I was recently posed with the question of how a business can bypass all of the middle people in the payment processing industry, and go straight to the credit card companies. This post is briefly in regard covers that question and also covers who the best company to process with is.

First off, it is not within the spec of my knowledge to accurately discuss negotiating directly with Visa or MasterCard, if it is even possible. Any company that is large enough to go straight to them, would have to be processing in the hundred of millions to billions of dollars per year. If your company is smaller than say Paypal, Visa and MasterCard wouldn’t even pick up the phone.

So, who is the best company to process with?

This depends on two factors, what you are looking for in a processing company, and how big your business is. If you want the absolutely lowest cost possible at the expense of any decent service quality, then going for a middle sized ISO, that offers some absurdly low processing rate is probably the way to go (You can find these companies on EBay). On the other hand if you have ever had problems that your ISO couldn’t fix in a reasonable manner, or you want to quality service that you can stick with, a good MLS, or a good mall to medium sized ISO is the way to go.

If you ever do have problems with your merchant account, and your ultra cheap provider is slow, or generally bad at getting the problem fixed, then I guarantee that you will wish you chose a better provider.

When would you go straight to a large ISO?

Only when your business is very large. In my view, very large is defined as above ten million dollars per month. Based on that you can probably negotiate a very low rate with the ISO, but also get decent support from them. Smaller businesses will normally receive poor, generic support when they process with very large companies.

Getting good support from a provider:

From my experience, as the size of a company goes up, the quality of support goes down. This isn’t always the case, but it makes sense. Large companies generally have poor support because the cost to maintain a good support department is very high, in addition to the technology to integrate all of their departments into a single, reliable system.

The best service:
The best support I have ever seen for merchant services is from small, independent sales reps that are large enough to have their own office, but small enough to know their customers by name. These outside agents usually handle customer service face-to-face, and will show up at their customers place of business when needed. Their customers pay a little more for their services, but if you ask any customer they have, you wont hear even the slightest hint of negative feedback. But, not all businesses need their provider to show up at the slightest sign of trouble. For these businesses, processing with a small to medium ISO that has good telephone support and a personal account representative, will be more than sufficient. They will save some money each month, but not by sacrificing the quality of their support.

The worst service:
The worst service I have ever seen, is when small businesses believe that they will save money by processing with the largest company they can find. They later find that when they have a problem, the get to navigate through endless telephone menu’s only to be left on hold for an hour, and hopefully get the issue resolved because they talked to someone who barely spoke English. And, each time they call they speak to a new person.

The other major mistake people make is by looking for the absolutely lowest offer they can find. These companies offer super low rates, which often come with hidden charges, or a rate increase a few weeks after the merchant account is up and running. The bottom line is, when you shop for the cheapest company out there, you get exactly that. The cheapest company out there.

I am currently in the process of developing a simple php based shopping cart system. What differs my shopping cart from most other carts out there, is that my cart can be easily integrated into an existing website. It is made for smaller website’s that don’t need a full features ecommerce system. But, it will still offer the capabilities for a website to accept paypal and credit cards through a variety of payment gateways.

I am looking for a few programmers to help develop and test the shopping cart. I need to have several payment modules created that will integrate the shopping cart with different payment gateway’s.

Email me if you are a programmer that has experience developing ecommerce systems and are interested in contributing. You will get a permanent link to your website on the shopping cart website.

The shopping cart already has its own website and will be distributed under GPL.

Just a reminder of a few simple things that you should avoid doing with your merchant account. The first two things can get your merchant account shut down, and the second two can cost your business extra money for nothing.

Don’t Ever:

1. Process your own credit card.
2. Refund to a different card than what was charged.
3. Refund cash on a credit transaction.
4. Forget to batch.

Processing your own credit card:
This is considered a type of fraud. Never, ever, process the card of the person who signed for the merchant account. Not even for a dollar. If you need some extra money in your bank account, get a cash advance on your credit card, take out a loan, anything, just don’t expect to fill your bank account by processing your own card.

Refund to a different card than what was charged:
This is also considered a type of fraud, even though you may not know that you are refunding to the wrong card. If the customer doesn’t have that exact same card, and you don’t have a software or POS system that automates refunding a credit card, issue a store credit. Never refund to a different card.

Refunding cash on a credit transaction:
Refunding your customer is refunding your customer, right?

Wrong…

If your customer paid with a credit card and they you need to refund them, refund to the card they used to make the purchase, and only to that card. Some online and PC based software systems retain credit card information so that you can issue a refund without seeing the card again. If the customer doesn’t have the card, and you don’t have a system that automates the process, you can issue store credit.

