When talking about online payments, PayPal is probably one of the first payment platforms to come to mind. Most of us already have a PayPal account — whether it’s to fund that auction purchase on eBay or to send money to friends and family around the world. But as a small business owner, there is so much more that PayPal offers, including invoicing.
If you’re a small business owner that’s looking for an easy and affordable invoicing solution, you’re in the right place. PayPal invoicing allows you to easily customize and send invoices, as well as receive payments from your customers. If you’re not yet in need of full accounting software for invoicing and payments, this option from PayPal may just offer exactly what you’re looking for.
In this post, we’re going to introduce you to PayPal invoicing. By the end of this article, you’ll know what PayPal invoicing is, how much it costs, and whether or not it’s the right option for your business. If you’re ready to send your first invoice, we’ll also be breaking down how to customize your invoices and send them to customers so you can get paid more efficiently.
Keep reading to learn more about this PayPal service.
What Is PayPal Invoicing?
PayPal invoicing allows you to create professional invoices in just minutes. There are no software downloads required, and you can create and send your invoices from your computer or mobile device. You can customize your invoices by adding a logo, custom fields, and contact information. The process is quick and easy and is a great way to invoice clients and customers without paying hefty software subscription fees or fumbling with a clunky, hard-to-use UI.
How Do PayPal Invoices Work?
You can create printable invoices without even signing up for a PayPal account. However, to take full advantage of all of the features of PayPal invoicing, you’ll need to sign up for a free PayPal Business account.
Once you’ve created an invoice, you have three ways to get it to your customer. You can send the invoice directly through email. You can also create a link that can be shared with the customer. Once the customer receives the invoice, they can pay it instantly, giving you fast access to your funds. If you prefer to send your invoices another way (i.e., by the US postal service), your invoice can also be saved as a PDF and printed.
Customers can pay their PayPal invoices using a credit card, debit card, or PayPal account. Eligible users can also pay using PayPal Credit, which allows you to get your funds immediately but gives your customers up to six months to pay off any purchase of $99 or more. A PayPal account is not required for your customers to submit payment with a credit or debit card.
PayPal invoicing also helps you keep track of your sent and paid invoices. You can track payments, view billing history, and even send payment reminders for unpaid invoices. Other features include recurring invoices, partial payments, and tips. You can also create a custom billing app with PayPal Invoicing APIs.
How Much Does PayPal Invoicing Cost?
To take advantage of every feature offered by PayPal invoicing, you have to sign up for a free PayPal Business account. Sending invoices is completely free — you do not have to pay a dime to send unlimited invoices to your customers and clients. There are no setup fees or monthly fees to use PayPal invoicing.
However, you will be required to pay a fee once the invoice is paid. The fee is 2.9% of the invoice, plus $0.30 per transaction for US-based transactions. For transactions outside of the US, the fee is 4.4% plus a fixed fee based on the currency.
Once your client pays the invoice, the fee will be deducted and the remainder will be added to your PayPal Business account. You can then keep the funds in your PayPal account and spend them using the PayPal Business Debit Card, you can initiate a standard transfer to a linked bank account for no additional cost, or you can initiate an instant transfer to a linked debit card or bank account for 1% of the amount transferred (maximum fee is $10).
How To Create & Send An Invoice With PayPal
Are you ready to send your first invoice? You can get started in no time at all with PayPal invoicing. Just follow these simple steps, and you’ll be on your way to getting paid.
Step 1: Sign Up For A PayPal Business Account
You can download and print paper invoices without signing up for a PayPal account by using PayPal’s invoice template generator. But to get access to all features, it’s best to take a few minutes to sign up for a PayPal Business account. It’s completely free and very easy.
First, visit the official PayPal website and click “Sign Up.” Then, you will be given the option to sign up for a Business or Personal account. For invoicing, you’ll want to sign up for a Business account.
Next, follow the prompts and input the required information. This includes the email address you use to log in, a password, your business contact, business name, business address, and phone number. You will also need to include your business type, description of products and services, and monthly sales.
To secure your account, you will also need to provide the last four digits of your social security number, your date of birth, and your home address. Note that a credit check is not performed, so your credit score will not be impacted by signing up for a PayPal Business account.
Once this information has been provided, you will then be taken to the PayPal Dashboard. From here, you can view your PayPal balance, link your checking accounts and cards, send money, request money, and perform other tasks. In this article, our focus is on creating and sending an invoice.
Step 2: Open The Invoice Dashboard
There are two ways to start creating invoices from the PayPal Dashboard. You can use the Invoicing Quick Link directly on the dashboard, or you can navigate to the “Pay & Get Paid” tab, then select Create & Manage Invoices.
Once you’re on the next screen, you can click the link to create an invoice if you want to jump in immediately. For the purposes of this tutorial, we’re going to set up customers, inventory, and other information first by clicking on the Settings option.
Step 3: Add Your Business Info
Under business info settings, you can add, edit, or remove your:
Company logo
First & last name
Company name
Address
Email address
Phone number
Website
Tax ID
Additional info (i.e., business hours)
You can apply these settings to a single invoice or to all invoices created in PayPal. In this section, you can also select your template. There are three invoice templates:
Quantity: This template allows you to input the item name, quantity, price, and tax. You can add an optional description.
Hours: This template includes the item name, quantity, price, and an optional description.
Amounts Only: This template features the item name and price only.
Later, you can customize these templates by adding or removing fields and changing currency.
Step 4: Add Inventory
Once you’ve saved your changes under the business information settings, navigate to the Items list. While you can also add items manually to each invoice, this is a more efficient way to create invoices, especially if you have a specific list of products or services at set prices.
Select Add a New Item. From here, you can add the item name, description, price, currency, and tax. Once you save the changes, the item will be added to your list and can be added to your invoices.
Step 5: Add Customers
Now, we want to go back into settings and add your customer information in the Address Book. This is particularly useful for recurring customers that frequently make purchases.
Under Settings, go into the Address Book. You can add information for each customer by clicking Add new contact. For this section, you can add an email address, business name, first and last name, phone number, shipping and billing addresses, and a memo to yourself, which won’t appear on your invoices.
Once you’ve added information for your customers, you can access the Address Book to make changes, delete old customers, or add new customers. Instead of typing in the customer information every time you create an invoice, you can now pull this information directly from the Address Book. You still also have the option to input a customer’s information directly into the invoice. You can also bypass adding all of this information and use just an email address to send your invoice.
Step 6: Create Your Invoice
Remember the invoice dashboard we navigated to earlier? We’re going to go back to that and create our first invoice.
Let’s look at each section and break down how to complete and send your invoice.
Bill To
In this section, you can add a customer from your address book, input customer information, or enter the email address of the recipient.
Templates
If you would like to use a different template, you can choose from the three options directly in the invoice.
Company Info
If you need to add a logo or make changes to your business information, it can be done here.
Items
Add items from your item list, and the total amount will be automatically calculated for you. You also have the option to add new items not found on your item list.
Message To Customer
In this section, you can add an optional note to your customer. You can also add terms and conditions or a reference number if you choose.
More Options
In this section, you can add up to five attachments. You can also add an internal memo that will not be viewable by the recipient of the invoice.
Invoice Information
Your invoices through PayPal invoicing are in numerical order beginning with number 0001. If you’ve used a previous invoicing program or have another system in place, the invoice number can be changed.
You can also edit the invoice date from the default (the date the invoice was created) and the payment terms. In this section, you can also add discounts and shipping charges.
Payment Options
In this section, you can allow a partial payment or allow the customer to add a tip. By default, these options are turned off but can easily be turned on by selecting the relevant checkbox.
Step 7: Preview Your Invoice
Once you’ve filled out all information on your invoice, you have the option to go ahead and send it to your customer. However, PayPal also allows you to preview the invoice so you can see how it will look to the customer. This is a great time to make sure the invoice looks the way you want it to and that all information you’ve added is accurate.
After you’ve reviewed your invoice, you have several options:
Save the invoice as a draft that can be viewed, completed, and sent at a later time.
Edit the invoice.
Get a shareable link to the invoice.
Download and print the invoice.
Send the invoice.
