Merchant Account
Merchant Accounts are resources to assist you in setting up a mechant account to accept payment through your website.
- Total Merchant Services (TMS) - This outstanding company comes highly recommended by Corey Rudl -- author of the #1 selling online marketing course, "Insider Secrets to Marketing Your Business on the Internet." The TMS Merchant account, for Internet transactions, will enable you to accept Visa, Mastercard, American Express and Discover.
Payment Processors
Third party credit card processors that will process your credit card orders for you. There are usually no monthly fees. They charge a "per transaction" fee and send you payment for all of your orders processed, minus their fee and a reserve fee.
- ClickBank - ClickBank is an outstanding company that will enable you to accept Visa, MasterCard, American Express, Discover, Eurocard, Visa-Debit, MasterCard-Debit and Novus cards. No merchant account is required. They also enable you to set up an affiliate program. They will bill your customers, pay you, and pay your affiliates a commission.
- iBill - This outstanding company is a complete ecommerce solution that will enable you to process transactions through your website via credit card (Visa, MasterCard, American Express, Discover, and JCB), online checks, or through their telephone billing service (900 toll phone number). http://www.ibill.com/
- PayPal - An outstanding company that enables any business or consumer with an email address to securely, conveniently, and cost-effectively send and receive payments online. You can sell with PayPal through an online auction, on your own website, or as part of an online marketplace.
Accepting Credit Cards on Your Website
Are you thinking of selling things on the web? If so, you will probably also be considering some way in which you can accept credit cards on your site. Since new webmasters who visit Affiliated Web Business.com often ask me about how they can get started accepting payments in this form, this article provides some basic information on adding credit card payment facilities to your website.
Why Do It?
Credit card payments allow you to take advantage of the following types of customers:
- Impulse buyers . After reading your advertisements and hype on your site, buyers would be all fired up about your product. If they have a means of making a purchase immediately, you've secured that sale. If you only allow cheque payments, the additional time it takes for them to get their cheque book and mail out the cheque may be a deterrence. They may also have second thoughts later.
- International customers . Credit card payment is a tremendous convenience if your customers are overseas. It automatically takes care of the problems of currency differences as well as the time it takes for a cheque to travel to the vendor. You will lose a large number of overseas customers if cheque payment is the only way you can accept payment.
Methods of Accepting Credit Card Payments
There are actually two ways in which you can accept credit cards on your site.
- Using Your Own Merchant Account . To do this, you will need a bank that will allow you to open a merchant account. Requirements for this will vary from country to country, and you should check with your local banks for more information on this.
- Through a Third Party Merchant . There are numerous companies around will are willing to accept credit cards payments on your behalf in exchange for various fees and percentages.
Which Method Should You Use?
The initial costs of opening your own merchant account is usually higher than when you use a third party merchant. Indeed, some third party merchants have no setup fee at all.
However, the transaction fee (which is what you pay the bank or third party merchant for each sale) is much higher when you use a third party as compared to when using your own merchant account.
A third party merchant is usually convenient to use when you don't know if you can actually make much out of your product or service. If you just want to test the water to see how things are, this is usually a good way to start. It is also convenient in that the merchant takes care of everything for you. You just get a cheque at the end of each payment period (if you have earned enough) and concentrate on your products, services and customers.
Having your own merchant account accords your business with a certain amount of professionalism. And, as mentioned earlier, your transaction costs are usually much lower. However you have to be careful to minimize your credit card risks since you'll be processing the credit card payments yourself. This is not to say that there are no risks attendant in using a third party merchant.
Some Third Party Merchants
Here's a list of some third party merchants that you might want to consider if you're looking for ways to accept credit card payments. I have not tried any of them myself (as a vendor) so I cannot vouch for any of them. Check them out carefully and use them at your own risk.
Note that rates and stuff that I publish below were correct at the time I investigated these vendors. It may have changed by the time you read this since I investigated them quite a while back.
The list is arranged alphabetically.
CCBill : There are no setup fees. Transaction fees vary (I can't find the schedule though) depending on the volume of sales in each accounting period. According to their website, "these fees are never more than 13.5% of revenues charged during this one-week period for CWIE hosting clients and 14.5% for non-hosting clients".
CCNow [http://www.ccnow.com/] : This is only for people who ship tangible, physical products. There is no setup fee, and they charge 9% per transaction except in the November and December where the fees are 8% per transaction (yes, lower).
Clickbank : There is a one time setup fee (US$49.95) and a transaction fee of US$1 plus 7.5% of sale price. There are no other monthly fees. This is only for people who sell services or deliver products over the internet (not for those who need to ship physical products).
Digibuy : This service is intended for software authors only. They charge 13.9% per transaction. I'm not sure if there are any other charges.
IBill : This is a very expensive merchant. They charge 15% of each transaction or lesser if you sell US$10,000 or above. It is a big and (I think) reputable company, so if you are willing to part with such a huge margin of your earnings, you might also want to check them out. http://www.ibill.com/
Kagi : There are no setup or monthly fees with this merchant. Kagi "charges 6.5% up to a maximum of [US]$3.00... plus 3.5% plus [US]$0.50 for processing costs".
