Internet Merchant Accounts
Advantages and disadvantages of online payment systems

Typically, Internet merchant accounts are provided through an acquiring bank (or acquirer) that lets you accept credit cards, and sometimes other types of payments, online. As is the case with any business decision, there are advantages and disadvantages to online payment systems and other types of credit card processors.

In general, advantages tend to revolve around having direct control of the payment processing system. Disadvantages tend to revolve around mechanics, security, and logistics of being responsible for the entire payment process.

Advantages of Merchant Accounts and Other Online Payment Systems

Merchant accounts and third party payment processors provide needed online services. Advantages include:

• Customer convenience - Online merchant accounts save site visitors the extra step of writing and sending a check or calling in an order.

• Increased functionality - Internet processors also enable Web sites to be direct sales generators rather than simply lead generators or online brochures.

• Additional direct sales channel - Credit card processors help you add Internet sales as a revenue stream.

• Immediate authorization - With automation, you know immediately if an Internet payment is valid. No waiting for checks to clear.

• Streamline payment process - With Internet merchant accounts and other payment providers, there are fewer steps necessary to assure valid payment as compared to less automated processes.

Disadvantages of Internet Merchant Accounts

Like any other technology, there are disadvantages to online payment systems. Some of the disadvantages of having your own Internet merchant account include:

• You are responsible - With your own Internet merchant account, it is your responsibility to maintain site function, resolve field service issues, etc.

• Fees - Various monthly fees are associated with Internet merchant accounts.

• Fraud - As a merchant, you may have to directly deal with credit card fraud.

• Security issues - Internet merchant accounts are only one piece of a reliable, secure payment system. Private, sensitive information such as credit card numbers can be stolen or altered; system integrity can be breached; and Web site spoofing are all risks with weak security systems.

• Agreements - Internet merchant accounts come with long agreements. Often, you are committed to minimum time frames and/or dollar minimums.

There are advantages and disadvantages to using third party payment processors as well. For more about third party processors, read "Accept Credit Cards Online Through an Online Payment Processor".

Avoid Getting "Trapped" into a Bad Merchant Account

There are so many facets related to Internet merchant accounts, it is easy for sales representatives or resellers to "forget" to reveal one or more fees. Even experienced business people can fall victim to undisclosed terms.

Bobette Kyle, author of the marketing plan and Web promotion book How Much for Just the Spider? Strategic Web Site Marketing and publisher of the companion site WebSiteMarketingPlan.com, is one such person.

Read about her online merchant account squabble here as well as her list of questions to ask a potential ecommerce merchant account provider.

Where to Find an Internet Merchant Account

Internet Merchant Accounts are sold through a variety of providers.

• Acquiring banks such as Wells Fargo or Bank of America may offer the account directly.

• Independent merchant account resellers offer a variety of products and services.

• Many host companies recommend or resell Internet merchant accounts along with technology included or compatible with the hosting service.

• Trade groups or other organizations sometimes negotiate preferred terms for members and provide details through membership materials.

To begin researching potential Internet merchant accounts:

• Be on the look out for advertisements.

• Ask your bank.

• Research trade groups or other membership organizations if they offer Internet merchant accounts.

• Check with your business software provider.

The variety of other components you will need - besides an Internet merchant account - will depend upon which reseller or bank you choose. Some have done legwork and offer turnkey packages (In some cases, you may pay an overall higher price this way to compensate for the reseller's administration costs.). Others offer limited services, requiring you to piece together a full ecommerce solution.

In summary, become informed by asking the right questions, understanding your merchant account agreement, and becoming aware of all fees. By doing so you can set up a successful ecommerce system.

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