. . . The first step for any Internet merchant intending to do real-time credit card authorization and delayed settlement processing is to get an Internet merchant bank account. This is the account that enables a business to take and clear credit card transactions (the moving of money from the buyer's account to the seller's account) from a real-time ordering order form at an online-internet e-commerce store. We will call this service provider the merchant bank provider.
The next step is to choose a service that will link your internet-based-businesses to a good credit card payment processor with fast credit card authorizations.
Now here's the tricky part. You actually have to do these two steps together because your bank will typically need to know which internet clearing service you intend to use. Also, most payment processing applications require you to indicate which gateway software you will be using.
In short, be prepared to contract with two separate companies and pay two separate setup charges and monthly fees if you intend to maintain your own merchant bank account and offer real-time credit card authorization over the Net. If you can't qualify for a merchant bank account of your own, there are many service providers out there that will function in place of a merchant bank account.
Whatever route you take, make time to evaluate a couple of online-payment processors. Compare their setup fees, transaction fees, authorizing, and support services you get from each before signing a merchant account contract.
In the next several sections we will try to provide some examples and "templates" that can serve as a guidelines against which you can evaluate the various payment processors out there.
Selecting a Merchant Bank Account Provider
To authorize and settle credit card payments over the Net, you should obtain an Internet merchant account from a bank, or credit union. Not all banks and credit unions support Internet businesses. Some internet-friendly banks we have found so far include Wells Fargo Bank, Bank of America and Chase Bank.
Major banks often use the First Data Corporation network for their credit-card payment processing and "creditcardauthorization" In fact, the FDC network clears about 80% of all credit card authorization transactions. More national credit card authorization issues and credit-card processing information is also located online at the credit card merchant service.
The payment processors that Open Market has integrated into ShopSite products use the FDC network as their primary network. This means that if you chose a merchant bank that isn't on the FDC network you may find yourself paying a premium setup fee. Typically you get hinged on two fronts, the setup fee costs more and the response time is slower because the service is using a modem connection instead of a leased line connection to the financial network.
If you are a new internet-business or a new business in general, your personal credit history (and FICO Score) is the single most influential element reviewed during the application process for a merchant bank account.
That is why you should obtain a free credit report and correct any credit reporting errors or negative issues appearing in your credit bureau file. Keep in mind, you are entitled to at least one annual free credit report, or more each time you are rejected for credit based (which was based at least in part on your credit report).
That is not to say you will not qualify for a new merchant credit card processing account, but the bank will look more favorably upon your application and the initial rate they offer you, based on your personal credit history.
If You Have an Existing Bank Relationship
If you already have a merchant bank account, check with your bank provider and make sure your type of account is one that can accept Internet transactions. Be aware that some banks charge a premium for a credit card charge back if the bank discovers you have a face-to-face type of account (which might be the case if you are using IC Verify or MacAuthorize as your interface to the payment processor) but are now running your Internet charges through that account. Word to the wise, check with your bank on how they "play the game."
If you have an existing merchant account, and decide to "Internet-enable" that account, your payment processor can help you get your account type changed. However, once the account type is changed to an Internet-type account, it will no longer support a "terminal" connection (the type of account typically used to process face-to-face type of transactions).
Selecting a Credit Card Merchant Account Processor
Open Market offers two-ways to link to a credit-card payment processor:
- Third-party processors, PaymentNet and CyberCash, are offered in ShopSite Manager and ShopSite Pro. To use either, the merchant needs a merchant bank account. Note: PaymentNet is not currently supported on the Solaris Intel (x86) platform.
- If you prefer to link to a payment processor of your choice, ShopSite Pro offers a real-time CGI interface to the orders database. A programmer can write a custom CGI script that grabs the order information from the ShopSite CGI in real time, and delivers that information to any online payment processor. If your service provider has suggested another service, make sure you clearly understand all the startup costs associated with that service, both from your host provider and from the payment processor.
- Merchant Accounts. Salespeople may try to sell you what you don't need. Their commissions may run several hundred dollars. We tell you where you can go to obtain a Merchant Credit Card account for little or no application fee.
- A payment gateway is the connection between your website and your bank's credit card processor. Unfortunately, you can be shoved into one that's inappropriate for your needs. You can back out when you get wiser (if you can break the long-term lease you may have signed), but by then you'll have paid all the non-refundable fees. This mistake can cost you many hundreds of dollars and set you back several months.
Basics You Should Know
Here are some hidden costs that we came across during our research.
- If you intend to use CyberCash, be sure to ask your merchant bank account provider if they charge a premium to process a transaction that comes to them via CyberCash. We discovered that some banks charge a 10-cent premium per transaction for a CyberCash transaction.
- What is a transaction? Let's start with an order. The request for credit card authorization is recognized as a transaction by most processors; the submission of the order for settlement after you have shipped your goods is another transaction. Therefore, the typical order will rack up two transactions to the processing service. When evaluating card clearing services, make sure you understand how that service counts transactions.
What to Expect from a Payment Processor
Use their rates, the items they charge for, the services they provide, and so forth, as guidelines when evaluating other online payment processors.
Before applying for services, the merchant must obtain an Internet merchant account with a bank. Banks that process credit cards through the FDC network are: FBBH, Wells Fargo, BankOne, BankBoston, Bank of Hawaii, Barnett Banks, Boatman's Bancshares, Chase Manhattan, Huntington Bank, NationsBank, PNC Bank, US Bancorp, and Wachovia Card Services.
Fees and Activities You Can Expect from a Payment Processor
Here's a quick reference chart to help you compare the various payment processor fees. Also, use this chart when evaluating the various services that function as an all-in-one payment processor, such as Card Services International. It will help you keep things in perspective.
- For a fee, merchants can upgrade their payment plan at any time.
- Once a transaction has been specified for settlement, the settlement usually occurs within a 24-hr time period (dependent on the issuing bank).
- PaymentNet conducts its communications with ShopSite via the secure PaymentNet client. The PaymentNet client is an SSL transaction gateway service, providing Internet merchants with the ability to immediately authorize payment card transactions, submit delayed-settlement transactions, or immediately merchant account settlement transactions.
- The merchant is provided immediate access to a password-protected transaction reporting site which is updated daily. The website reports all transaction attempts that are made from a merchant's account, including sales, credits, and new credit card authorizations.
There are salespeople looking for your money -- and some very legitimate, helpful people. You absolutely must get some understanding before you buy -- or you're going to pay excessive fees.
Websites of Interest