Giving a cash refund on a credit transaction, opens you up for a chargeback that you cant win. After you lose the chargeback, you just lost 2 times the amount of the purchase, once for the cash refund, and once for the chargeback.

Forget to batch:
Forgetting to batch out your transactions daily will cause them to downgrade. It also increases the amount of time that it takes for your transactions to be deposited into your bank account. Downgrading can more than double your cost for processing that transaction. Many businesses are setup to automatically batch each day, and other need to manually batch every day that they process credit cards. Don’t be one of the businesses that realizes that you haven’t been getting your money for two months, because you haven’t batched out your terminal.

There are probably thousands of merchant account affiliate programs on the internet. Because of the lack of a solid internet foundation that most merchant service providers have, most of these programs are completely worthless.

Affiliate Program Key Areas:
There are a few key areas that an affiliate should look for when finding a program to join. To get paid a commission whether pay per lead or pay per account, your referral is going to have to fill out an application on the provider’s website. The website and the way that the application form is setup are the biggest factors in turning your leads into commissions. A visitor needs to instantly be able to trust the provider’s website. The website should be clean, professional, and well established. An important fact about merchant services is that online applications are not the actual application for a merchant account. The longer the application, the less likely it will be for a visitor to fill out the application because they will have to fill out another application at some point. Make sure that the affiliate program’s website is above average in appearance and professionalism, and it has the shortest application form possible. If you have the time and/or knowledge, investigating things like rates, customer satisfaction, and business history will help you to find the best program, but these time intensive tasks are not mandatory to find a decent program.

Where to find a merchant account affiliate program:
There are several ways to find reputable merchant account affiliate programs. Affiliate networks have a few programs available, but most merchant service providers use in-house programs. By finding a good merchant account provider, you can then look to see if they have an affiliate program available. This way, you can ignore any potentially poor merchant account affiliate program right from the start. The most common affiliate networks, are commission junction, shareasale, and linkshare. As far a merchant services go, commission junction which is normally the leader in quality affiliate programs, only has one provider. Shareasale and link share have a few, but the majority of programs are in-house operated.

Affiliate Networks vs. In-House Programs:
Affiliate networks are great because they are a third party that helps to maintain the integrity of an affiliate program and all parties involved in it. Affiliate networks ensure timely and proper payouts, and help protect all parties from fraud. In-house programs are run by the companies receiving the application. Make sure that if you do decide to go with a company’s in-house program, that the company has a very good reputation. There is very little recourse for affiliates that are scammed by in-house affiliate programs.

Getting Paid:
One very important part of the affiliate program is how to get paid. Make sure the affiliate program you are interested in offers acceptable payout methods and amounts. I have seen a few programs payout only when commission reaches $500. While every affiliate would love to be getting $500+ checks each month, the simple fact is that most affiliates aren’t going to reach $500 in a reasonable amount of time. Unless you know from experience that the minimum payout is an easy target, look for a more reasonable $100 or less minimum.

Programs that I have found with reputable companies:

Pay Per Lead:

The Merchant Store Inc. – This is my company’s affiliate program. We offer $20 per lead, and 3% for equipment sales that our affiliates generate. We have both a shareasale program and an in-house program. By using 2 programs we can offer custom affiliate partnerships with select affiliates or affiliates with special needs. We have been in business for over 10 years.

Electronic Transfer Inc. – Offers $10 per lead and performance incentives for well performing affiliates. Electronic Transfer Inc. has been in operation since 1989.

Pay Per Account:

Merchant Accounts Express – Pays $80 / approved merchant account. Over 8 years of operation.

Paynet Systems – $50 – $100 per approved account.

Ecommerce Exchange – $50 / approved account. In operation since 1989.

3rd Party Processing Programs:

Paypal – You will receive an initial monthly bonus, equivalent to 0.5% of the new merchant’s net sales, as soon as that merchant reaches $200.00 in sales. Every 30 days for the next 12 months, you will receive a bonus of 0.5% of the new merchant’s monthly net sales. The maximum total bonus you can receive is $1,000.00.

2Checkout.com – All referrals earn $9, every third referral earns an additional $5.

Related Posts:
Guide to Merchant Account Affiliate Programs – Part 1

This is a two part post on merchant account affiliate programs. The first part will cover the basic types and payout amounts of merchant account affiliate programs, and the second will cover where to sign up for merchant account affiliate programs, and will list a number of available programs.

An affiliate program is an online referral program that is designed for website owners to refer visitors to another website in exchange for a commission on any transaction those visitors make.

Merchant account affiliate programs have become increasingly popular with web design, hosting, consulting, and businesses where customers may seek a recommendation on getting setup accepting credit cards. Merchant account affiliate programs have two basic payout structures: pay per lead, and pay per account.

