BUSINESS Merchant Accounts-3-Word Doc

8/9/2019 BUSINESS Merchant Accounts-3-Word Doc

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Excerpted from:

Dhealthstore.com

Online

BusinessCourse

Manual

Copyright 2012. All rights reserved


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Chapter 5.

Payment Processors, Payment Gateways, Merchant Account

Services, and Aggregator Services

Now that you have your on-line website (store) set up,youll need to be able to accept on-line payments which is done

with credit cards (Visa, MasterCard, Discover, and American

Express) primarily, but nowadays, also with debit cards and

electronic checks.

Personally, I recommend that you always be able to acceptpayment in any form (including personal checks, money orders

and cashiers checks), however, youll want the fastest way in

which customers money will enter into your business checkingaccount and this has a lot to do with the payment gateway

service provider.

A payment processor allows you to process paymentsonline. Payment processing companies use a payment gateway

that authorizes the payments. This is a separate service from the

merchant account service.

A payment gateway service is an e-commerce service that

authorizes payments for e-businesses and online retailers. It is

the equivalent of a physical POS (point-of-sale) terminal locatedin most brick-and-mortar retail outlets.

A merchant account provider is typically a separate

company from the payment gateway. Some merchant account


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providers have their own payment gateways but the majority of

companies use 3rd party payment gateways.

The gateway usually has two components: (1) the virtualterminal that can allow for a merchant to secure login and key in

credit card numbers or (2) have the websites shopping-cartconnect to the gateway via an API to allow for real time

processing from the merchants website.

A merchant account is a type of bank account that allowsbusinesses to accept payments by payment cards, typically credit

cards and debit cards and established under an agreement

between an acceptor and a merchant acquiring bank for the

settlement of payment card transactions.

In some cases a payment processor, independent sales

organization (ISO), or merchant service provider (MSP) is also a

party to the merchant agreement.

Whether a merchant enters into a merchant agreement

directly with an acquiring bank or through an aggregator such as

PayPal, the agreement contractually binds the merchant to obeythe operating regulations established by the card associations.

It is very important on how fast you receive your funds

from on-line business transactions because that money mayserve as working capital for your business and youll need quick

access to it to keep your business up and running smoothly,

especially during the early stages of your business.


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Depending on the payment gateway service provider, your

money could take up to 2 to 5 days to enter into your businessmerchant account. Therefore, youll want to go with a payment

gateway service provider that can guarantee that your funds willenter your business checking account in two days minimum,

three days maximum.

When we first established Dhealthstore.com, we went with

Flagship Merchant Services i-Payment our payment gateway

service provider. It took approximately 4-5 business days for ourmoney to enter into our business checking account. This was too

long to wait for money to cross over into our business checking

account, especially for a start-up business, but we put up with up

for a few months and what helped us was that we (my wife andI) had personal money available for the business if and when it

was needed.

It is very important to have some money saved for your

new business venture because in business one things for sure: ittakes money (spending or investing it) in order to make

(generate) money.

We ended up losing that account with i-Payment due to i-

Payment accessing us as a liability business simply because we

were generating too much cash for a start-up business. On our

application we were told to start at $5,000.00 as far as what weexpected to generate monthly. Well, we only had one month of

business where we did less than $5,000.00 in sales and that was

the first month of our agreement with i-Payment.


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Because of the business exponential growth and i-Payment

deemed us a liability to them, they held our funds for 30 daysand after it happened again they terminated the account and

service, after giving us notice of course. This was a blessing indisguise because it forced us to seek out other payment gateway

service providers.

However, we learned that when your account is terminated

by a payment gateway service provider, your business name is

blacklisted so to speak.

Basically, your business (name) enters a computer database

shared by the payment gateway and merchant account industry

and so when you attempt to acquire payment gateway servicesfrom other payment gateway service providers, your business

comes up as a red flag making it extremely challenging to

establish payment gateway service.

Dhealthstore.com was generating so much money that wehad a real dilemma on our hands. However, I know that dilemma

is a word with a two-fold meaning: problem and opportunity.

After no luck with any other payment gateway service

provider, I remembered my last resort company for payment

gateway services: PayPal.

When all else failed, PayPal was there to save the day. We

actually set up a PayPal business account months earlier while

we still had i-Payment as our payment gateway service provider

so our customers had several options in which to make payment.


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This allowed our customers around the nation and especially

around the world to make purchases, including those who didnteven have a credit card because through PayPal they could pay

by electronic check.

But a PayPal business account is not the same thing as apayment gateway. The good thing about PayPal is that they

provided both - business account and payment gateway service,

which undoubtedly gives PayPal an advantage over most other

payment gateway service providers.