Step 8: Getting Paid & Additional Steps
Once you click “Send,” you’ll be taken back to your invoice dashboard. From here, you can view information at-a-glance, including the customer name, invoice number, invoice amount, due date, and status. There are several things you can do to your invoices directly from this dashboard.
Some of the actions you can take include: Sending a reminder, editing the invoice, recording payment (if a payment was made outside of PayPal), canceling the invoice, or archiving it.
Once your customer pays the invoice, payment will automatically be recorded and the funds transferred to your Paypal balance. Your list of invoices will be automatically updated accordingly to show that the invoice was paid.
Through the Invoicing dashboard, you can also set up recurring invoices for repeat customers.
Simply choose the Recurring Series option, open a new invoice, select the frequency of invoicing, and create your invoice as you normally would. Invoices will automatically be sent as scheduled until you cancel or update them.
Another option that may simplify processes within your business is the ability to create estimates. You can do this through the Paypal Invoices dashboard. You can even later convert the estimate to an invoice if your customer decides to move forward with the transaction.
Are PayPal Invoices Right For You?
Congratulations! If you made it this far, you now know just how easy it is to create invoices with PayPal. Once you’ve set up your system, you can easily invoice your customers in minutes and be on your way to getting paid.
Still on the fence as to whether PayPal invoicing is right for you? Consider using PayPal for invoicing if:
You operate an eCommerce business.
You don’t have an extensive amount of inventory to track.
You don’t want or need more complicated accounting software.
You don’t want to pay for invoicing upfront (only pay when you get paid).
You want an uncomplicated invoicing system to use on your laptop or on the go.
PayPal invoices aren’t for everyone. If, for example, you need a more advanced inventory system (as opposed to just an inventory list), you’ll want to look elsewhere for invoicing software. If you’re looking for more advanced features and customization options, you might want to look into other software. Unsure of where to start? Check out our top picks in invoicing software, or start your search with a reputable product like Square Invoices. Remember to take advantage of free trials and no-cost plans to fully explore each option before making the choice for your business. Good luck!
The post Getting Paid With PayPal: How To Create & Send PayPal Invoices appeared first on Merchant Maverick.
You’d never want to use the word “luck” in the context of something like a pandemic, but the adaptations businesses have made to comply with lockdowns and social distancing have made a powerful case for entrepreneur Larry Talley’s vision.
Talley is the founder & CEO of Austin, Texas-based Everyware, a payment gateway that seeks to address some common pain points in the payment/billing cycle. Talley’s solution is built on an optimistic premise: that many bills, transactions, and customer service inquiries that go unaddressed or unfulfilled aren’t being purposefully avoided. They’re simply getting lost in the shuffle. In other words, have you carefully gone through that pile of mail on your kitchen table? Do you regularly check your spam folder to make sure nothing important is landing there?
If you’re anything like me, probably not.
It Starts With A “Thank You”
Everyware gets around this by sending a text message receipt with every transaction.
âIt can be as simple as a thank you, but what it does is provide a basic communication channel that’s open all the time, 24 hours a day, seven days a week,” explains Talley. “You can always text back your concern or your problem. Or even a positive review.â
Talley, who is a software developer, bootstrapped Everyware and maintains it with a small team of around 25. The company now has customers not only in the US, but in Canada and Mexico thanks to word of mouth and ISO referrals.
âLike most bootstrapped companies, you start with a great idea, but bringing that idea to market is a lot harder than you think,” says Talley, “The idea really goes back to 2015, but it took until about 2017 to really pull it together.â
Saying “YES” To Text-Based Billing
The kind of text channel Everware helps to create can be used for more than just thanks or communication; it can also be used to initiate payments. This can be done through a link in the text or, if the payer has a credit card on file, simply approving the transaction with an affirmative text message like “YES.”
As a freestanding payment gateway, Everywear can be added to most existing merchant account services.
If you’ve interacted with the medical system in the past few years, or have donated to a political campaign, you probably have an idea of how this works. Many healthcare providers will, for example, send you texts reminding you of upcoming appointments. Afterward, they’ll send you a message alerting you that your bill is now available, usually with a link to their patient portal. Similarly, many political campaigns this cycle have utilized “textbanking” to connect with supporters, alert them about events, and solicit donations. As you might imagine, these have been two of Talley’s biggest sources of customers.
Talley expands on how useful text-based billing can be in the medical industry, “When you go to the hospital, you might have five different doctors and different bills for each. All when you’re going through a tough time in life.â It’s not uncommon for patients to get a bill from one doctor or department, think they’ve completely settled their medical payments, and miss the other bills. The hospital misses out on payments, and the patient starts getting calls from collection agencies. Everyware seeks to eliminate this problem by providing better communication with an easily accessed paper trail.
Thanks To COVID, Everyware Is…Everwhere
Everyware’s niche may turn out to be a lot bigger than politics and medicine when all is said and done. COVID-19 has created an enormous demand for contactless payments. While eCommerce transactions can and have been filling the gaps, they aren’t the only way to replace what would otherwise be over-the-phone card payments. A text-based transaction can not only be used to make many of those payments, but it can do so more securely. Think of it as something like two-factor authentication. Not only are you getting the card’s security features, but you’re also getting it via a phone number and device that have a record of belonging to a specific individual for an extended period of time. This creates less room for fraud than most card-not-present transactions. It also leaves a record of the transaction in a place where it can be easily seen and recovered.
“We’ve signed up a few private airports, so now pilots don’t have to get out of the plane to pay for gas. They can just pay from their phones,” says Talley. Talley sees government and municipalities as big growth sectors, particularly where the court system is concerned. While getting a traffic citation by text may not be a thrilling prospect for most people, Talley anticipates savings from reduced paperwork and fewer unpaid tickets.
There are plenty of other businesses that may find a use for text transactions in our new paradigm.
âWith curbside pick-up, pharmaceuticals, online schooling, everything moving toward a model that’s compatible with our platform, it has really accelerated our growth,” explains Talley. “We’re today, a company that’s cashflow positive and high-growth. We’re more or less a platform now rather than just a standalone payment gateway.â
The post Everyware Uses Text-Based Billing To Help More Businesses Profit From Contactless Payment During COVID appeared first on Merchant Maverick.
To say that WordPress looms large over the modern-day internet would be an understatement.
Statistics compiled by w3techs.com show that 37.7% of all websites are powered by WordPress. If this includes you and your business — or if you’re looking to build a small business website using WordPress — there are a number of shopping cart integration choices. However, one choice stands out as the most popular and, arguably, the best: WooCommerce.
WooCommerce’s open-source shopping cart has been downloaded over 84 million times since its initial release in 2011.
Let’s explore how this free eCommerce plugin works and examine just what makes it such a popular service among online merchants.
What Is WooCommerce?
WooCommerce is a free, open-source eCommerce plugin that works exclusively with WordPress sites. However, while the software is free to download, running a WooCommerce-powered online store is not free — you will still have to pay for hosting and for the add-ons and extensions needed to make your store functional.
After you download WooCommerce, you can connect it to your WordPress site like you would with any other WordPress plugin. Just click “Add New” on the plugins page, search for WooCommerce, then click “Install” and “Activate.”
With WooCommerce, you are given a set of basic tools for free. You can later add extensions to fill in any feature gaps. That’s what makes WooCommerce such a scalable platform — if you invest in plugins to get the more advanced features, you can go from selling a few products to selling thousands of products without having to switch eCommerce platforms in the process.
What Is WooCommerce Shipping?
WooCommere Shipping is a shipping tool that you can download for free from WooCommerce’s website. Once installed, it integrates directly into your WooCommerce dashboard. The shipping tool allows you to set up and print shipping labels, manage packages, review your label reports, and more.
With WooCommerce Shipping, you can display live shipping rates from FedEx, UPS, USPS, and other carriers in your store.
What Can You Sell On WooCommerce?
What can you sell with a WooCommerce online store? Just about everything! Let’s go through the types of products WooCommerce allows you to sell:
Physical Products: Sell clothing, trinkets, artwork, gadgets — whatever you like. You can sell physical products in multiple variants. For example, a shirt can be sold in multiple colors and sizes, and you can set different weights and prices for each product variant.
