Setting up an online store is easier than ever before, but there are some challenges when it comes to taking payments. While you could use Paypal to accept payments, and indeed many stores do, the service charges high fees and the risk of chargebacks is a serious thing. It is often more economical to set up a merchant account, so that you can cut the costs if you process a higher volume of transactions.
There are many institutions that provide merchant accounts, but you should be aware that with online businesses there may be some heavier fees than for bricks and mortar merchant accounts. This is because online transactions are classed as “card not present” and this means that there is an increased risk of fraud.
Accepting Credit and Debit Card Payments
Merchant accounts can be set up in one of two ways. You can either enter into an agreement with a member bank, that has its own processing agreement with Visa and/or Mastercard or enter into a company that acts as an agent of the member bank, such as a sales organization, or a member service provider. The agreement states that you will abide by the operating regulations that the credit card brands set, and it is also a form of ‘credit’ in that you are agreeing that the company will advance transactions for you, the buyer will purchase products from you and agree a payment, and you will get the money after the payment has been processed, but if the buyer put the transaction on their credit card then they may not actually pay for it until much later, when their statement comes through.
Key Considerations With Merchant Accounts
Before you set up your merchant services account, you need to consider how the payments will be taken. For most online stores, you will probably want to take payments online only, and you will want to accept Visa and Mastercard at a minimum, but you may want to take other brands such as American Express. Think about the brands that you want to accept, and make sure that you know what you are looking for.
Do you want to process payments online only, or do you want to also accept payments via your mobile phone or in a bricks and mortar store? Do you want to use a virtual terminal? Will you have a need for recurring billing? These are things that you should consider before you apply for an account. If you are going to take payments by more than one method, then make sure that all of the methods you accept are things that will integrate with your existing billing system.
It Pays to Shop Around
You should shop around before you commit to best merchant services companies. You should look for a company that works for the kind of transactions that you process. Most providers will charge a per transaction fee and will then charge a fee that is a percentage of the sale as well. If you accept a lot of very small payments, then a smaller per-transaction fee could work out better for you. If you sell high value items, then you may want a lower percentage transaction.
Fees will usually be higher for companies that are new and that do not have a long history. They may also be higher for companies in high risk industries. You can reduce your fees if you provide evidence of your last years’ worth of transactions, or if you are able to show your books and business plan, as well as provide evidence that you are taking measures to prevent fraud.
Note that in addition to the transaction fees, you may have to pay set up fees, and there may be a monthly minimum fee, as well as batch fees, and fees for certain kinds of transaction or customer service interaction. Make sure you understand all of those charges, and what the long-term contract is. Try not to lock yourself into too long of a contract for your first transaction, because you could end up stuck in a contract that is expensive to maintain. Ideally, you want to not have to wait too long to get out of your contract if you find a better deal.
Some common ‘gotchas’ include virtual terminal processing fees, recurring billing fees, or fees for things like sending email invoices. If you want those things, then make sure you know whether they are included as standard.
Ideally, you should get as much control as possible over the branding and the experience that the customer has. Being able to communicate with your customers, and to customize and invoices and receipts or reminders that your customer gets will go a long way towards improving the customer experience.
Getting Up and Running
The member bank is going to want to review your profile as a business before they approve the setup of the account. This can take up to a week. Once they have done that and you have signed the contract, you will be given the tools that you need to integrate the account with the website. Usually, this is easy to do. The exact process will depend on the shopping cart software that you are using, but the merchant services provider will be able to help you with this, indeed if you are using some common software they will probably provide some ready-written instructions. You can consult the shopping cart company for assistance as well.
If you are not sure what merchant account provider to go with, then ask for advice from some experts. There are many companies that are experts in the world of merchant services, that can help you to pick out the perfect provider, and they will be happy to compare prices for you and offer suggestions to help ensure that you get the best possible deal for the size of your business, and the number and type of transactions that you process on a month to month basis.