Finding an E-Commerce Payment Processor
How to Choose the Right Type of Merchant Services Account
May 9, 2009
Trying to find the best option for an e-commerce business can be daunting, with thousands of providers to choose from. Local financial institutions tend to shy away from e-commerce due to the increased risk of credit card fraud. While they may already be a trusted business services provider in the brick-and-mortar world, local banks are usually unwilling to get involved in e-commerce.
Types of Internet Merchant Services Accounts - Low to High Risk Merchants, Small to Large Needs
Internet merchant services specialize in online business. They understand the complexities of secure online transactions, fraudulent chargebacks, website integration and other concerns inherent to e-commerce. There are two types of merchant accounts available to e-commerce websites:
- True Merchant Accounts- With this type of account, the business applies directly to the bank or financial institution. The merchant account provider will then decide whether to approve the application, usually based on an evaluation of the business entity's (or in the case of e-commerce sole proprietorship, the owner's) credit and the type of business that will be conducted on the website. The business is accountable to the financial institution and must abide by their rules. This type of account is ideal for larger, established e-commerce businesses. First Atlantic Commerce is an example of a true merchant account provider.
- Third-Party Processors- In this case, the e-commerce business applies to the third-party processor, who then processes transactions under their merchant account. Instead of meeting a bank's financial criteria, the e-commerce website must only meet the criteria of the third-party processor and typically will not undergo a full credit check. This is the ideal solution for new or smaller e-commerce businesses, or for high risk merchants who may not qualify for credit otherwise. PayPal and WorldPay are two examples of third-party processors.
Internet Merchant Services Account and Shopping Cart Integration
Securing a merchant account is one of the first steps in creating an e-commerce business. Before choosing a shopping cart solution, choose a merchant account and ask for a list of compatible shopping carts and payment gateways. There is no point in installing a shopping cart that cannot work with your merchant account. Check your credit report and clean up any potential issues before approaching merchant account providers to get the best rates.
With little exception, payment processors expect that websites have a few important things before they will consider processing the application. Once the website is built, ensure that is has the following components before applying to payment processors:
- Terms of Use
- A shipping policy, including detailed costs
- A policy for returns or refunds
- A privacy policy
Internet Merchant Services Account and Payment Processing Fees
The fees associated with various merchant accounts vary widely and can change depending on the e-commerce website's average ticket size and average number of transactions per month. When price shopping and comparing features, consider these types of fees:
- Application fee (if applicable)
- Set-up fees
- Discount rate (the % of sales the processor takes)
- Transaction fees
- Monthly fees
- Termination fees
- Miscellaneous fees
If the payment gateway service is not included in the merchant solution, remember to compare compatible gateway prices, as well.
Finalizing the Merchant Services Account Decision
Choosing a payment processor should not be a snap decision. Compare prices, understand available features and examine several options before applying. Switching payment processors can be disruptive and complicated, so it is best to ensure the fit is a good one before launching an e-commerce business.
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