Digital Products: WooCommerce lets you sell digital downloads of all kinds. From MP3s to event tickets, if the product is digital, you can sell it through WooCommerce.
Subscriptions: With the WooCommerce Subscriptions add-on, you can accept recurring payments for subscription products, whether they be digital or physical. You can charge renewal payments on a weekly, monthly, or annual basis.
Of course, just as with any other eCommerce platform, there are restrictions on what you can sell with WooCommerce. WooCommerce’s terms and conditions forbid you from using the service “in furtherance of illegal activities” such as copyright infringement. Likewise, WooCommerce Payments has a list of services and product types you cannot sell, such as drug paraphernalia, firearms, and adult content. While you can always use a payment gateway other than WooCommerce Payments, other gateways are likely to have similar policies.
How Does WooCommerce Work?
We’ve established that WooCommerce is a WordPress plugin. This means that in order to install WooCommerce, you’ll need to buy WordPress hosting and install WordPress first. Once you’ve done this, you can install the free WooCommerce plugin. Once you’ve done this, you’ll have the tools necessary to build a basic eCommerce site — all for free.
The following is a partial list of what you’ll get for free:
Mobile-Friendly Design: Because WooCommerce-powered online stores are designed to work well on mobile devices — on your end and on the customer’s end — your customers can shop on the go, just as you can manage their orders on the go.
Geo-Location Support:Â Geo-location detects your customersâ addresses to streamline shipping and tax calculations.
Organize Your Products: WooCommerce lets you group your products by category, add variations to each product, and sell affiliate products.
Inventory Management: WooCommerce’s free package includes built-in inventory management. Track your stock level, hold the stock when an order gets canceled, and hide out-of-stock items from your storefront.
Shipping Options: You can offer a shipping calculator on the shopping cart page, insuring there are no surprises at checkout. Let customers choose between pickup, local delivery, and shipping.
Search Engine Optimization:Â Benefit from WordPressâs built-in SEO best practices.
Checkout Options:Â Allow your customers to create an account on your site or check out as guests. It’s always a good idea to give your customers both options.
However, to get the functionality you’ll need to run a profitable online store, you’ll likely need to explore the many feature extensions available for WooCommerce. Many of these require a paid subscription, though you can find some decent free ones as well. You may also want to explore the many custom themes available, both free and paid.
The Benefits Of WooCommerce
WooCommerce is a supremely adaptable and scalable eCommerce platform. This is the core of WooCommerce’s appeal and goes a long way to explain the platform’s widespread popularity. You can start out with a basic free online store, and once your store finds its sea legs and/or you need a wider range of features to expand your business, the WooCommerce extension ecosystem stands ready to take your store to the next level.
Another point in WooCommerce’s favor is the fact that it is open-source. If you and/or your team has web development experience, you can edit the code to customize your store with a great degree of precision.
Finally, WooCommerce’s popularity is, in itself, an asset, as it means the WooCommerce community stands ready to help you with solutions to technical issues. Likewise, the community is continuously developing new features and add-ons to extend the functionality reach of the product.
Pros
Free to download and use
Lots of extensions and themes available, both in-house and third-party
Software is open-source, making it endlessly customizable
Scalable to accommodate your online store’s growth
Huge WooCommerce community stands ready to help you
The Drawbacks Of WooCommerce
While WooCommerce is designed to be usable even if you’re not a tech whiz, it’s not as easy to use as some competitors and can be challenging to learn. Expect to face some degree of difficulty as you tackle the learning curve. Thankfully, WordPress has a collection of tutorial videos available to walk you through setting up your store.
Another thing to keep in mind is that WooCommerce’s active customer support is quite limited. You can submit a web ticket to WooCommerce, though it may take a full day to get an answer, and you may need to disable your third-party extensions before the company can help you. Thankfully, you can always turn to the extensive WooCommerce community for assistance.
Lastly, though the core product is free, you may end up spending more than you anticipated on feature extensions, particularly if you purchase many of them as monthly subscriptions (some are priced as one-time purchases).
Cons
Steep learning curve
Limited customer support
Paid add-ons are often necessary
Who Should Use WooCommerce?
With WooCommerce being as scalable as it is, the product can easily meet the eCommerce needs of startups and mature businesses alike. Just make sure that you use a web host that can keep up with your bandwidth usage as you grow.
As for the type of business most suited for WooCommerce, the wide variety of extensions, themes, and payment processors available mean that just about any type of merchant can build a great WooCommerce-powered online store. Of course, being a WordPress add-on, it helps if you and/or your team has experience with WordPress. You’ll also be able to more easily extend your store’s functionality if your team has some web development expertise.
If you find WordPress intimidating, or if you just want a simpler eCommerce solution with an easier learning curve, an all-in-one eCommerce solution like Shopify may be more to your tastes. Shopify’s powerful SaaS platform does most of the heavy lifting for you, so those looking for a more straightforward selling platform may prefer it to WooCommerce. Of course, the flip side is WooCommerce’s open-source software gives you more flexibility and control than you’ll ever have with Shopify. So, which platform is best for your business? It all depends on your business priorities and needs.
Check out our WooCommerce VS Shopify article for a deeper look at this comparison.
How To Get Started With WooCommerce
By now, you know that you’ll need WordPress in order to use WooCommerce. WordPress comes in both a self-hosted version available from WordPress.org and a hosted freemium version available from WordPress.com (our WordPress review examines the latter version).
If you’re going to use the self-hosted version of WordPress, keep in mind that when choosing a web host for your online store, you’ll want to choose a host that specializes in WordPress hosting. This way, you’ll have hosting that is optimized for the needs of WordPress along with better technical support. Once you have a WordPress-friendly web host and you’ve bought a domain name, download and install WordPress (it’s free!).
If you’re going to use the hosted WordPress.com service, you won’t need to find a separate host, as hosting is included. You can then buy a domain from WordPress.com or connect any existing domain you already have.
Once you have WordPress, get yourself a WooCommerce-optimized WordPress theme (both free and premium themes are available) and activate WooCommerce. See WooCommerce’s installation guide for detailed instructions as to how to do this.
Once you have WooCommerce activated, you’ll have the option of adding functionality beyond what comes with the free WooCommerce package. From payment gateways to shipping to subscriptions to booking to marketing, you’ll have a seemingly endless array of options to make your online store exactly what you want it to be. Just keep in mind that while some of these feature extensions are free, many require a paid subscription, while some third-party add-ons are available for a one-time payment. Check out our article on the top WooCommerce add-ons to see some of the best extension options available.
The Bottom Line
If you want an online store that is truly yours — one that is entirely under your control and which you can customize to the nth degree — a WooCommerce-powered website is hard to beat. If your business is prepared to take on the challenge, WooCommerce’s offerings will empower you to create the eCommerce empire of your dreams.
To learn more about WooCommerce, head on over to our complete WooCommerce review. If, on the other hand, you don’t see WooCommerce working out for you, have a look at the leading alternatives to WooCommerce.
The post What Is WooCommerce & How Does It Work? appeared first on Merchant Maverick.
Worldpay is one of the largest merchant services providers in the industry and also a direct processor with a worldwide presence. Recent acquisitions have made the company even bigger, with an estimated $1.5 trillion in annual processing volume. Because of Worldpayâs commanding market share, many merchants eagerly sign up for an account with the company, thinking that âbigger is better.â After all, most of us do business with industry-leading companies all the time. We buy our smartphones from Apple, our cars from recognizable brand names such as Toyota or General Motors, and just about everything else from Amazon. Big-name brands can offer better selection, better customer service, and more competitive prices, right?
Well, no. Unfortunately, the merchant services industry doesnât work the same way as the technology, automotive, or retail sectors. Huge direct processors such as Worldpay can be a good deal for a large, well-established business that has the leverage and the negotiating expertise to hammer out a deal thatâs beneficial to both parties. However, small business owners frequently get stuck with the worst possible terms, including tiered pricing plans, long-term contracts with expensive early termination fees (ETFs), and sometimes outrageously overpriced processing equipment leases. Make no mistake — Worldpay and other large processors aggressively market to small businesses. The collective market share is simply too big to ignore. However, as an individual small business owner, you wonât get the kind of favorable terms and competitive prices that a large business can get. Youâll also struggle to get the companyâs customer service department to pay any attention to you.