A PayPal business account allows customers to send you

money directly to your account using PayPal and a PayPal

payment gateway account allows your customers to makepayments to you (your business) on your website (your online

store) using credit cards and debit cards in addition to giving

them the option to make payment with their PayPal account.

When we sought payment gateway services from PayPal,because we already had a PayPal business account which

allowed PayPal to see how much money we were doing in

volume pertaining to sales, within a day or two they granted ourapplication for PayPal payment gateway services. It was a very

easy process and it saved the day for us.

And it also turned out to be better for us because PayPalgave us the control to transfer our funds over into our business

checking account, just like PayPal does with a personal PayPal

account after you receive payment(s), and the wait for the funds

to transfer isnt long at all. Just two days.


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Continuing,

Youll also want to consider the fees associated with having

a payment gateway account. Theres no way around paying fees(as thats how payment gateway service providers make money

or generate their income) so you want to make sure that youchoose a payment gateway provider with fees you can live with

paying.

Again, youre going to pay fees (individual transaction feesand monthly service fees in addition to other applicable fees), so

dont even trip on this. Just look for a service provider that has

fees you can live with (afford) and that are not too high,

especially since your just starting out.

When applying for a payment gateway account, make sure

to read the contract too, the entire contract. If the contract

mentions how the payment gateway provider can hold your

funds (for a certain amount of months) for several differentreasons, abstain from doing business with this kind of provider.

Another thing to be aware of with payment gateway serviceaccount is the monthly amount they start new businesses off

with (something I touched on above).

For example, when initially applying for the paymentgateway account, they will ask you how much money do you

expect to generate on a monthly basis (states will also ask you

this on their retail licenses or sellers permit applications).


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Go low in the amount you expect to generate in sales on a

monthly bases and do so on both payment gateway and statesellers permits application.

So again, for starters, go low because you can always

increase the amount in the future, giving the payment gatewayservice provider advance notice that youll need to raise the

amount of money youre expecting to generate monthly with

your business.

Always take the initiative here lest you find yourself in

trouble with the payment gateway service provider who can

penalize you for making too much money with your new

business.

And as far as dealing with states and their sellers permit

application and how to fill them out, purchase our business

document State Sellers Permits - What You Need To Know.

Now some merchant providers, e.g. Flagship Merchant

Services, Secure Pay, etc. will start you off on the low end, e.g.

$5,000.00 per month but if and when you exceed this amount,youll need to contact the payment gateway service provider as

soon as possible and request an increase due to high volume of

business. Remember, you must take the initiative to do thus

(request an increase), and while you can do it over the phone, itis best (and more professional) to do in writing. See Example

Letter attached.


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As soon as you realize your business is at the $5,000.00

mark consistently or nearing said amount (if in fact you startedout with this amount), apply for the increase. Again, your failure

to do so can result in certain payment gateway service providersholding your funds in accordance pursuant to contractual

agreement which could potentially jeopardize your business,especially if you are dependent upon the funds that are being

held against your wishes by the payment gateway service

provider. i-Paymentfor exampleis notorious for this.

The best payment gateway and/or merchant account service

provider, especially for the small or start up business, is PayPal.

PayPal gives you more freedom and flexibility. Theres asmall monthly fee, usually around $30.00 and a deduction for

every order that comes in (c. 2% - 5%), and as stated supra,

PayPal allows you to transfer money over (into your business

checking account) as soon as you make a sales transaction with

your online store and the money appears in your PayPal account.

Other payment gateway service providers automatically

make the transfers to your business checking account, whichwill usually take about 4-5 days to enter your business checking

account, which in my honest opinion is too long to receive your

money if youre a start up business.

PayPal will have your money into your business checking

account in about two days, with the exception of weekends. The

sooner you can get your money the better.


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The only downside to payment gateway services with

PayPal is it doesnt allow merchants to accept Amex (AmericanExpress). Again, you want to be able to accept all forms of

payment.

If your business is primarily online (online business), youllneed a payment gateway company and provider, e.g.

Authorize.net, as the go between between your company and the

merchant account provider company.

Some companies, e.g. Secure Pay and PayPal, offer both

merchant account services and payment gateway services all in

one, which I highly recommend for the start-up business.

Most companies dont offer both, so youd you need a

payment gateway service provider in addition to a merchant

account service provider which are plentiful including financial

institutions, e.g. Bank of America, Wells Fargo Bank, etc.

A payment gateway allows you to track and monitor your

sales and batches to see how much money you are generating

daily, weekly, monthly and yearly. They allow you to createreports.

