My Merchant Account Blog

Certified E-Commerce Guru

Wednesday, January 21, 2009

Experts Exchange is a collaboration of experts and IT professionals from around world helping to solve problems and share knowledge.  Experts Exchange has over 900 zones currently.  They recognize the experts on a point-based system.  One of the writers on this blog, Corey Bryant, has achieved guru status for E-Commerce Guru.

As noted last month, the had also achieved the Payment Processing Recommendation and Integration Guru.

Your Merchant Account and Your Growing Business

Saturday, January 17, 2009

You have purchased a domain name, found a good web hosting company, and found a product that you think you can sell.  Now it is time to think about accepting credit cards.  Normally, some people might think of going to their bank to get an Internet (keyed) merchant account.  Some banks might just tell you they refer merchants over to merchant account provider (ISO / MSP) since getting an Internet merchant account also requires having an electronic payment gateway.  And all you needed was a way to accept credit cards on your web site.  Unfortunately, this is a pretty large step and many companies are involved in a credit card transaction on the Internet.

You finally sifted through all the companies, listened to sales people tell you why their company is better and you have decided on a ISO / MSP and an electronic payment gateway.  The ISO / MSP needs you to complete an application.  Now, if you decided on a company based solely on a typical sales call, read the contract completely.  It will be very detailed, explaining all the fees that are involved and if there is a contractual obligation.  Even if the salesman told you it is month to month, make sure it is.  Some will tell you it is month to month, but you might find the provider wanting a three-year agreement.  So what if you business tanks in six months - the salesman made the sale and got the credit.  Now you are stuck with a merchant account for thirty months.  It could cost you upwards of $1,000 or more to cancel the contract and to make sure you do not end up on the TMF / MATCH List.

Once you have completed reading the contract, making sure it is everything you thought it would be, you are ready to start the process.  It wants a lot of information, your DBA, the EIN, your address, phone number, e-mail address, how long you are in business, if you have had a merchant account before, how much monthly volume you expect, your average ticket amount.  Now wait a minute, if you are just starting a business, how do you expect to know how much volume you will be receiving?  You hope a lot, of course but being realistic, it might take a few months before you turn a profit.

Monthly Volume

Well what number should you enter into this field?  Does it make a difference?  Should you enter a number higher or lower than what you think?  Some good questions to ponder. 

Well, it does make a difference in the number you enter.  And it makes even a bigger difference if the average ticket is a large amount.  For example, if you enter $20,000 for the monthly volume and $5,000 for the average ticket, the ISO / MSP will look into this account a bit more.  One chargeback could easily push you over the chargeback ratio, thus having your merchant account suspended or even terminated.

Merchant Account Suspended

Let's look at this a bit differently.  Most ISOs / MSPs in the United States will approve your application pretty quickly if it is under $30,000 a month and you are not selling something they consider high risk.  Some sales agents will tell you to enter what you think you will be doing in six months.  Merchant account providers are in business to make money - most businesses are.  The provider is the one who will have to pay the money back to the consumer if the merchant turns out to be fraudulent.  They are the ones that monitor the merchant's activity.  If there is a significant increase in volume and transactions, this could raise a red flag to the provider.  The ISO / MSP might think you, the merchant, is doing something dishonest and might want to review your account.  This is very typical - it helps to protect the provider.  The provider could suspend some of the transactions while they verify the transaction with the consumer.

If you call the ISO / MSP to let them know of this increase before it happens, things will usually be a lot easier.  For example, maybe next month you are considering doing an advertisement on the local radio.  You hope this will increase your sales.  And you don't want anything to hinder your company from getting the money from those sales.  The ISO / MSP might ask that you fax over the receipt from the radio station as confirmation.  Fax that over and maybe the next day, follow-up with a phone call to make sure everything is OK.

The ISO / MSP might also ask that you fax over a copy of your bank statement and complete a request for a limit increase.  Do this right away to ensure no funds are held.  Follow up with a phone call the next day or so, and always document who you spoke to - get their name or ID number.  I am not saying that a ISO / MSP will do anything negative, it's just always good to have documentation.

Merchant Organic Growth

Another factor in growing is time in business.  Hopefully your business grows month-to-month, year-to-year.  Usually, merchant account providers will take this into consideration.  For example, I spoke with Chris over at CDGCommerce recently about this.  He said that usually no action is taken on a merchant if the volume increases slowly over time.  He called it "typical merchant organic growth".

Consider this - each merchant is different.  Each ISO / MSP is different.  I know that most like certainty - something like the Pythagorean theorem if you will.  Unfortunately, there is not a formula for them (merchants and merchant account providers) to just enter a couple of numbers into to get a specific answer.  Everything is on a case by case basis.  A considerate and polite attitude always helps as well.  I know these matters can be very delicate and patience might be needed from time to time. 

If you see your business growing as the example above, it won't hurt to pick up the phone and call your ISO / MSP.  I know, why bring attention to your account - things seem to be going OK, money is going into your bank account daily.  But you are an honest businessman doing a hard day of work, so you have nothing to worry about.  This will show the ISO / MSP you understand how much you respect having the account and you want to make sure you are playing by all the rules.

The Players in an E-Commerce Transaction

Thursday, January 08, 2009

When you get a merchant account, you usually let the merchant account provider know what card types (Visa, American Express, MasterCard, JCB, Discover, etc) you would like to accept.  This usually permits the e-commerce merchant to accept any cards that display this logo, even debit cards (you might need to check something on your merchant account application for the debit cards).  Accepting these cards, credit / debit, and at least Visa / MasterCard, will allow you to sell to most everyone.

If you start to think about accepting credit cards, you might only be familiar with your merchant account provider, the electronic payment gateway, and the consumer.  However, there are a few more companies involved in the transaction.  We will take a look at some of the companies and their function in a (Visa) e-commerce transaction.

E-Commerce Merchant

An e-commerce merchant is an authorized individual / company of certain card associations (Visa, MasterCard, American Express, Discover Financial Services, JCB, etc. for services or products.

Cardholder

An authorized individual / company that has a card with one of the card association logos on it.

Issuing Bank

This is a financial institution that maintains the (Visa) cardholder's relationship while also issuing (Visa) cards and contracts to cardholders for repayments of transactions.

Acquiring Bank

This is a financial institution that contacts with merchants to accept and process (Visa) cards for payment of services and goods.

VisaNet Processor

A member (or Visa approved nonmember) that is directly connected to VisaNet® to provide authorization, clearing, or settlements for merchants / members.

VisaNet®

This is a collection of systems that support the electronic transmission of all Visa card authorizations between acquirers and issuers and facilitates the settlement of funds.  In January 2002, First Data announced a program in which card transactions where First Data is the processor for both the card issuer and the merchant would be processed internally by First Data, without going through VisaNet®.  Visa did sue First Data but it was settled: Visa USA and First Data Corporation Agree to Settle Legal Dispute.

Merchant Servicer

This is a company that stores, processes, or transmits account numbers on behalf of a member's merchant.  Some examples include providing services as online shopping carts, electronic payment gateways, hosting facilities, data storage, authorization, and / or clearing and settlement messages.

All these companies or services help the authorization, authentication, and settlement of the transaction.