For these reasons, many small business owners have quickly soured on the idea of having Worldpay as their merchant account provider. Weâve seen dozens of complaints against the company, both on consumer protection sites, such as the BBB, and in the Comments section of our Worldpay review. Unfortunately, closing a merchant account is never a simple process. Providers such as Worldpay go out of their way to make it as difficult as possible in the hopes of discouraging you from terminating your business relationship with them. In this article, weâll discuss why itâs so difficult to get out of a Worldpay merchant account contract and lay out the specific steps that youâll need to follow to do so successfully. Weâll also show you how to find a better provider and give you a few recommendations for you to check out.
The Trouble With Cancelling A Worldpay Merchant Account
In addition to the usual problems with high prices, long-term contracts, and poor customer service, one of the most persistent complaints that merchants have about Worldpay is that it is extraordinarily difficult and frustrating to get out of your contract and close your account once youâve decided to do so. Worldpay — and most other traditional processors, for that matter — seems to go out of its way to make it as difficult and inconvenient as possible to close a merchant account once youâve signed up, regardless of the circumstances. The company is counting on a steady stream of income from your business, and it doesnât want to give it up for any reason.
The following is a brief (and incomplete) list of problems that merchants have had in trying to close their accounts:
Missing Paperwork: The merchant submits a written request to close the account, but Worldpay claims it never received the request. The account remains open — often for many months after the closure request was submitted — and monthly fees continue to be deducted from the merchantâs bank account, even though the account is obviously no longer being used.
Disappearing Equipment: Merchants know that they have to return processing equipment, such as credit card terminals and POS systems, at the end of their contract unless they originally purchased them outright. Somehow, Worldpay frequently âlosesâ returned equipment in transit, giving the company an excuse to charge the full price for the missing equipment. If you leased the equipment, lease payments would continue for the entire length of the original leasing agreement, regardless of when your merchant account was closed.
Inability To Reach Customer Service: Once youâre on Worldpayâs radar as wanting to close your account (often through a voicemail or email requesting help in closing your account), you can be virtually assured that the company will never return your calls or respond to your emails again.
Closing Your Account By Telephone:Â Even if you do manage to reach a real person at customer service, be very wary if they allow you to close your account over the phone. Worldpay requires a written notice, which must be submitted within the required notice period to take effect. If a customer service representative offers to close your account over the phone without that notice, youâll likely find that your account was never really closed, and youâll continue to be charged all of your monthly account fees indefinitely until you figure out that this is happening.
Being Erroneously Charged An Early Termination Fee (ETF):Â Letâs be clear here: If you agreed to an early termination fee (ETF) as part of your contract when you opened your account, and you end up closing your account before the end of your current contract term, you will be charged an ETF as soon as your account is closed. However, if you obtained a written waiver to the ETF when you negotiated your initial contract, or youâre closing your account at the end of the current contract term, you should not be charged an ETF at all.
How To Cancel Your Worldpay Merchant Account In 4 Steps
So how do you properly go about closing your merchant account with Worldpay? Despite what you might think, the company canât legally keep you bound to your contract forever. It has to provide a procedure for terminating your contract and closing your account, and Worldpay has to honor it if you follow this procedure to the letter. Like most providers, instructions for closing your account are contained in your contract documents, usually in very fine print buried somewhere in the middle of the document, where Worldpay is hoping youâll never find them.
Believe it or not, Worldpay is actually a little more transparent than many other providers in this respect. An FAQ on the Worldpay website contains the following instructions:
In order to cancel your account, WorldPay requires that a 30-day written notice be submitted via fax or US mail. On the cancellation notice please verify the purpose of the account cancellation, along with the company name, 5 digit Account ID, signature of the primary contact on record, and an email address to which a confirmation can be sent. Please do not assume your account is cancelled until you receive confirmation via email.
While this information is accurate, it doesnât cover everything you need to consider before closing your account. Youâll want to review your merchant agreement carefully to find the full details of how to close your account. One key takeaway here is that you cannot close your account over the telephone. Worldpay, like most providers, requires that you submit your request in writing. While the company knows full well that this requirement makes it more inconvenient and time-consuming to close your account, having a written record of your request protects you as well. If you find that youâre still getting charged monthly account fees after you thought your account was closed, youâll have a written record of when your request was sent as well as proof that you provided all of the required information.
Weâd also note that the 30-day notice requirement is more or less the industry standard for account closures. Like most financial organizations, processors work on a 30-day billing cycle. You should expect that you might be billed for the month after you submit a request to close your account. However, you should protest any charges beyond that. Weâve seen other providers require a minimum notice of 60 or even 90 days before closing your account, which makes it that much harder to get your notice in before your contract automatically renews for another year. We strongly suggest that you pad the minimum notice period by as much time as you can to minimize any possible delays in mailing your written notice to Worldpay. For example, thereâs no reason why you canât send in the notice 45 days (or even earlier) before the end of your current contract term.
You also need to consider the reasons why youâre closing your account and whether youâre shutting it down at the end of a contract term or in the middle of one. Ideally, youâll want to time your account closure so that it occurs at the end of your contract term. Doing this prevents the contract from automatically renewing and absolves you of any responsibility to pay an early termination fee. However, if youâve decided to close your account before the end of your current contract term, you will probably have to pay the full ETF. If youâre closing your account to switch to a competing provider, thereâs no point in protesting the ETF. However, if youâre closing your business for good (as opposed to selling it or transferring ownership) and no longer need the account, you might be able to convince Worldpay to waive the ETF.
With these considerations out of the way, letâs examine the step-by-step approach youâll need to follow to close your account successfully:
1) Find Your Merchant Agreement
Contract documents relating to your merchant account are critically important, and we recommend that you keep both digital and written copies of all of them. Most contracts usually consist of a Merchant Account Application (which spells out pricing and terms unique to your account) and a Terms and Conditions section (which lays out the boilerplate provisions that apply to all merchants). You might also have separate documents for equipment leases and third-party services (e.g., payment gateways). You should also keep copies of any waivers granted by your sales representative when you initially set up your account.
2) Review Merchant Agreement For Termination & Account Closure Provisions
While the quote above from Worldpayâs FAQ gives a good overview of the account closure process, itâs not legally binding. Youâll want to review the full closure requirements contained in your original contract documents. Worldpay, like most providers, uses a variety of standard contract documents that change over time. Donât assume that a blank contract document you found on the internet is identical to the one that applies to your account.
In addition to identifying specific account closure procedures and requirements, youâll also want to determine your accountâs anniversary date. That is the date when your current contract term expires, and a new term will automatically begin if you havenât initiated the process to close your account. This date can be either the day you signed your contract, the day you first started using your account, or some other date as defined in your contract. Unfortunately, while providers go to great lengths to spell out how your anniversary date is determined in your contract, theyâre not so forthcoming about what date theyâre actually using for your account. A customer service representative should be able to provide this information for you, as your provider uses your anniversary date to determine when your contract automatically renews and when any annual fees are due.
Weâd also note that if you intend to continue in business with a new provider after youâve closed your Worldpay merchant account, the transition will be much smoother if you can have the new account set up and ready for use before your current account closes. That will prevent the unfortunate possibility of being unable to process any credit or debit card transactions while waiting for the new account to activate.
3) Follow Account Closure Provisions To The Letter
Once youâve nailed down your account closure requirements and determined your anniversary date, you need to follow those instructions to the letter. This is not the time to get sloppy. A missing signature, incorrect merchant account number, or any other errors on your part will almost certainly result in your closure request being rejected (or delayed just long enough for the automatic renewal clause to kick in).
We highly recommend that you contact customer service before initiating a closure request, even though theyâre not likely to be very helpful. While Worldpay appears to accept any form of a written request that contains the required information, many other providers will insist that you submit your request on a special form. This form wonât be included as part of your contract and wonât be available from the providerâs website. Instead, youâll have to ask for a copy and hope that the company sends it to you in time.
