When setting up an ecommerce merchant account or when accepting credit cards online, you usually have two components, the merchant account itself and what's called a "gateway account". If you have done any research into this topic, you'll probably have heard of a few different gateway companies. This article is about the gateway account and how that relates to the internet merchant account.
A gateway is a software package that allows transactions to get from your customer through the internet to the merchant bank for processing. This gateway also makes sure the transaction is submitted using encryption so that there is a significantly less chance of any financial data being lost along the way. There are dozens of pretty good gateway companies out there but probably one of the more common gateway companies is Authorize.net.
In addition to getting the transaction information from your shopping cart to the bank for processing, most gateway accounts also have what they call a "virtual terminal". This is the ability to login directly to the gateway account and charge a credit card without having your customer or you, for that matter go through the shopping cart checkout process. This works very well for both charging credit cards in the event of a phone in order, in person order as well as when you as a business owner will need to reverse a charge. This is all easy to manage from within this virtual terminal.
The fees associated with the gateway account are usually based on three components, the setup, the monthly fee, and a per transaction fee. Expect to pay around $25 to $150 for the setup, $5 to $15 for the monthly and anywhere from $.00 to $.10 per transaction for the gateway service. Keep in mind that these fees are usually above and beyond what the merchant account provider will charge you for the merchant account processing fees. Depending on who you use for your merchant account provider, you can usually get a very competitive rate and pricing that includes bundled fees to where your total monthly fee is less than $25 (which is about what the Paypal professional account costs). With this "real" merchant account, you'll usually be lower on your processing fees as well.
There are several payment platforms in the US including First Data, Paymentech, Global / Vital, and several others. That I know of, First Data represents over 50% of the nation's processing. Either way, most merchant account providers today are setup on several different platforms or at least have the ability to select a specific platform or what's called a "file build". The main thing you need to do here is simply let your merchant account provider know what gateway company you plan on using and make sure to ask them if it's compatible. Chances are it is. There are some merchant account providers who also offer a 30 or even 45 day "trial" period on the merchant account so if it doesn't work, you aren't tied into a long term contract. Ask your merchant account provider for details about that topic.
With a gateway account, there are some providers who have an option to process the transactions using a USB reader. What this does is allow the transaction to be processed at a "retail" rate because the card is physically present at the time of the transaction as demonstrated by the fact that the magnetic strip was read instead of just the credit card number. This doesn't work for all merchants, but if you are doing a good percentage of your transactions live, at tradeshows or a storefront as well as via the internet, this solution may work well for you and save you money in the long run. These readers typically cost around $50 to $70 or so for the basic ones and make sure your gateway company allows this type of transaction. This also means that you setup your account with your provider as a retail account as well, not an internet account. This is the only way you'll get those lower rates.
There are some instances where you can bypass the gateway altogether and submit transaction information directly to the payment platforms for processing. This is typically reserved for companies that process a LOT of transactions. The reason being is because in order to get to the point where you don't have to go through a gateway, you'll need to have your setup audited by some 3rd party auditor that will allow you to go through a certification process to where you can be "verified by Visa" and Mastercard has a similar program I know. This process is not overly difficult, but requires some extensive programming, certification, and of course there is a greater degree of liability as you know maintain the customer transaction information on your server where previously this may have been stored on the servers of the gateway company. There are high fines or fees for any credit card information that is compromised including a fine of up to $10,000 per instance. So, you can see that coding directly to the payment platform has its costs and risks.
Getting setup with an internet merchant account typically includes the gateway account as well. The main concerns that you may have is which gateways are compatible with your shopping cart. If you can narrow down this list to your top 2 or 3 gateways, you'll know where to begin your research to compare gateways both cost and features / benefits. If you have questions, you should also have some method in place to contact your internet merchant account provider to ask him or her about your options. This is a relatively easy part of getting setup and should be very straightforward. Good luck in your efforts and best wishes with the success of your business.
If you enjoyed this article, I have put together a couple of videos on Youtube the explain more about
internet merchant account basics and all about setting up an
ecommerce merchant account. If you are a business owner, repricing your existing merchant account could very well be the most effective use of your time related to your earnings per hour.
