Online
Credit Card Payment
We were talking about payment
scheme and payment facilities. Credit card payment is now
the major payment facilities in all types of business. We
came across reading an article of Richard Adams, the founder
of Merchant Account Forum which he began having experienced
the potential problems of accepting payments online first
hand.
Let
me quote his article about: "An Introduction
To Accepting Credit Cards On The Internet. If you
have a website and you don't accept credit cards then you're
losing massive amounts of business. Even if you do accept
credit cards it may be worth considering an alternative
that will either offer you better rates or save you time.
Infact, if you're within the United States of America or
Canada, there are a large range of options open to you.
Unfortunately if you're like me, and are located outside
these jurisdictions life becomes a little more complicated
- though by no means impossible. Whatever your circumstances
the aim of this article is to give you a quick start in
accepting credit cards on the Internet. Once you understand
the basic concepts then hopefully the other articles on
this site will help you decide exactly what's right for
you.
To enable you to accept credit cards online, there are three
methods you can use.
They are:
*Gain your own merchant account from your bank
*Use a broker or intermediary to gain your own merchant
account
*Use a third party service
Let's look at these three options in more detail.
The most direct route to gain a merchant account is through
your local bank. Many banks will automatically send you
details of their own particular service when you open a
business account. The problem with many banks is that as
large, powerful institutions many are loathe to accept small
businesses and startups. For example, 12 months or more
of audited accounts may be required, business plans or evidence
of considerable investment capital.
Add
to this the fact that many banks are still developing their
e-commerce services. You see, banks offer different types
of merchant accounts depending on the situation. For example,
those accounts for retail are usually considerably easier
to gain than an Internet account. This is primarily because
the retail "swipe card machine" (or PDQ) involves physically
swiping the card then checking the signature.
On the Internet of course, the number is just typed in and
you can't check the signature so there's a far greater risk
of fraud. Having said that, banks are slowly starting to
introduce services to help internet companies, but in today's
business climate I feel certain you'd be better putting
your time, energy and cash into gaining a merchant account
through the second route - using an intermediary.
Intermediate companies do exactly what it sounds - they
form a defence between the bank and yourself. Whilst this
may at first sound like a disadvantage because there's another
body to get authorised by, the matter is quite the reverse.
Intermediary companies understand the banks and what they
look for in a new client. They can "pitch" your application
right and many boast enviable acceptance rates, even for
non-US merchants.
The greatest tip I can give you when applying through these
companies is this - minimise risk. Of applicants that do
get refused many of them are refused on the grounds of high
risk. That's what these companies look for. So wherever
possible, find ways to make your business appear a "safe
bet" and you'll greatly increase your chances. I don't mean
lie - far from it - you'll end up in far more trouble than
it's worth but...
Aim to start small, selling low priced items. Aiming to
sell a few hundred $10 items per month is much less risk
than aiming to sell 10,000 television sets. Think small
to start off with, then expand slowly. Prove you're financially
solvent - some companies will ask you to prove your personal
net worth. They may ask about your credit card bill, mortgage
and more so minimise your debt wherever possible.
Whilst I have no evidence to back me up on this point I
believe that forming a limited company (so you become Pig
Farmers Inc. or Swine Herders Ltd.) makes you look more
professional and as result less risky. As one can form such
a company over the Internet these days for a tiny amount
of money I think it's well worth it if in doubt. You may
also be asked about guarantees on your products, monthly
overheads of your business, past fraud of any one of a million
other questions.
For every one you're asked - "How can I instill more confidence
and make my business look safer?".
It's just like your car insurance. Your rates are better
if your car is nice and safe (boring, even), is kept in
a garage at night and you've never had a crash, so think
of it this way. Even if you do get accepted, you may well
find that if you appear safer, the rates you are offered
will be better. If in doubt apply. You might just get a
nice surprise, and the sources we recommend allow you to
apply without paying an application fee so there's no risk
to you whatsoever.
The third and final method of accepting credit cards on
your website is to use a third party service. In this case,
your business itself is not granted it's own merchant ID
but rather you utilise the merchant account of another company.
Setting up an account with a third party processor is tremendously
easy - it's a case of filling in a simple form with your
name, address etc. and you're away.
Some of these services are free to set up whilst others
require a small "activation fee". For the new startup who
have tried unsuccessfully to gain their own merchant ID,
third party processing is the way to go. As with any other
method there are benefits and distinct problems with third
party processors. The first benefit is clear - easy, quick
and cheap setup.
Many
third party processors also offer additional services, some
paid for, some free. For example, Kagi can set you up with
a free digital download service so customers can instantly
and safely download your ebook or software after purchase.
Others such as Clickbank come with built-in affiliate software
as standard. These are just two examples I have chosen from
many which illustrate possible savings in terms of time
and money.
However, now we turn to the negative side of the story.
Firstly, most merchant account intermediaries deposit the
money paid by your customers in 24-48 hours. This means
that you receive payment swiftly which helps keep your business
finances bouyant and enable you to expand your operation
faster. In contrast, third party processors on average pay
every 14-28 days depending on the company in question.
Some will even pay you mid-month, for the previous month's
takings - meaning you may have to wait up to 45 days for
the settlement of funds. Clearly this stunts your business
and can leave you open to problems. Secondly, it's fair
to say that all merchant account providers, be they bank,
intermediaries or third party processors charge fees. This
may involve a set per-month fee and/or a per-transaction
fee (such as 5% of the value of each purchase).
Unfortunately
as you might expect, those of the third party processors
are generally far, far higher than those charged to businesses
who possess their own merchant account. Lastly in this argument
is the fact that you are far more limited in your dealings
with a third party service than your own merchant account.
What I mean by this is that you have to send your visitors
to their website to make their purchase, which makes you
look less professional and you generally have to use the
third party processors designated order form, with their
name on, though some level of customization is usually possible
such as adding your company logo.
In this respect you're simply less in control of matters.
And finally, as you are using the third-party processor's
merchant account, and not your own, your customers credit
card bill will show up the name of the third party processor
you have used rather than that of your company. In general
therefore, I'd regard using third party processors as a
"last resort" due to their far higher fees and less professional
appearance.
So which of these three methods is right for your business?
Unfortunately only you can make this decision. I just hope
I've clarified rather than clouded your opinions!
Best of luck to you and your business." End of quote.
Indeed our company need
to apply for merchant card for us not to loose enormous
number of clients.
Jorge
Dilag
www.kolobialtravel.com
