If you’re looking for a merchant account provider to handle your online business needs, you have a lot to choose from. Today, there are hundreds of account providers who are anxious to help you grow your online business. To make the best solution for your business needs, start by considering the three main types of transaction systems and the benefits and drawbacks of each.
• Merchant Internet accounts. These accounts allow you to accept and process credit card transactions online, and are probably the most popular solution for most online businesses. Credit cards are a popular choice among consumers who shop online; in fact, about 90 percent of all online transactions are made using credit cards. Credit cards increase impulse buying, and also result in larger sales than other forms of payment. Studies also show credit card users are more likely to buy big-ticket items than are those who pay with other methods. Another bonus of the merchant Internet account: when a customer enters his or her credit card information, you have automatically gathered their mailing information, meaning you have a built-in method of increasing your in-house mailing list for future sales and promotions.
So what are the drawbacks? Some consumers are still concerned about providing credit card data online, fearing their information will be “picked up” by wireless internet users or stolen. Credit card purchases also come with the added risk of fraud and chargebacks, which can affect your bottom line and, when they occur too regularly, cause your merchant account to be suspended or even closed. You may also find it difficult to qualify for a subsequent account if an account closes because of too many chargebacks. Also, because of the risk of fraud and chargebacks, merchant account providers deem online businesses to be riskier than retail accounts, and charge higher fees as a result.
• Electronic fund transfers. During a transaction using electronic funds transfer, funds are transferred from the customer’s bank account directly into your business bank account. Electronic checks are an example of this type of transaction. In an electronic check transaction, the customer supplies the routing number and bank account number of their account, the same way a credit card user would enter their credit card information. That information is processed by the customer’s bank, and the fund transfer is authorized (or declined) and completed. These types of transactions offer an option for customers who don’t have credit cards, making them an excellent addition to a standard merchant account. And because credit cards are not involved, there’s no risk of chargebacks.
Drawbacks: The process is more complicated than a credit card transaction, limiting impulse buying, and not all customers are comfortable handing over their checking account information. Also, this type of transaction is not an option for most overseas or international customers.
• Telephone billing. This type of transaction system is the most recent addition to online billing options. In telephone billing, the cost of goods or (more commonly) services are billed directly to a customer’s telephone bill. Telephone billing is used primarily for downloads of music and software, as well as for websites that charge for time-measured services, and is also sometimes used for making charitable donations online. The advantages of telephone billing are that it eliminates the risks associated with credit cards and is available to customers without credit cards, as well as to some international customers.
However, customers are required to install a plugin application, and for online applications, the option is currently only available to online customers who are using telephone modems to connect to the Internet. Most applications are also limited to the sale of soft goods, like downloads, and are not available for the sale of hard goods.
While the lion’s share of online sales are completed using credit cards, it’s true that there are some customers who do not have credit cards, or who are uncomfortable supplying credit card information during an online transaction. For those reasons, the most comprehensive solution that will result in the greatest number of customers is one which includes credit card processing capability, combined with an option that allows online payments by a method other than a credit card.
Fortunately, many merchant account providers have realized the need for more than one type of service, and offer combination accounts, also known as “bundled services.” These merchant account providers enable online merchants to accept credit cards, debit cards, and other forms of payment online, all within the same merchant account. By bundling the services together, the merchant is required to establish and maintain only one account, and most merchant account providers who offer bundle services are able to offer reduced fees and discounts, making the overall costs less than what you would pay if you bought each service separately, and from different sources.
Your online business is waiting for you to make the choices that will allow it to grow and flourish. Start your search today to find the solution that is best suited for your needs and future plans.
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