Pay Per Lead
Pay per lead affiliate programs are where a flat fee or percentage is paid to the affiliate for each referral. A referral is normally considered a visitor applying for a merchant account. The affiliate is paid whether or not the applicant actually sets up a merchant account.

Positives:

• Paid for each application.
• Paid whether or not an account is ever setup.
• Faster turn around time for being paid.

Negatives:

• Lower commission per action.

Pay per Account
A pay per account affiliate program is almost unique to merchant service affiliate programs. An affiliate is paid for each approved merchant account that they refer. Unlike a pay per lead program, the affiliate has to wait for the referral to be approved and processing before they are ever granted a commission.

Positives:

• Higher payout per referral.

Negatives:

• A substantial percent of applicants wont ever get fully setup.
• Delay in getting commission until merchant account is setup.
• No control of the process once referral is made.

As you can see the two programs are similar, but offer completely different benefits. It is my experience that for merchant account affiliate programs, pay per lead affiliate programs are better for both the affiliate and the business they are referring to.

The simple difference between the two program types:
The key difference between a pay per lead and pay per account program is that affiliates with the pay per account programs have to wait and trust that the lead they referred will be turned into an account.

With a pay per account program, the merchant account process can be confusing and frustrating for affiliates who are waiting for their commission. Apart from that, the best merchant account provider is not going to convert more than 70% of their leads into sales. That means that in the best case scenario, 3/10 referrals will never be paid. Realistically, most providers will never break a 50% conversion from a lead to an account.

Payout Amounts:
Pay per lead programs usually pay between $5 and $25 per lead. Pay per account programs normally pay between $50 and $200 per account. When you get into the higher paying programs, there is very often additional requirements for the commission to be paid. Sometimes the requirements are as detailed as having a required monthly minimum processing volumes, or the referred business has to process for 3 or more months. The bottom line is that the time, complicated process, and limited payout window that pay per account programs offer, are not worth it.

Part 2

I wish that I would have seen this article sooner. Jason Chance of jccommerce.com wrote an article, 10 Easy Steps to a Horrible Ecommerce Site, that covers many of the mistakes that new online businesses make. Here are a few excerpts from the article. I highly recommend new and existing online business owners to take a look at it.

Whatever shopping cart you use, the “stock” or default look is fine. After all, if it wasn’t the best layout of all time, why would they distribute it as “stock” in the first place?

All that junk about customers “Caring about their privacy” and being “Worried about identity theft” is unfounded. Just ask my friend “John” from Indonesia. Hey, by the way, he has $30,000,000.00 he wants to send you. He just needs your credit card number along with your name and billing address.

http://www.sitepoint.com/article/steps-horrible-ecommerce-site

For a new business, checking into the company merchant account is often near the bottom of the to-do list. It is very important to ensure that the merchant account is running smoothly and in a manner that is cost effective right from the start, to help to prevent problems that can arise in the future.

1. Watch your statements carefully in the beginning.
2. Don’t exceed your processing limits early on (or without notice).
3. Check your bank account daily.

Watch your statements carefully in the beginning.
The first few months of a new merchant account are watched closely by the processing banks. Traditionally most fraud that occurs with merchant accounts, occurs in the first few months of processing. It is equally important for businesses to watch their own statements closely in the first few months of processing. The start of opening a merchant account is the best time to find errors and problems, because they can normally be corrected more easily than after the business has been processing for a long time.

What business owners should be watching for is that their business is setup with the correct merchant account type, that they aren’t downgrading excessively, and that there aren’t any major fees that they were unaware of.

Don’t exceed your processing limits early on (or without notice).
When you applied for your merchant account, there was a section on the application that asked you what your anticipated monthly volume was expected to be. This volume acts as a base line for comparing your monthly processing to. Processors use this amount to flag fraud and other risk factors. Another number that you entered was your average ticket size.

While growth to you is a great thing, quick unexpected growth is hated by most credit card processors as it opens avenues for fraud. Because of this, many businesses have been held back or even had their merchant accounts canceled due to growth.

Exceeding your monthly volume: It is my opinion that businesses should always check their merchant accounts using an online account access system, which is available with almost every merchant account. If your merchant account approaches your specified monthly volume, you should call your merchant account provider immediately. There is some leniency for the occasional high volume month, but if you consistently reach or exceeding your volume, you need to request a volume increase. If your processor cant increase it, you should start looking for a new processor. Believe me when I say that the negative reaction from some processors handling growth is far worse than shopping for another merchant account. Your current provider may also have another processing bank that will grant you a higher volume. Either way, this is something that should not be ignored.

