addition it is the Processors name that will appear on the customer’s credit card bill and not yours, depending on your business this might be considered unprofessional.