Payment processing is a very competitive business and many merchants are pressured into choosing a specific provider based on either not knowing the available options or following the advice of their local bank or website hosting company.

Banks and hosting companies are RESELLERS of merchant accounts. They make money if you purchase their merchant account plans. Most banks, credit unions and hosting companies will encourage their account holders to use their “partner” providers.  However, online payment processing is not a “one size fits all” scenario and a merchant may be able to save thousands of dollars in fees by shopping around and researching alternate payment solutions.

Furthermore, contrary to what many local banks tell their customers, your net credit card sales can be deposited directly into your business checking account from ANY payment solution.  Therefore, you are not required to choose a specific payment provider just so that you can receive your online sales into your primary business checking account.

Before entering into an online credit card processing agreement with your local bank or website hosting provider, get quotes from several different payment solution providers based on your website’s estimated number of daily and monthly transactions , average transaction amount and gross monthly  sales.   Your total cost per month can vary significantly based on the number of transactions, average amount per transaction and total sales per month.  

Call online merchant account providers directly and compare their rates with the package(s) offered by your bank.  Companies such as First Data, Chase Payment Tech, Wells Fargo and BankCard USA work with virtually any payment gateway and shopping cart system.  Some providers may have a lower monthly fee but the per transaction percentage or per transaction fee could make it cost prohibitive for high-volume websites.  Conversely, for lower volume websites, providers that have higher per transaction fee but no monthly fee may be more cost-effective.

After receiving quotes from several providers, consult with your shopping cart company to verify compatibility with your preferred payment solution.  Your online store developer or ecommerce provider can usually also provide recommendations on which payment solution will work best for your business type. Once you determine the best payment solution provider based on your sales volume and complete the merchant account application process, you will need to configure your shopping cart to send online payments through the provider’s supported gateway.  Most shopping carts include major payment gateway support built-in.  However, if your shopping cart does not support your preferred payment solution, it can usually be programmed into the system for a one-time nominal fee.

For new businesses that cannot accurately predict their sales volume, it may be wise to not sign a long-term contract or use a service such as PayPal or Google Checkout that provides credit card processing and online payments without requiring a contract. During the first few months of online business, the merchant will get a good idea of their average transaction amount and gross monthly sales.  The merchant will then be able to calculate the most economical, long-term payment solution provider for their online store.

For detailed information on the differences between online merchant accounts, payment gateways and how online payments are processed, please visit the resources below:

http://www.authorize.net/resources/howitworksdiagram/

http://www.ourshop.org/resources/internet-merchant-accounts.html

If you have any questions on which type of payment solution is best for your specific online store or have comments, please feel free to submit them below!

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Kevin R. Rounsavelle
Founder, Site Store Professional
http://www.sitestorepro.com

As a result, I spent the majority of July 3 talking to and calming down many of our ecommerce clients who use Authorize.net as their primary and in many cases, only online payment processor.

The biggest question/complaint I received was: “How could one of the biggest payment processors in the world be brought down by an incident at only one of their locations and why didn’t they have some type of redundancy in place that would prevent the entire network from going down?”

Although there has been no official report on how a fire at their primary data center also brought down their backup data center and even their public website,  this incident not only sheds light on having redundancy and fail-over on mission-critical systems but also the importance of having an alternate shopping cart checkout system in place for your online store.

In the past, store owners have primarily concentrated on redundancy for their website hosting, database and email servers but have ignored the one central point of failure that would bring their online sales screeching to a halt: their credit card processor.

Many of our clients that were using Authorize.net as their only payment processor are now implementing PayPal, Google Checkout or a secondary payment gateway on their stores as a backup in case there is another extended network failure from Authorize.net.

Having an alternate payment source such as PayPal or Google Checkout will allow merchants to continue to operate and process orders even if their primary payment provider is down or not responding to credit card authorization requests.

Although the Authorize.net incident yesterday cost merchants millions of dollars in lost sales, hopefully it will prevent future lost revenues by proving that ecommerce solution providers, no matter how large or small, will eventually suffer system outages and it is up to the merchant to prepare for such an emergency by having backups in place for all elements of their ecommerce site, including their payment provider.

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Kevin R. Rounsavelle
Founder, Site Store Professional
http://www.sitestorepro.com