If you will take orders over the phone then it is imperative

that you have a payment gateway service provider, e.g.Authorize.net or PayPal, so as to have access to a virtual

terminal so as to process credit and/or debit card payments.


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A virtual terminal is a web-based application that allows

you (merchant) to login in from any computer with a usernameand password so as to input credit and/or debit card data for

payment processing.

Like the traditional credit card terminals that you see atretail stores, virtual terminals can accept both swiped and keyed

transactions. Now, in order to accept swiped transactions for an

actual brick-and-mortar business, merchants must use a terminal

that is compatible with a card reader that plugs into thecomputers USB port.

Payment processing and merchant account companies sell

these card reading terminals for an extra fee. You an purchasethe terminal outright or lease it. Even if you purchase the

terminal youll still have to pay monthly service fees for the

processing of all transactions.

Virtual terminals offer many advantages over physicalterminals such as the ability to access them from any computer,

no equipment leases, real-time processing, tracking and

reporting, recurring billing and employee sales monitoring aswell as many other dynamic features.

Virtual terminals are ideal for the online business that is

being operated from a house or an apartment.

Lastly, a great thing about virtual terminals is that you can

process payments (credit cards and debit cards) right from your


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Smart Phone (which has Internet access). Now how awesome is

that?

In conclusion, newcomers to online businesses who maynot be legally astute need to know that if you think you can

operate an online business and not have to report income or hideincome, youre in for a rude awakening.

Laws changed in 2011 and as of January 1, 2011, all

merchant services and payment gateway providers are requiredby law to report income of merchants. Thats right! Income

received through credit card and debit card transactions will be

reported to the Internal Revenue Service.

Banks and merchant service providers will report annual

gross payments processed by credit or debit cards to the IRS and

merchants. Credit card payments will be reported by the

merchant service provider using IRS tax form Form 1099-K

with copies sent to the business and to the IRS.

The IRS plans to collect ten billion dollars in new taxes

over the next decade. Government realized the new incomeopportunity by taxing the online merchant after developing a

scheme in which to force banks and merchant service providers

to provide financial information about their merchants who

bring in a certain amount of money and/or who do a certainnumber of transactions yearly.

An online business should not be seen as a way to generate

money without having to pay taxes on the income or profit.


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What To Look For When Choosing A

Merchant Account

A merchant account is a simple but important thing. Whenyou are shopping for a MAS (merchant account service), always

keep in mind that the service needs you more than you need it.

There is no reason to go with anything less than the best

company you can find.

Account Set Up Time.

In addition to having low start-up and monthly costs, the bestcompanies turn your application around with a day or two after

you submit it. Lesser services can take up to a week.

Annual Fee.

Make sure the merchant account provider does not charge anannual fee for the service. many merchant account providers

charge an annual fee anywhere between $99.95 and $300.00

Application.

Choose a merchant account service that does not charge moneyfor an application. Application fees are a red flag.

Average Approval Rating.

The approval rating for merchant account services refers to the

percentage of applications a company approves. The higher a


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services approval rating, the higher the chance you have of

getting an account through that service. This is an importantnumber to know, especially of the service changes an application

fee.

Business Reputation.

How does the credit card processing company stack up with

others that provide merchant accounts? Check the Better

Business Bureau (as well as online reviews) for complaintsabout the company before committing. If there are numerous

complaints against the merchant account service provider, move

on.

Contract.

Compare merchant account contract terms and duration of

commitment or find a credit card processing service that does

not require a contract at all for your merchant account. If youdecide to commit to a contract, it should be for one year

minimum, two years max. However, no contract (on duration of

commitment) is best.

Cost Per Month.

It will do you little good as a retailer to accept payments if theservice takes more in fees than you make in profit. The best

merchant account services offer low monthly service fees as

well as low per-transaction costs.

Customer Service.


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Allowing a company to handle your payments involves a hugeamount of trust. If a company does not have great customer

service, it doesnt deserve to handle your livelihood. What doformer customers have to say about them? Do they have a free

customer service number? What are their customer servicehours? These are all questions you should ask.

Discount Rates.

Credit card processing companies will charge your merchant

account for each transaction (also known as Per Transaction

Cost). This is called the discount rate. The merchant account

discount rate is typically 1.5 percent to 2 percent.

Fees.

Make sure all fees associated with your merchant account are

reasonable. But also, make sure that a merchant accountprovider fees arent too good to be true. You shouldnt have to

pay an application fee, setup fee, installation fee, annual fee, or

cancellation fee. Those are a lot of fees that many less-than-reputable merchant account providers will try to bill you for.