We also recommend that you print out your account closure request and submit it via Certified Mail. Emails can get lost or âaccidentallyâ deleted all too easily, but using Certified Mail gives you a record of when your letter was mailed as well as when it was received and who signed for it. You might need this information if the company later tries to claim that it never received your request.
Besides a written request, you might also need to return any processing equipment that doesnât belong to you. This mostly applies if you received a âfreeâ terminal as part of your initial merchant account setup. These terminals are provided for your use for as long as you keep your account open, but they remain under Worldpayâs ownership. Youâll need to send any such equipment back to Worldpay as soon as your account is closed to avoid getting charged the full value of the hardware.
Unfortunately, it isnât so easy to get rid of leased equipment. If you made the mistake of leasing your processing hardware, youâre pretty much stuck with both the equipment and the monthly lease payments for the duration of your leasing contract. If youâre switching to a new provider, you might be able to have the equipment reprogrammed to work with their processing system.
4) Monitor Account Statements & Any Additional Charges
Unfortunately, weâve received way too many complaints from merchants whose problems with Worldpay didnât end when they closed their accounts. As weâve discussed above, thereâs a possibility that youâll continue to be charged monthly (and possibly annual) account fees long after you thought your account was closed. The burden is definitely on you to monitor your account statements and your business bank account to catch any of these charges. While itâs normal to be charged fees during the month after your account is closed, anything beyond that should be brought to the companyâs attention immediately.
Worldpay promises to notify you by email when your account is closed, but you shouldnât assume that this is the final word. Any number of hiccups can occur that might prevent your account from actually closing. If this happens to you, your first course of action is to notify Worldpay immediately and provide all documentation related to your account closure request. If the unauthorized charges continue, we highly recommend that you file a complaint against the company with the BBB. Believe it or not, even huge companies such as Worldpay care about their online reputation, and theyâll usually be a lot more helpful in trying to resolve the situation once youâve gone public with your grievances. As a last result, if none of the above actions have worked, you may have to close your business bank account to stop the automatic withdrawals. We realize that this is a tremendous inconvenience, but itâs better than being charged every month for an account that youâre not using.
How To Find Alternatives To Worldpay Credit Card Processing
As weâve discussed above, merchants have found many reasons to leave Worldpay for a better (and more affordable) provider. The processing industry is extremely competitive, and providers are always trying to convince established businesses to switch to them from their current provider. Some companies will even offer to pay your early termination fee from your current provider if you sign up with them. While this might sound like a terrific deal, it usually is not. Why? Because nothing is ever truly âfreeâ in the processing industry, and any provider that will pay your ETF for you is almost always going to require you to agree to another long-term contract with them in exchange for this benefit.
So how do you find a better provider than Worldpay? We can help! Our article on how to choose a merchant service provider can guide you through the fundamentals of evaluating pricing, contract terms, and other considerations in selecting the best provider for your business. We recommend that you narrow your choices down to several of the best providers you can find and obtain quotes from each of them. Armed with this information, you can make an informed decision as to which one will (hopefully) offer you the best combination of fair pricing, flexible contract terms, and top-notch customer service for your business. There isnât a one-size-fits-all solution that works best for everyone, so bear in mind that a company thatâs good for a large, established business often wonât be a good choice at all for a small business. Once youâve decided on a provider, our article, How To Negotiate The Perfect Credit Card Processing Deal, can show you how to get the best terms from your chosen provider. Finally, if you have no idea where to start, our Merchant Account Comparison Chart provides a head-to-head comparison of some of the best merchant services providers in the industry.
Switching From Worldpay To Another Processor Isnât Easy, But It Is Possible
As weâve emphasized above, closing your merchant account is never an easy process, and providers deliberately make it as difficult as possible to discourage you from switching to a competitor. In this regard, Worldpay is no different from any other traditional provider that relies on long-term contracts to keep merchants on the hook for as long as possible. In fact, Worldpay’s willingness to accept a simple written request and offering to confirm your account closure via email puts the company slightly ahead of its competition.
However, you wonât have these kinds of problems in the first place if you sign up with a provider that offers true month-to-month billing with no long-term contracts to all their merchants. Many of our top-rated providers donât use long-term contracts or early termination fees at all, so closing your account is simply a matter of making a phone call or submitting a written request. You wonât have to worry about expensive cancellation penalties or continuing to be charged fees for months after youâve shut down your account.
If youâre unhappy with Worldpay — or any other provider — we recommend that you take a close look at your contract and see what it will really take to get out of it. Weâve outlined the steps above that youâll need to follow to put a bad provider behind you, hopefully without having to pay an exorbitant amount of money to do so. Good luck!
The post The Complete Guide To Switching From Worldpay To A Better Credit Card Processing Company appeared first on Merchant Maverick.
If you’ve been searching for a payment gateway, you’ve probably come across these two names: Stripe and Authorize.Net. Or heck, maybe you were just searching for a way to take credit card payments online, and these appeared near the top of your search results.
Both companies offer a powerful suite of payment services along with robust support for developers who want to integrate their services into their websites. Both companies provide excellent support for foreign eCommerce transactions.
While Stripe and Authorize.Net aren’t exactly the same type of company — Authorize.Net is not a “full-stack” payment service — it is possible to get most of the same services through either company.
Stripe VS Authorize.Net: Quick Comparison
Evaluating Stripe vs. Authorize.Net comes down to the sheer volume of features vs. flexibility.
Both Stripe and Authorize.Net provide payment gateway access, but Stripe does so as merely one part of a gigantic payment services package. Authorize.Net gives you the option of pairing its gateway service with any merchant account, potentially making it a better choice for businesses with established, stable merchant accounts. On the other hand, Stripe — which has no monthly fee — will probably be the more efficient option for newer businesses.
Features
I struggled with this one for a bit despite, at a glance, it being pretty obvious that Stripe is just a far more massive service than Authorize.Net. That begs the question of whether it’s a fair comparison. Stripe is designed to be a one-stop-shop for your payment processing needs. Authorize.Net focuses on a much smaller part of the payment processing environment. If it offered everything that Stripe does, it wouldn’t be Authorize.Net anymore. In fact, Stripe can be overkill for a lot of businesses, and if all you’re looking for is a payment gateway, it just doesn’t make sense to choose Stripe over Authorize.Net.
Authorize.Net has some niches where it excels, particularly where security is concerned, but let’s give credit where credit is due: Stripe can just plain do a lot more than Authorize.Net. From its more comprehensive support for global eCommerce to its more flexible development environment to its plethora of add-on features, it lives up to its “full-stack” claims.
Stripe Payments
Stripe is a powerful brand for international eCommerce. Stripe is available to businesses in 34 countries. The company’s reach, however, is significantly greater; you can accept payments from all over the world thanks to Stripe’s support of over 135 currencies and numerous regional payment methods.
Stripe Supported Payment Methods
Stripe breaks its support for payment methods into two categories: universal, for payment types accepted throughout the world, and local, for payment methods that are only supported in specific regions, with particular attention given to the US, European, and Chinese markets.
Stripe accepts the following universal payment types:
Alipay
Apple Pay
Google Pay
Microsoft Pay
Amex Express Checkout
Masterpass by Mastercard
Visa Checkout
WeChat Pay
Stripe supports these payment methods in their markets:
ACH
Bancontact
EPS
Giropay
iDEAL
Klarna
Multibanco
P24
SEPA Direct Debit
SOFORT
Stripe Core Features
Listing all of Stripe’s features would make this article unreadable. It’s an enormous ecosystem, with numerous optional features. Here’s a quick rundown of the main features:
Payments:Â Stripe Checkout is a prebuilt form that you can just drop into your site. But if you need something more customizable, Stripe Elements will let you design a form that suits your needs. You can build payments into your website or your mobile app.
Connect: Stripe’s Marketplace tools are some of the most robust out there, allowing you to build and manage your platform, including automated payouts to your merchants. Connect also facilitates connecting Stripe to other services (such as building native payments into eCommerce software).
