My Merchant Account Blog

Merchant Accounts and Electronic Payment Gateways

Wednesday, August 19, 2009

When starting a business on the Internet, usually that business wants to make money. It's up to the business owner to consider varying methods to collect payments from their customers. If the business owner is based in the United States, he will usually have more options available to choose from (as compared to owners in other countries).

Merchant Accounts and Electronic Payment Gateways

Most owners will probably consider a merchant account, while others will look for an Internet Payment Service Provider (IPSP). Simply put, the merchant account will allow the merchant to accept credit cards (Visa, MasterCard, Discover, American Express, JCB, etc). However, if the business is online, it needs a way to communicate with the website and a transaction processor. This is called an electronic payment gateway. This could be compared to a POS terminal for a brick and mortar merchant account (aka swiped merchant account). Some merchant account providers, like CDGCommerce, have developed their own gateway (Quantum Gateway) while some merchant account providers outsource this to other companies.

Having your own merchant account can be very beneficial to the merchant. Most electronic payment gateways offer an API to process the credit card transaction on the merchant's website. This helps to maintain a consistent checkout process without re-directing the customer over to another URL. Usually, the timeframe to get the money from the transaction is two to three business days. This time can be critical to some businesses depending on the cash flow. The name of the merchant will also appear on the customer's credit card statement.

Merchant Account Fees

Some merchants might think it is too expensive to get a merchant account. Some companies do charge more for about the same type of services. Some will require a contract, a termination fee (even if the contract has been met), a set-up fee, or an application fee. However, one merchant account provider, CDGCommerce, charges $10.00. This includes the Quantum Gateway. There is no monthly fee, customer service fee, or monthly minimums. Most merchant account providers will charge $10.00 - $50.00 a month for a monthly fee or customer service fee. Some might even charge a monthly minimum.

Electronic Payment Gateway Fees

The fees for an electronic payment gateway can vary, ranging from $10.00 to $100.00 or more a month, depending on the "extras" you choose. For example, Authorize.net / Cybersource might charge 10¢ for each transaction. Some resellers are able to get you 250 free transactions a month, and then charge a fee for each transaction.

The Quantum Gateway however does not charge for any transactions, periodic billing, or its QuantumVault (which allows the merchant to store credit card numbers in a secure environment - on Quantum's servers, allowing the merchant to charge it's repeat customers the same amount, or varying amounts each billing cycle.

One of the larger advantages to using the Quantum Gateway is its security and fraud prevention features built right into the gateway to help merchants reduce chargebacks. Unlike most other gateways which might charge extra for each service, the Quantum Gateway does not charge extra for the features. Compared to the LinkPoint / YourPay Gateway, (aka First Data Global Gateway - they renamed the gateway but did nothing to improve it), the Quantum Gateway is far superior. First Data had a chance a few years ago to improve on its services when the gateway was completely rebuilt, but unfortunately First Data did not take advantage of this and merchants still have problems preventing fraud online. Built right into the Quantum Gateway is MaxMind, DialVerify, and Verified by Visa / MasterCard Secure Code (VBV / MSC). Unlike before, where you would need to have a developer integrate these extra features, all you need to do is integrate with the Quantum Gateway. The gateway will then scrub (vet) the transaction before it hits the Quantum Gateway. This saves the merchant a transaction fee (imposed by the merchant account provider) if it fails the process.