Choosing a Merchant Credit Card Processing Vendor To Meet Your eCommerce
Credit Card Processing Needs
To process online orders, you must offer online payment options.
The most widely used form of payment currently is merchant credit card
processing. Marketing studies show that you'll lose 60 percent to 80 percent
of your potential orders if your Web site is not set up to accept credit
cards; they also show that if you offer credit card payment and use merchant
credit card processing, not only will you receive more orders, but those
orders will be substantially larger.
Credit cards enable impulse buying, reassure customers of your legitimacy,
and simplify your billing. Other methods of collecting payment are becoming
available and include charging purchases to a phone bill, using electronic
funds transfers (EFT), paying by electronic check and various forms of
prepayment. Each of these methods requires payment processing either in
the form of software added to your Web site or by linking to a payment
Understand Merchant Credit Card Processing Accounts and Their Fees
To accept credit cards, you must establish a merchant account, a special
bank account for handling the revenue (and fees) from credit card transactions.
Your merchant account provider (MAP)-a bank or other institution that
processes online credit card transactions-will verify the credit card,
process the transaction, and deposit the results into your account, usually
within two to four days.
Evaluate Alternative Online Payment Methods
eCommerce credit card processing still reigns as the leading method of
payment for online purchases, but other payment options are available.
Your product and your customers' buying preferences will influence which
payment methods you accept. In other countries, ecommerce credit card
processing is not as pervasive, so you may want to consider offering alternatives
for your international customers. Offering multiple payment options on
your Web site, if you can afford it and maintain your profit margin, is
a means to increase sales by increasing customer convenience and confidence.
Many alternative methods are better suited to micro-payments, charges
under $1, because the processing costs are often lower and credit card
merchant-account fees don't apply.
Determine The Fee Structure That Maximizes Your Profit Margin
Not every product sells the same way, and not every ecommerce credit card
processing provider charges you the same way. Choose a provider that suits
your business. Begin by considering the nature of the products you sell-are
they large and expensive? Perhaps then you ought to seek a MAP that offers
a higher flat-rate transaction fee and minimizes the discount rate, since
even a hefty $1 transaction fee will be far lower than a 2.5 percent deduction
from the charge. On the other hand, if you rely on small, high-volume
sales, even a $0.30 transaction fee can erase your profits.
Specify Your Technical Requirements
Different MAPs require different "gateways" on your site. These gateways
are the pieces of code that transmit your customers' orders to and from
your bank's transaction authorizing agent. If you plan to manually process
your orders, a secure Web form might be good enough to capture credit
card information that you can process offline.
Evaluate Your Business's Credit-Worthiness
MAPs, like most banks, pay close attention to the companies with which
they do business. Such factors as your company's length of time in business,
outstanding debt, debt payment history, goods and services offered and
even your personal history (for new businesses) will affect the fees your
company pays to process credit card transactions on the Net.
Find MAPs You Can Work With
Many merchant account credit card processing providers refuse accounts
to start-up firms or firms and individuals with bad credit histories.
Some MAPs will not accept "high-risk" accounts, a term that usually encompasses
adult sites, online casinos, and sites operated by firms outside the MAP's
own nation. Other merchant account credit card processing providers refuse
to process any transactions that originate on the Internet-even from their
own existing brick-and-mortar clients-or may require that you create a
separate merchant account to process orders that are not taken face-to-face
but are received by mail, phone, or via the Internet.
Compare Fees and Technical Capabilities
Once you've developed a list of merchant account credit card processing
providers who might offer you an account, you need to compare the different
MAP offerings. Be certain to ask detailed questions about each MAP's technical
requirements, and make sure your system can work with your MAP's gateways-the
software that actually submits your customers' credit card information
for payment authorization.
Minimize Credit Card Chargebacks
Discussion about consumer credit card protection for Internet purchases
has become intense. But the fact is that U.S. federal law limits a consumer's
liability for unauthorized charges to $50, whether the purchase was made
face-to-face or on the Internet. No such protective legislation exists
for merchants, however, and they bear the full cost of fraudulent charges
as chargebacks from their banks. When a fraudulent credit card transaction
takes place without the physical card being presented to the merchant,
or funds are uncollectible for some other reason, merchants are charged
the sale amount by the cardholder's bank. This is known in the industry
as a chargeback. Merchants may also be asked to pay penalty fees in addition
to the cost of the original charge. Though it has not been as hot a topic
for e-tailers, credit card chargebacks pose a serious threat to profits.
To reduce revenue losses due to credit card fraud, online businesses need
to take steps to reduce the risk they take with every order received through
their Web sites. Find out how credit card chargebacks occur and what you
can do to protect yourself.
Secure All Your Transaction Data and Prevent Fraud
Credit card information is extremely sensitive, and plenty of villains
are waiting to exploit any breach in your security. Additionally, online
merchants are as susceptible to credit-card fraud as face-to-face retailers.
Make sure your merchant account provider has addressed these issues.
Prepare for International Payment Processing
Some payment processing and merchant account providers do not accommodate
international commerce. If you plan to market your product globally, you
may need to search specifically for an international provider.
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