Merchant Services: Simple Solutions for Online Businesses
If you operate a business online, accepting credit cards is essential. Research indicates about 90 percent of all online shoppers turn to credit cards when they’re ready to make a purchase through an Internet merchant.
As the number of online merchants has increased, merchant account providers have simplified the account setup process and have reduced many of the fees associated with credit card processing accounts. As a result, the time has truly never been better for online businesses to begin the process that will allow them to accept credit cards as payment for the goods and services they offer.
Paypal and other third-party processing companies may be an option for businesses that are just starting out. But for any business that is serious about attracting customers over the Internet, opening a merchant account is a must, and has been proven to be the pathway to far greater profits and a much larger customer base.
Most account setup fees range from a few dollars to a couple of hundred dollars, and many merchant account providers offer free account setup. Maintenance fees, such as monthly fees and transaction fees have also dropped in recent years, meaning you keep more of the money your sales generate.
Unlike retail merchant accounts where credit card transactions take place face-to-face, online sales allow customers to retain a degree of anonymity; therefore, the risk of credit card fraud is higher for online merchants than for retail establishments. As a result, the fees associated with online accounts is generally higher than those charged for retail accounts, in order to mitigate the risk potential.
But even with the added costs associated with online merchant accounts, the increase in profits a business can experience as a result of accepting credit card sales far outweighs any additional account fees or costs.
A merchant account for an online business is a little different from a retail merchant account. While retail accounts generally rely on actual credit card terminals to capture credit card data and process transactions, online businesses will need to use a virtual terminal or a gateway provider (sometimes referred to as a “weblink”) to gather credit card information from customers, and to process the information to determine if a transaction is approved or denied.
A virtual terminal is a less expensive option, and can be a good solution for smaller businesses as well as businesses that expect a small volume of sales on a daily basis. Unlike the gateway system which is totally automated, a virtual terminal requires a person to type in credit card information for processing. As a result, the number of sales which can be processed in a timely manner is limited by the speed and accuracy of the individual entering the information. This limitation is the biggest drawback in using a virtual terminal system.
Some virtual terminal systems also rely on deferred processing, sometimes referred to as non-real-time processing. In deferred processing, credit card information is gathered, but it is not processed until a set time during the day, usually the end of the business day, when all receipts are gathered and all credit card information is processed at one time. Deferred processing has the additional disadvantage of not allowing the merchant or the customer to know whether a sale has been processed until some tie after the transaction. By contrast, real-time processing, which is used by some virtual terminal systems and by all gateway provider systems, offers a nearly instant decision regarding whether or not a credit card has been approved, allowing the transaction to be completed in real time, rather than being delayed.
In addition, most online processing systems – both gateway providers and virtual terminals – use address verification systems, or AVS, which is designed to decrease the incidence of fraud by comparing the addresses provided by customers during an online transaction with the addresses associated with the cards being used.
No matter which type of system you use – gateway or virtual terminal – be sure your service offers the latest secure encryption technology when transmitting data to and from your storefront. By encrypting credit card information and other sales related data, you can help prevent data from being “read” by third parties and help decrease the incidence of fraud and credit card theft. And also be sure any virtual shopping cart software your business uses is compatible with the software used by your gateway or virtual terminal provider.
All of this information may seem like a lot to digest. But fortunately, merchant account providers have expertise in the area of setting up and maintaining online storefronts. By working closely with your merchant account services provider, you can ensure that you select the products and services that are the best fit for your business, allowing you to compete with both major and smaller retailers that have set up shop on the Internet.
Karen Zabel is a freelance writer who writes about businesses that provide merchant credit card processing services.
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