The reason that this is also applicable to new businesses, is that they often have no idea what their volume is going to be. Hopefully if a guess was made, it was higher than needed, and if a lower guess was made, a volume increase or new merchant account should be a priority.

Exceeding your average ticket size: Almost every business has to run a few transactions over their average ticket size. After all it is an average, and not a limit. 10 – 15% is acceptable with most processors, and some like Nova often allow a 100% over transaction. But, running a $5,000 transaction when your average ticket size is set at $20 is not a good thing. The processor will force you to refund the money and collect payment with another form. They probably wont refund your processing fees as well. Now your mad at your processor, you just lost some money, your customer is inconvenienced and nobody is happy. If you expect that you are going to need to run a much larger transaction than your average ticket, call your processor. They may allow you to run a one time transaction because it just happens sometimes. If you expect that you are going to be seeing a lot of these larger transactions you either need a average ticket increase, or you need to find a processor that will let you have the high ticket size. Be prepared to prove that you do sell something costing that much (it would be hard to believe that a dollar store sold had a transaction for $5000, etc).

Check your bank account daily.
Just like anything, a merchant account sometimes has errors. At some point a human has to add your bank information to an electronic system. Although rare, this account number sometimes gets mixed up, and money goes to the wrong account. If this mix-up ever occurs, it is also soon after a merchant account is opened.

Since money is normally deposited into a business’ bank account about 48 hours after they process a transaction, there isn’t a good excuse for notifying your processor that you haven’t been receiving your money for two months. Check you bank account closely for the first few weeks and make sure that your money is going to the correct place.

Overview:
These three small tips can help prevent about 90% of all the potential problems you can possible have your merchant account. Catching them early on will help to ensure that your credit card processing is transparent, allowing you to focus on the rest of your business.

We recent upgraded our SSL certificate to a Verisign certificate from Geocerts. I have purchased SSL certificates from several different companies over the years, and I must say that the Verisign process is something different.

One of the main reasons people use Verisign for a SSL certificate is that they are very well trusted and you get to display a Verisign logo on your website. This is also one of the main reasons that we installed the certificate, trust. As far as SSL certificates go, 128 Bit encryption is the same whether you issue the certificate on your own server, or Verisign issues it to you.

The Verisign Process:
In this case we opted for the most basic Class 3 certificate that Verisign offers. The initial process of applying for the certificate was easy enough. Generate a CSR (Certificate Signing Request) on your own web server, fill out a few information forms on the Verisign website, pay a small fortune, and hit the process button. Once the charge is completed, Verisign goes to work on validating your business and then generating your certificate.

Coming from always using instant SSL certificates, I thought the certificate would arrive in my email in about 10 minutes. I did know that Verisign had a business verification process, but I had no idea how involved it really was. Verisign checks several things to verify that your business exists, and you are who you say you are. First, your domain registration is checked to ensure it matches your business information. Next, they check phone directories to ensure that your listed phone number is registered to the company, and is a listed number. Lastly, they check to ensure that your business actually exists, and is legally registered. Only when you have meet all of their verification, will they issue a certificate.

I personally though that we had all of our ducks in a row, but I had to fax Verisign about 5 different documents before we were fully validated. After the faxes and about two days of being verified we were issued the certificate.

Overall the process was fairly smooth, and the ease of getting setup is directly dependent on having your domain name registered to your exact business name, having your business’ contact number as a listed number in phone directories, and having your business legally registered.

I will post in a few months, whether I think the certificate is worth the extra cost. We track our sales very carefully, and should have an accurate model to the any increased or decreased sales within a few months.

Something new I learned today was that newer Verifone Omni 3750 credit card terminals can come with a mobile version of McAfee virus scan installed on them. While I have never heard of a credit card terminal virus, nor have I personally seen a McAfee installed Omni, I think this is a really interesting feature that is showing someone is looking toward the future.

The way this particular virus scanning system works, is similar to the computer based McAfee. A local scanning utility is installed on the terminal, which automatically watched for viruses and other malicious scripts. This software on the terminal is automatically updated from a central McAfee server. Because of the nature of the software, it would only be necessary for Omni’s processing over a broadband connection. In this case, the terminal could be vulnerable to anything that exists on the internet. Again, I have never hear of a credit card terminal virus, but as advanced as the Omni 3750 is, I think that it could be possible for someone to target these terminals with a virus.

I will post any updates on Credit Card Terminal virus scanning if I come across them.

Link to Verifone’s McAfee information page

A new tool is now available in the tools area. The advanced merchant account fee calculator takes downgrade and other charges into account and should provide a fairly accurate estimate of the cost of processing credit cards.

Link to The Advanced Merchant Account Fee Calculator