Billing:Â “Billing” now encompasses all of Stripe’s subscription, invoice, and recurring billing tools. Stripe’s subscription tools have always been powerful, but with the addition of invoice capabilities and the option for metered billing, it’s safe to say that you really can’t beat what Stripe has to offer.
Additional Stripe Features
Sigma: Stripe offers an assortment of standard reporting tools in its dashboard. However, if you want advanced reports, then you’ll need Sigma. For an additional monthly fee (based on volume, see the Pricing section below for more details), you can generate custom reports based on SQL queries.
Radar:Â Stripe’s fraud monitoring tools include machine learning to identify and flag suspicious transactions. Merchants can review and override transactions they know to be legitimate or set up custom rules for fraud transactions, all with far less fuss than you’ll see with Braintree. If you’re very comfortable with fraud management, this is definitely an advantage.
Multi-Currency Displays & Conversions:Â Stripe has spent a LOT of time billing itself as the platform of choice for global businesses. It should come as no surprise then that Stripe allows merchants to display pricing in local currencies and automatically handles the currency conversion. You can connect multiple bank accounts to save money on conversion costs, too.
Account Auto-Updater:Â Keep recurring transactions from failing when customers get new cards. Stripe will automatically update card data in your vault to ensure continuity of subscriptions.
Atlas:Â Atlas allows international businesses to incorporate in the US, set up a US bank account, and get tax and legal guidance. Stripe says it has had more than a thousand startups apply in more than 120 countries, and it has added more than 100 partners to the network since the launch.
Payouts: This is an automation toolset designed to help you send mass payouts to sellers, freelancers, or service providers. It’s also designed to help simplify compliance requirements with third parties and global markets.
Relay:Â Relay’s features allow merchants to link their eCommerce catalogs with your app or directly upload product information. Relay creates in-app buy buttons and forwards all the sales information to the merchants to fulfill the order.
Integrations: Stripe has more than 300 integrations with all kinds of other software and services that a business might need. The sheer number of supported integrations could be a significant advantage for some merchants. You can browse the integrations by category on Stripe’s “Works With” page.
Stripe Developer Tools
Stripe’s built a reputation on being extremely developer-friendly, and, to be fair, it’s largely earned it. Stripe’s SDK is easy to work with for novices and extremely customizable for experts. Stripe’s documentation is also second-to-none, with detailed tutorials, clone-able boilerplates, and support for mobile platforms.
Stripe supports the following server-side languages:
Go
Java
.NET
Node.JS
PHP
Python
Ruby
Authorize.Net
Authorize.Net’s business support isn’t quite as widespread as Stripe’s; it’s only available to merchants in the United States, Canada, United Kingdom, Europe, and Australia. Its currency support is also more limited. Authorize.Net supports different currencies, depending on the region in which your business is located.
US & Canada: USD, CAD
The UK & Europe: CHF, DKK, EUR, GBP, NOK, PLN, SEK, USD
Australia: AUD, NZD, USD
Authorize.Net Supported Payment Methods
Authorize.Net supports the following payments methods:
Visa
Mastercard
Discover
American Express
JCB
PayPal
Visa Checkout
Apple Pay
Chase Pay
eCheck payments
Authorize.Net Core Features
Authorize.Net’s feature set is considerably smaller than Stripe’s, but at their core, they do many of the same things.
Payment Gateway:Â If you’re working with Authorize.Net, you’re there for the payment gateway. Or even more likely, the payment services company you signed up for is using Authorize.Net as its gateway. It is, however, possible (though not necessarily advisable) to work from the other end and sign up directly with Authorize.Net, in which case the company can help set you up with a merchant account through one of its partners. Just be aware that, unlike Stripe, the merchant account isn’t in-house.
Virtual Point Of Sale, Mobile Point Of Sale & Simple Checkout: Authorize.Net offers ways to accept cards both on the web and through mobile devices. The virtual terminal also allows you to key in card information manually. Authorize.Net is integrated into a dizzying number of third-party shopping carts through Simple Checkout, which allows you to generate HTML snippets for “Buy Now” and “Donate” buttons to add to your website easily.
Billing:Â Authorize.Net allows you to process recurring subscription payments and permits you to not only customize pricing but also offer free trials and installment packages.
Authorize.Net Additional Features
Advanced Fraud Detection Suite (AFDS):Â Included for free with your account, AFDS consists of a set of thirteen filters that you can customize to your own needs to help flag and block potentially fraudulent transactions. This feature helps to prevent inventory loss due to fraud and lowers your liability for chargebacks. While Stripe’s security features are nothing to sneeze at, Authorize.Net’s have a reputation for being some of the best in the business.
eCheck.Net: This is an optional feature. You can add echeck processing to your existing merchant account or sign up for the eCheck Only Pricing Plan. Pricing is 0.75% per echeck, a much lower rate than you’ll pay for credit or debit card transactions.
Customer Information Manager (CIM): The CIM, one of Authorize.Net’s most powerful standard features, allows you to securely store customer information, such as billing address, shipping address, and payment method information. Because this includes your customers’ sensitive credit card information, the data is securely encrypted. As we’ve noted, however, this security comes at the expense of data portability (see Negative Reviews & Complaints).
Sync For QuickBooks: While a QuickBooks integration is fairly standard these days, it’s still nice to have and will keep your accountant happy, especially if that accountant is you.
Authorize.Net Developer Tools
Authorize.Net also has a healthy developer subculture with excellent online resources and the option to create a sandbox account in which to test out your code. It doesn’t support quite as many languages as Stripe, but where the two overlap, you’ll probably see variable preferences from developer to developer.
Authorize.Net supports the following languages:
PHP
Ruby
Java
C#
Python
Pricing
Both Stripe and Authorize.Net offer similarly priced services, although making a direct comparison isn’t easy. For purposes of this comparison, I’m only looking at the costs of features the two companies have in common. If you want a complete look at Stripe’s pricing, check out our guide.
If you take Authorize.Net up on its merchant account partnership offer, you’re looking at identical flat-rate transaction costs for both Stripe and Authorize.Net. Beyond that, you have to dive into the secondary fees. If you process a lot of subscriptions, you may incur a processing fee with Stripe. On the other hand, Stripe’s chargeback fees are $10 less. International transactions are more expensive with Authorize.Net unless you need to do a currency conversion, in which case Stripe is more expensive.
And then there’s the gorilla in the room: You can buy Authorize.Net as a humble gateway service without any of the other bells and whistles. With Stripe, if you want to use the gateway, you’re also getting the payment processing bundled up with it.
What ultimately breaks the tie in Stripe’s favor is its lack of a monthly fee. Stripe’s fees are almost entirely usage-based, making it easier to get a sense of where you’re getting value and where you’re not. By comparison, if you’re interested in Authorize.Net, it’s often cheaper to get it bundled with another service than directly from the company.
Authorize.Net Fees & Transaction Costs
Authorize.Net breaks its services into three plans:
All-In-One (includes a merchant account with one of Authorize.Net’s partners)
Monthly Gateway Fee: $25
Per Transaction: 2.9% + $0.30
Payment Gateway Only
Monthly Gateway Fee: $25
Per Transaction: $0.10, daily batch fee $0.10
Enterprise Solutions (for companies processing over $500K/year)
Contact Authorize.Net for pricing info
International transactions cost an additional 1.5%. Chargebacks cost $25 per occurrence. Note that, should you choose the All-In-One package, you may be subject to additional fees associated with the merchant account provider you are paired with.
Stripe Payments Fees & Transaction Costs
Since Stripe has a lot of add-on features that Authorize.Net does not, we’re going to ignore those for purposes of this comparison and just compare pricing for those features that they both offer.
Card Transactions:Â 2.9% + $0.30
Subscription Fee:Â 0.4% after the first $1 million
Stripe charges $15 per chargeback incident. International transactions cost an additional 1%, with another 1% added on if currency conversion is required.
Ease Of Use
Both companies are reliant on a mix of do-it-yourself developer culture and third-party services that integrate Stripe or Authorize.Net into their product.
Starting with the first case, as we touched on above, both companies offer extensive documentation for developers who want to add payment functionality into their websites and apps through the services’ APIs. Stripe’s documentation, support, and interfaces feel just a little more extensive and modern than Authorize.Net’s, but your mileage may vary.