PayPal : If you are a Premier or Business account user, you get charged US$0.25 for transactions of US$15 and below, 1.9% plus US$0.25 for transactions above US$15 when your customers pay by credit card. They require your customers to sign up for their services before they can pay you. This can be a deterrent for your customers.
ProPay : A new competitor to PayPal (see elsewhere on this page) that currently only caters to US residents. You have to pay a $35 fee to sign up, but there are no monthly charges.
RegNow : Designed for software authors to sell their ware, this merchant deducts 20% of your sale price with a minimum of US$2.00 for their commission. There are also other charges for sales generated by your affiliates, etc.
Share-It : This service is for shareware authors. They charge US$2.95 plus 4% per order, and US$1.95 plus 4% for the 1000th order of the month and above. There are also charges for mailing you your cheque in some instances.
Verza : There are no setup or monthly charges. Transaction charges range from 4.9% to 6.9% of your sale price plus US $0.99.
V-Share : This service is only for people selling shareware. There is a range of charges depending on the number of transactions and your sale price. I'm not sure I understand their charge schedule completely, so I'm not going to list it here. Check it out yourself if you are a shareware author. (http://www.v-share.com/)
Trying It Out
Whichever you choose, if you are selling things on the Internet, you really have not much choice but to accept credit cards. You probably don't know what you missed until you try it out.
Alternative Online Email Payment Systems One of the most frequently asked questions I get as a webmaster is "can you setup an ecommerce system for our company?"
For most businesses venturing into ecommerce, e-payment means accepting credit cards. This involves setting up a complex system including a SECURE order page/shopping cart software, a merchant account (basically a bank account that receives the credit card proceeds), and a credit card processing service. Care has to be taken to ensure that the shopping cart is compatible with the authorization service. All the various elements need to be compatible and interface with each other.
While the bulk of Internet ecommerce is still transacted using credit cards, there has been steady inroads being made by alternative methods of settling e-transactions. These Web Payment Services (WPS) have ingeniously utilized the most popular application on the internet "e-mail", to appeal to customers.
By using an existing platform to launch their services, WPS providers have enjoyed wide appeal with customers worldwide. The largest of these, PAYPAL, has approximately 11 million users, processes 150,000 payments per day, and attracts over 20,000 new users each day.
But are there any advantages of using these alternative payment systems over credit card merchant systems? To help you decide the following criteria will be evaluated:
(a) SetUp
(b) Maintenance Costs
(c) Ease of Use/Convenience
(d) Cash Flow Effect
(e) Customer Perception
SETUP
As mentioned above the setup of a credit card merchant system is complex. The setup of a merchant account may take up to two weeks or more for final approval to be granted from the financial institition involved and verification of the integration of various components completed.
WPS services on the other side of the scale, are incredibly easy to setup, almost laughably so. For example, Paypal, which is the largest WPS just requires a merchant to go to the Paypal site to register their account. This whole process may take 5 -10 minutes. There is no transaction processing software to install, and importantly, no shopping cart to rent or buy. Paypal simply generates a HTML code which you can place in your site next to your inventory items.
A click on these buttons takes the customer straight to Paypal's secure server. When customers want to make a payment they send a message to Paypal, and then Paypal, the middleman, does the rest.
MAINTENANCE COSTS
Establishing your own merchant account for credit card processing and installing a shopping cart can easily run into hundreds of dollars. In addition there are the ubiquitous monthly minimum fees and address verification fees (a proven anti-fraud strategy).
WPS providers don't levy application setup or monthly charges, and the costs are competitive with Credit Card transaction processing charges. These average at $0.35 and 2.5% per transaction.
EASE OF USE / CONVENIENCE
Although WPS providers intimate that their services are very user- friendly, the fact of the matter is that WPS services are not as easy to use as credit card systems. WPS services require the user/ customer to register with them, if they have not already done so. Now this is a major disadvantage as it interrupts the flow of "impulse" purchases. Potential customers have been known to abandon shopping carts for even less interuptive purchasing hiccups.
On the merchant side, payments received in WPS accounts are not automatically lodged to your bank account. The merchant will have to manually claim and then transfer payments into their bank account. With credit card merchant accounts your account is automatically updated.
CASH FLOW EFFECT
Having your own merchant account will certainly increase the flow of funds to your bank book. While a merchant account provider will hold your funds to prevent charge backs losses, the period of time is usually relatively brief, about 48 hours. Expect to wait for at least a week before money appears in the account of WPS providers.
CUSTOMER PERCEPTION
At this point in time credit cards are the medium of choice and a business that uses only WPS providers as the means of receiving payments may appear to be amateurish and "small-fry". In the online world, where site visors don't have a face to relate to, perception is critical, and the ability to accept credit cards has been held as a mark of an established, feet on the ground firm.
CONCLUSION
There are definite advantages to using WPS providers. They should however be used as backup payment services or in conjunction with merchant accounts. Its always to your advantage to present the customer with as many payment options as possible.
The following is a list of WPS providers:
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