Merchant Account Company Features.

merchant accounts usually accept credit cards that are either

swiped through an electronic reader or have the credit card

number typed into the computer for orders received over the

phone. If you will be using the same point of sale (POS


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( terminal for both swiped and typed transactions, find out if

there is a higher fee for typed transactions. The merchantaccount discount rate for keyed-in cards is usually 2.2 percent to

3 percent.

Number of Credit Cards Accepted.

Seek out a credit card processing company that works with all of

the major credit cards: Visa, MasterCard, Discover and

American Express. The more cards you accept through yourmerchant account the better for your business.

Risk.

Does the merchant account provider process and manage a

diverse range of both high risk and low risk merchant accounts?

This may be important if your new business is considered a high

risk. many merchant accounts will not take high risk businesses

or if they do, they will charge the high risk businessastronomical fees to establish an account.

Start Up Costs.

If a merchant account is too expensive to start up so as to start

accepting payments, avoid the company. The best services

charge you nothing to set up a merchant account.

In conclusion, choose a merchant account provider that meets

your technical needs and has a proven track record, with

thousands of satisfied clients. Additionally, verify that the


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merchant account provider offers excellent customer service and

low fees, along with a guarantee.

Technical Support.

Technical support with your merchant account is critical. If youneed technical support, when is it available? Around the clock

(24 hours)? Monday through Friday, 7 a.m. or 8 a.m. till 4 p.m.

or 5 p.m.? Is technical support available during weekends?

These are questions you need to ask.

CONCLUSION

After seeking all of the above, you should have noproblems (or unanswered questions) about merchant account

service provides and/or payment gateway providers. You save

money and time in selecting the service providers that are ideal

for your new business.

Remember, in business,profit is the lifeblood of business,

and an online business is a business, and is thus dependent upon

sales for purposes of profit. By being able to process payments(via online and telephone via virtual terminal) your business gets

to make the necessary sales so as to make a profit.

Merchant Account Providers and Payment

Gateway Providers


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Authorize.net

P.O. Box 8999San Francisco, California 94128-8999

Tel: 1.877.447.3938Fax: 1.801.492.6489

www.authorize.net

Card Payment Options

www.cardpaymentoptions.com

ECS World:

www.ecs-world.com

First Data:

5565 Glenridge Connector NE, Suite 2000

Atlanta, Georgia 30342

Tel: 1.800.735.3362

Fax: 1.303.967.8000

www.firstdata.com

Flagship

Tel: 1.866.473.3760

www.cardservicesales.com

Intuit2632 Marine Way

Mountain View, California 9043

Tel: 1.888.254.8163

www.payments.intuit.com
http://www.payments.intuit.com/http://www.cardservicesales.com/http://www.firstdata.com/http://www.ecs-world.com/http://www.cardpaymentoptions.com/http://www.authorize.net/http://www.payments.intuit.com/http://www.payments.intuit.com/http://www.cardservicesales.com/http://www.cardservicesales.com/http://www.firstdata.com/http://www.firstdata.com/http://www.ecs-world.com/http://www.ecs-world.com/http://www.cardpaymentoptions.com/http://www.cardpaymentoptions.com/http://www.authorize.net/http://www.authorize.net/


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Leaders

Tel: 1.800.249.8035www.rockbottommerchantaccount.com

Merchants Accounts.cn

www.merchantaccounts.cn

Pay By Web

www.paybyweb.com

PayPal

Tel: 1.877.419.7765

www.paypal.com

Pay SimpleTel: 1.866.585.6178

www.paysimple.com

Secure Pay:

1515 Hancock Street, Suite 301

Quincy, Massachusetts 02169

Tel: 1.800.932.5708

Fax: 1.866.999.6601

www.securepay.com
http://www.securepay.com/http://www.paypal.com/http://www.paybyweb.com/http://www.securepay.com/http://www.securepay.com/http://www.paysimple.com/http://www.paysimple.com/http://www.paypal.com/http://www.paypal.com/http://www.paybyweb.com/http://www.paybyweb.com/http://www.merchantaccounts.cn/http://www.merchantaccounts.cn/http://www.rockbottommerchantaccount.com/http://www.rockbottommerchantaccount.com/


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GLOSSARY OF TERMS


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Aggregator. Also known as Payment Aggregator and Merchant

Aggregator. A payment or merchant aggregator is a serviceprovider through which e-commerce merchants can process their

payment transactions. Aggregators allow merchants to acceptcredit cards and bank transfers without having to setup a

merchant account with a bank or card association. Theaggregator provides the means for facilitating payment from the

consumer via credit cards, stored value accounts or bank transfer

to the merchant. The merchant is paid by the aggregator. These

services are the most popular forms of payment behind creditcards.