Some users report that Authorize.Net is a little bit faster on average when it comes to payment processing time (one to seven business days vs. two to seven business days).
On the third-party side, your ease of use will depend entirely on the method of integration you’re using, for example, a shopping cart such as WooCommerce. With most of these services, activating your payment gateway is pretty simple, just tweaking some toggles and entering security keys; the challenge with most of these is mastering the eCommerce environment more than the payment integration.
Customer Service & Support
Both Authorize.Net and Stripe offer numerous ways to resolve problems should they arise.
Authorize.Net offers:
Phone Support: This avenue of support is available 24/7, minus major holidays.
Support Center: The online resources include a knowledgebase, articles, white papers, and video tutorials.
Ticketing System:Â You can open a support case online through the integrated ticketing system.
Social Media: You can reach out to Authorize.Net on Facebook, LinkedIn, and Twitter. You can also check out video tutorials and customer testimonials on YouTube.
Stripe offers:
Phone Support: This avenue of support is available 24/7.
Live Chat: This is also available 24/7 to customers.
Knowledgebase & Documentation: Stripe’s documentation is the gold standard. Developers will have no trouble here, whether they’re searching for a term or clicking through the sidebar. The knowledgebase is a little more sparse but serviceable.
Email: Stripe offers 24/7 email support but doesn’t give an exact time frame on how quickly someone will get back to you.
Freenode IRC Chat: Stripe’s developers seem to spend their time in the #stripe channel if you need technical assistance. Unsurprisingly, most developers seem to like this aspect of support.
While Stripe offers more methods of contact, Authorize.Net seems to have a better reputation for quick, responsive, and useful customer service. Stripe’s made efforts to improve — including offering phone support — but it still has some ground to make up.
User Reviews, Complaints & Criticisms
Both Stripe and Authorize.Net have avoided any scandals grave enough to drop their BBB ratings below an A+, though both do register a fairly typical spread of complaints. They tend to garner similar scores on various review aggregators, with a few outliers here and there rating one substantially higher than the other.
Stripe High Points
Pricing:Â While it’s not the cheapest possible option, it does offer a lot of functionality for the price.
Global Utility:Â Stripe is a truly international platform, giving businesses the ability to conduct eCommerce all over the world and in different currencies.
Freedom & Control:Â Stripe’s API allows for great flexibility for developers and makes it a good fit for various integrations.
Stripe Low Points
Account Holds & Terminations:Â Like all third-party processors, Stripe ends up doing a lot of its due diligence after the fact, which means it’s easy to run afoul of its opaque quality control processes. Most user complaints about Stripe fall into this category.
Lack Of Fraud Protection: While Stripe’s security features are strong, most of the advanced ones cost extra, leaving some users more exposed to chargebacks than they’d like.
Unresponsive Customer Service:Â While Stripe’s customer service is much improved, many customers were frustrated by Stripe’s inability to resolve or contextualize sudden account holds and terminations.
Authorize.Net High Points
Recurring Billing Support: Many users were pleased with how easy this feature was to activate and use.
Flexibility:Â Between Authorize.Net’s robust API and the ability to pair the service with any merchant account, users were generally happy with the amount of freedom it offered them.
Customer Service:Â Many positive user reviews involve good experiences with Authorize.Net’s customer service.
Authorize.Net Low Points
Billing Issues:Â Most of the complaints you’ll see about Authorize.Net revolve around that pesky monthly fee. The timing of the monthly payments seems to cause confusion for a number of customers, resulting in disputes over what interval of time they were paying for.
Non-Refundable Fees: Related to the previous issue, customers found it difficult to recover fees for which they believed they were wrongly charged. Be aware that if you sign up for an account online, you will be charged the gateway fee.
Data Portability:Â Authorize.Net has a reputation for being a difficult platform to migrate from, although some of this appears to be due to issues that have been at least partially addressed.
Integrations
If you’re running your credit card through any eCommerce site, there’s a very good chance it’s passing through a Stripe or Authorize.Net gateway. The number of integrations for both services is staggering, and both can be easily plugged into most eCommerce environments with just a few lines of code. In general, you should have very little trouble getting either to play nice with the program of your choice.
Since we are splitting hairs, however, it’s worth mentioning that Stripe is just a bigger fish in the pond, possessing a higher market share and more widespread adoption. That translates to more integrations, should you need to work with something more niche and obscure. But again, both are extremely well-supported.
Which Is Best For My Payment Gateway Needs?
We’ve arrived at the moment of truth. If you’ve been following along until now, you probably already have a sense of the recommendations I’m about to make. If you’re impatient and skipped to the end, and who can blame you, here are my recommendations.
Choose Stripe Payments If…
You Need Payment Services In Addition To A Gateway:Â Stripe works best as a comprehensive, all-in-one platform offering both a payment gateway and third-party payment processing. It delivers the gateway functionality at the same per-transaction cost as Authorize.Net and without the monthly fee.
You’re Doing Business Globally:Â Authorize.Net’s support for foreign transactions is good, but it’s not anywhere near as extensive as Stripe’s. Stripe supports local payment methods in addition to the popular international brands and can handle over 135 currencies.
Choose Authorize.Net If…
You Already Have A Merchant Account You Like:Â If you’ve been taking card payments for a while and are pleased with your merchant account provider, you won’t be able to take it with you if you migrate to Stripe. On the other hand, you can simply add Authorize.Net onto your existing services.
You’re In A “High-Risk” Industry:Â Because it’s a third-party processor, Stripe isn’t keen on taking chances with industries that are flagged as high-risk. As a payment gateway, Authorize.Net has far fewer restrictions regarding the types of businesses it’s willing to partner with (just make sure your merchant account provider is also cool with your industry).
Neither Option A Good Fit For You? Try These Alternatives To Stripe & Authorize.Net
Stripe and Authorize.Net are both excellent gateway options, but they’re not the only ones. If Stripe has too much bloat and Authorize.Net feels too much like a clumsy add-on, consider one of the following options.
PayPal
If you’re looking for a Stripe alternative with brand name recognition, PayPal’s a no-brainer. PayPal covers most of the same bases as Stripe. It’s a third-party processor/gateway combo that plays nice (even better, arguably) with international markets. Like Stripe, it’s a sprawling platform with tons of optional buy-ins. Just be aware that it doesn’t support recurring billing.
Square
Square is another popular “full-stack” payment services provider. Compared to Stripe and PayPal, Square is a bit more focused on brick-and-mortar transactions, offering a wide variety of productivity-related functionality as well as POS hardware. Square supports eCommerce, but don’t expect the international support that Stripe offers.
Payline Data
It may not be a household name, but Payline Data is one of our favorite merchant account providers here at Merchant Maverick. It offers stable merchant accounts with interchange-plus pricing, not to mention its own proprietary payment gateway free of additional charge.
Comparing Authorize.Net & Stripe Payments: The Final Verdict
The battle between Stripe and Authorize.Net comes down to a big hearty buffet vs. a tasty side dish that can be served with almost any meal. Newer businesses that don’t want to add unnecessary complexity will probably prefer Stripe’s comprehensive payment services. Veteran businesses with stable merchant accounts that want to add gateway functionality may appreciate the flexibility Authorize.Net offers them.
If you’re scratching your head over a lot of the terms used throughout this post, don’t feel bad; payment processing is a very confusing industry. If you want to learn more about it, start with our complete guide to getting a merchant account. You may also want to read more about what a gateway is and how it fits into accepting payments online.
The post Stripe VS Authorize.Net: Which Is Better? appeared first on Merchant Maverick.
Here at Merchant Maverick, weâre constantly advising you to read your contract before you sign up with a merchant account provider. Why? Because this is the most important step in the process of negotiating an agreement with a provider. No matter how much time youâve spent obtaining quotes from multiple providers, researching each company, and negotiating with an agent for the company youâve chosen, none of it will matter if the legally binding documents that define every aspect of your relationship with your merchant account provider donât match up with what you were promised by the companyâs sales agent. Failing to read contract documents and understand what youâre really agreeing to can be an extremely frustrating and expensive mistake. In fact, a poor understanding of the terms of a processing agreement is the most common cause of issues that arise between merchants and their providers.
