3rd Party Credit Card Processors

Did you know that you don't need your own merchant account for most on-line businesses?

There are hundreds of third party card processors that you can choose from and most of them offer much more than a UK bank's merchant account can.

Most of them are (surprise surprise) US based, but their technology and their understanding of the needs of an online business are, in the main, streets ahead of any offerings from UK based companies.

There are a few things to consider though.

Currency

At an early stage in your site's development, you need to decide what currency you are going to conduct transactions in.

If all of your business is likely to be done with UK based customers, there is no reason to use anything other than Pounds.

However, if you selling internationally, you are best advised to conduct your transactions in US Dollars.

That is because although UK customers (and those from other countries) appear to be happy to purchase from sites charging in US Dollars, the average visitor from the USA does not seem willing to purchase from sites conducting business in UK Pounds.

Bear in mind that when the Pound is strong against the Dollar, that you will receive less money per transaction than you might be used to receiving.

If your target audience is European, you might like to consider doing business in Euros - but on the net, theUS Dollar is the internationally accepted currency just like English is the interneationally accepted language.

Fees

All third party processors make their money in much the same way.

They charge a variable set-up fee - this can be as low as $50, rising to as much as $750 depending on a number of factors.

Some charge a minimum monthly fee ranging from $0 to $250.

All charge a percentage of every transaction - this is called a commission and varies from arounf 4% to 18% depending on the type of business and the risk involved. In addition, most companies charge a fixed fee per transaction ranging from $0.35 to $1 per transaction.

There will also be a retention amount to protect the card processor against any chargebacks. Chargebacks are discussed in more detail under the heading "Fraud & Chargebacks". It is an important section, so please read it carefully.

The chargeback reserve is usually in the regionof 5-10% of each transaction. You get this money back in most cases, after 6 months, or when you close your close account, but as it's a "rolling reserve" you are always paying some of each transaction into it.

Payment Schedules

Third party systems are not the same as having your merchant account.

The merchant provider collects your payments online and sends the necessary receipt to your customers and to you, so that you know when a sale has been made.

You get paid at agreed times. This can bbe weekly, fortnightly, monthly or in some cases, when your account balance reaches a certain limit that you define. The latter option is great if you want to avoid receiving lots of small value cheques or deposits into your bank account.

IMPORTANT: If you are using a US processor, it is cheaper to opt for payment by cheque as this is usually offered free of charge. Wore transfers from a USA processor to your bank account costs anywhere between $20 and $35 a time.

Notices

It is usually a condition of these services that you include a statement on your web site explaining to customers that your transactions are being handled by the company concerned.

This is a legal requirement and if you are using a reputable provider, can actually reinforce your credibility and sales message.

Complete Solutions

On the face of it, third party processors appear more expensive than having your own merchant account - and of course, for some businesses, that will be the case.

Where the third party companies score very highly is that they offer a complete, fully integrated solution, rather than just a merchant account.

The better systems include things like customer management systems that allow your customers to track and trace their payments, enquire about progress of their orders, add comments and feedback as well as offering you a whole suite of back office tools that allow you to analyse your sales and trends.

Most merchant accounts don't offer these, but with a third party system, you get them free!

Imagine being to email all of your customers who have bought a particular product or service from you, offering them an upgrade or additional item at the touch of a button.

That's what a good third party system can deliver for you.

Easy Integration

Most third party payment systems are extremely easy to install onto your web site and will not require any specialist skills or programming knowledge, other than a very basic grasp of HTML.

One of the systems I use personally allows me to build an entire shopping catalogue online within minutes - it really is that simple!

All I have to do is log in to my online control panel, tell the system what I want to sell and click a button to get all of the code built for me instantly. Once done, I just copy and paste it into my web site and forget about it until the orders come in.

Services Or Products

Some companies systems are suitable only for products, while others allow you to sell services directly from your web site, something I do personally.

If a client wishes to pay me by credit card, I simply build them a "buy now" link from my control panel and then send it to them by email. When they click the link, I get paid, often in advance of providing the service.

Conclusion

Third party card processing is ideal if you are non-technical and wish to get up and running in the shortest possible time.

Most of the companies operate on a "pay as you go" basis, meaning that you are only paying fees when sales are made - and of course, you can add these fees to your prices.