API. Abbreviated form of Application Programming Interface

(API) is a specification intended to be used as an interface bysoftware components to communicate with each other. An API

may include specifications for routines, data structures, object

classes and variables.

E-Business. E-Business is the conduct of business on theInternet, not only buying and selling but also servicing

customers and collaborating with business partners. The term

E-Business derived from such terms as e-mail and e-commerce, the E standing for electronic.

Electronic check. An E-Check (or electronic check) is an

electronic version of a paper check used to make paymentsonline. Anyone with a checking account can pay by E-Check

through a merchant account, payment gateway, or aggregator

(i.e. PayPal). To make a payment with an E-Check, you simply

provide the following information: your bank routing number,


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your bank account number (typically a checking account), and

the name on your bank account. This information is printed onyour paper checks.

E-Commerce. E-Commerce is the buying and selling of

products or services over electronic systems such as the Internetand other computer networks.

E-Tailer. A person involved in the selling of retail goods on the

Internet.

E-Tailing. E-Tailing is the selling of retail goods on the Internet.

Short for electronic retailing, and deriving from words such as

e-mail, e-business, and e-commerce. E-tailing issynonymous with business-to-consumer (b2C) transaction.

ISO. Abbreviation for Independent Sales Organization. An ISO

is an organization or individual that is not an Association (Visa

or MasterCard) member, but that has a bank card relationshipwith an Association member that involves acquiring or issuing

functions such as the ISO soliciting merchant accounts,

arranging for terminal purchases or leases, providing customerservice, and soliciting cardholders.

Merchant account. A merchant account is a type of bank

account that allows businesses to accept payments by paymentcards, typically debit or credit cards, and are established under

an agreement between an acceptor and a merchant acquiring

bank for the settlement of payment card transactions. In some

cases a payment processor, independent sales organization


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(ISO), or merchant service provider (MSP) is also a party to the

merchant agreement; and whether a merchant enters into amerchant agreement directly with an acquiring bank or through

an aggregator such as PayPal, the agreement contractually bindsthe merchant to obey the operating regulations established by

the card associations.

MSP. Abbreviation for Member Service Provider. A member

service provider is a non-member that is registered by the

corporation [i.e. MasterCard] as an MSP to provide ProgramServices to a member, or any member that is required to register,

in the Corporations sole discretion, and has been registered as

an MSP to provide Third Party Processor Program Services to

another member. The acquirer must register all ISO / MSPswith the applicable Association.

Payment gateway. A payment gateway is an e-commerce

application service provider that authorizes payments for e-

businesses, online retailers, bricks and clicks, or traditional brickand mortar and is the equivalent of a physical point of sale

(POS) located in most retail outlets, and which protect credit

card details by encrypting sensitive information, such as creditcard numbers, to ensure that information is passed securely

between the customer and the merchant and also between

merchant and the payment processor.

Payment processor. A payment processor is a company (often a

third party) appointed by a merchant to handle credit card

transactions for merchant-acquiring banks. They are usually

broken down into to types: front-end and back-end. Front-end


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processors have connections to various card associations and

supply authorization and settlement services to the merchantbanks. backend processors accept settlements from front-end

processors and, via The Federal Reserve Bank, and move themoney from the issuing bank to the merchant bank. In an

operation that will usually take a few seconds, the paymentprocessor will both check the details received by forwarding

them to the respective cards bank issuing bank or card

association for verification, and also carry out a series of anti-

fraud measures against the transaction.

POS (point of sale). Also sometimes referred to aspoint of

purchase (POP) or checkout is the location where a transaction

occurs. A checkout refers to a POS terminal or more generallyto the hardware and software used for checkouts, the equivalent

of an electronic cash register. A POS terminal manages the

selling process by a salesperson accessible interface. The same

system allows the creation and printing of the receipt.

Smart phone. A smartphone is a mobile phone built on a mobile

computing platform, with more advanced computing ability and

connectivity than a feature phone, i.e. high resolution touch-screens, web browsers, Wi-Fi, mobile broadband, digital camera,

pocket video camera, portable media players, and GPS

navigation units.

Shopping cart. A shopping cart is software used in e-commerce

to assist people making purchases online. The software allows

online shopping customers to accumulate a list of items for

purchase, described metaphorically as placing items in the


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shopping cart or adding to cart. Upon checkout, the software

typically calculates a total for the order, including shipping andhandling (i.e. postage and packing) charges and the associated

taxes, as applicable.

Virtual terminal. A virtual terminal is a web-based applicationthat allows merchants to accept credit card payments using their

Internet connected computers.

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