You’ve decided to open an ecommerce website.
There are lots of decisions to be made:
- what products to sell
- how to design your site
- how to drive traffic to your site
- which shopping cart provider to use
But the one thing you didn’t know - obtaining a merchant account is the hardest part of easy to use ecommerce solutions.
What's the best course of action for an e-commerce marketer?
Options without a merchant account
Without a merchant account, PayPal or Google Checkout are the most common options.
Both of these options offer one very compelling feature for the visitor to the site - the online retailer does not receive the buyers complete credit card information, minimizing the chance for fraud.
But, if your prospect does not already have a PayPal or Google Checkout account set up, you risk losing them as a buyer.
Many users have also found out with these solutions, similar to merchant accounts, e-commerce is scrutinized much more highly, and sometimes, unfavorable terms will be added to the users account - including long waits for monies to be received. More commonly, this happens when there is an above average refund rate.
Other options include other online payment gateways that process payments without the user specifically setting up a merchant account. Often, fees will be higher with these types of arrangements.
What is a merchant account?
A merchant account is an account, often issued by a bank, that allows a merchant to accept debit or credit card payments.
In addition to shopping cart software, this is also needed by many e-commerce providers.
Why is it hard to get a merchant account?
The biggest reason merchant accounts are hard to get is the potential for fraud in internet-based transactions.
Tips for getting a merchant account:
Factors considered in your application include how long you’ve been in business, your credit history, and previous merchant accounts you’ve had.
Additionally, your business matters - what type of products are you selling, projected monthly volume, and average amount per transaction.
Specific tips that can help you get a merchant account include:
Be prepared - the institution evaluating your application will often want to receive copies of a lot of documents - entity documents, banking statements, bank account statements, or other documents requested to support the application.
Start the process early - obtaining a merchant account can take anywhere from 1 week to six months.
Disclose all material information - if your personal credit contains negative information, full disclosure is often better for an applicant than trying to overcome the discovery of undisclosed information.
Address your companies understanding of and policy for minimizing fraud - many institutions view e-commerce as a risky proposition based on their experience with fraud. Reassurances you can provide to help with these fears may help your application.
Compare terms and rates - often terms and rates vary by financial institution. Some institutions will provide better terms or rates than others.
AbleCommerce provides e-commerce shopping cart and hosting solutions. For more information on our product offerings or additional tips to help your business, please contact us.