Reading your contract safeguards you in three major ways:
It protects you from unscrupulous sales agents who fail to disclose important contract terms, or even lie about the costs or obligations contained in a contract.
It gives you a clear understanding of almost every possible cost that you will or could be responsible for as long as you maintain your account.
Most importantly, it gives you your last and best chance tocall the whole thing off and back out of the deal before youâve signed up if you find that the actual terms of your contract are simply unacceptable to you.
In this article, weâll explain what merchant agreements are, how theyâre structured, and how to identify and interpret the most important clauses youâll find in them. Weâll show you examples of common verbiage that describe the length of your contract, how to cancel your agreement, and any penalties that might apply for doing so. Weâll identify common red flags that indicate that your sales agent isnât being honest with you, and give you some strategies for dealing with this all-too-common problem. Finally, weâll show you how to get out of a bad deal if youâve already signed up for an account, and things just arenât working out between you and your provider.
What Is A Merchant Agreement?
A merchant agreement is simply a document (or, more likely, a collection of documents) that establishes a contract between you, the merchant, and your merchant services provider. A contract, in turn, is an agreement between two parties that establishes the expectations and rules of behavior governing the relationship between them. Thatâs actually the simple definition â contracts have been around for hundreds of years and there is an entire branch of the law devoted to them. Despite what you may have heard, verbal contracts can be legally valid, although theyâre extremely difficult to enforce if a dispute arises between the parties. Today, most contracts are written, and they govern practically every aspect of modern life. From obvious examples such as automobile loans to those End User License Agreements (EULAs) that pop up whenever you install a new app on your phone, contracts are everywhere.
Unfortunately, weâve become so inundated with contracts that we rarely take the time to sit down and read them. Now, you might be able to get away with this when installing the latest trendy social media app (assuming you donât mind letting the company sell your personal data to advertisers, of course), but itâs a really, really bad idea when it comes to merchant services. Why? Because the sales agents that are tasked with selling merchant accounts have learned over the years that itâs much easier to convince you to sign up for an account if they conveniently forget to mention or explain certain terms — terms you might not be comfortable with if they were brought to your attention. These terms include (among other things) early termination fees that penalize you for closing your account, liquidated damages clauses that make it even more expensive to get out of your contract, automatic renewal clauses that keep you obligated to your provider indefinitely, and the fact that your equipment lease (if you have one) is completely and utterly noncancelable. Plus, thereâs a host of âhiddenâ fees that your sales agent might have neglected to tell you about but that are spelled out â often in very, very fine print â somewhere in your contract.
Before we dive into the nuts and bolts of understanding your contract, letâs begin by explaining that every merchant services provider will have a contract that governs your relationship with them. This includes popular payment service providers (PSPs) such as Square (see our review). So, if you see a provider claiming that they have âno contractsâ on their website, be aware that what they really mean is that you wonât have a long-term contract that commits you to keeping your account open for years at a time.
Depending on which provider you sign up with, your âcontractâ may actually include agreements with more than one party. Obviously, there will be an agreement between you and your provider. However, you might also have an agreement that applies to the relationship between you and the backend processor that will be processing your transactions. If you make the mistake of signing up for an equipment lease, there will usually be a separate (and even more draconian) agreement that only covers your leased processing equipment. The leasing of credit card machines has earned such a poor reputation in the business community that most large processors have spun off subsidiaries (wholly owned by the main company, of course) to handle these leases. Lastly, your contract might also include separate agreements with third-party service providers, such as payment gateway providers, etc.
Can You Negotiate A Merchant Services Agreement?
If youâve read this far and are starting to wonder whether itâs really worth it to open a merchant account at all, we have some good news. Unlike many other vendors or service providers you deal with in your everyday life, most merchant services providers will allow you some leeway to negotiate the exact terms of your contract. In other words, you wonât necessarily have to accept the first offer you receive from a prospective provider. In fact, many providers assume that you will try to negotiate a better deal, and set their prices higher than what theyâre really willing to accept. In this case, failing to negotiate for lower rates and more favorable terms can be an expensive mistake.
Hereâs what Jeff Marcous, the Chief Evolutionary Officer of Dharma Merchant Services (see our review) had to say about merchant services agreements:
The merchant agreement issue is definitely complex and is pretty much dictated by the acquiring banks of the MSP/ISO. For our part, we have to go along with the boilerplate terms set down by either Wells Fargo or Synovus Bank, but we do have authority to delete certain clauses â like termination fees, etc. It’s kind of like clicking on the terms of agreement for an iPhone update â if you or I actually read (and understood it), we would probably gasp at what is being agreed upon, but of course, you could not continue to use their services even if you pushed back on something.
That said, probably the most important thing is for an agreement to explicitly offer the ability for the merchant to cancel at any time without penalty. Even then, the processor has the right to keep an account “open” for a period of time in order to process any chargebacks or malicious activity on the account.
Now, before you start salivating at the prospect of customizing your entire contract to your liking, you need to be aware that your ability to change the terms of your contract is quite limited. In fact, roughly 90% of the terms of your contract consist of standard boilerplate terminology that will be the same for every merchant, regardless of which provider youâre using. For example, you canât change the rules set forth by the credit card associations (e.g., Visa or Mastercard) that are restated in your contract. Likewise, youâre extremely unlikely to get a waiver on arbitration clauses or clauses that specify a choice of jurisdiction for disputes. However, many of the most critical aspects of your contract are, in fact, negotiable. These include the following items:
Early Termination Fee (ETF) Or Liquidated Damages Clauses:Â These clauses are the most common terms in a merchant services contract to be waived through negotiation. No one wants to be hit with a penalty for closing their account, and providers are often eager enough to get your business that theyâll waive the ETF as an inducement for you to sign up with them. A word of warning is in order, though. Never rely on a verbal waiver promised to you by your sales agent. Always get a written waiver, and keep a copy of it for your records. Weâve heard far too many complaints from merchants who were promised a waiver, but then had the ETF automatically taken out of their bank accounts later on because the sales agent never passed the waiver information along to anyone else at the company.
Contract Length:Â Although theyâre falling out of favor, the standard merchant account agreement today still usually requires an initial commitment of three years. However, you can often have this term waived if you ask for a month-to-month arrangement instead. Be aware that having a waiver to the early termination fee does not mean that your three-year term is automatically waived also. These two terms are often contained in separate clauses to your contract, and youâll want written waivers to both of them to protect against being automatically charged recurring fees after youâve closed your account early.
Processing Rate Plan:Â Although we consider tiered pricing to be the worst possible processing rate plan for merchants, itâs still the most commonly used type of pricing in the industry. Why? Because most merchants donât know the difference between tiered pricing and interchange-plus pricing, which is both more transparent and more affordable. Many merchant services providers will try to set you up with tiered pricing, even though they also offer interchange-plus plans. Donât fall for it! Always ask for an interchange-plus pricing quote, and be prepared to find a different provider if it isnât offered to you. Note that if your provider of choice offers flat-rate or subscription-based pricing, or uses a standardized interchange-plus rate based on your monthly processing volume, you might not be able to negotiate a custom pricing quote unless your processing volume is extremely high.
Some Fees:Â Donât get too excited here. Merchant account providers charge a host of recurring and incidental fees, all of which should be disclosed somewhere in your contract. While some of these fees can be reduced or eliminated through negotiation, many others cannot. For example, you can always count on having to pay chargeback fees, monthly account fees (although you can sometimes lower the amount), and any fees that your provider has to pass on to issuing banks or credit card associations (e.g., Visa FANF fees). Fees that can be waived or reduced include application fees, account setup fees, statement fees, and your monthly minimum.
Your ability to change the terms of your merchant services agreement will depend primarily on both the size of your business and your negotiating skills. Providers make more money and are exposed to less risk by working with larger businesses that have established processing histories, and so theyâre more likely to adjust their offer to get one to sign up. Small or newly-established businesses, on the other hand, donât have these advantages and often have to take what they can get. However, you can still improve your negotiating skills and use them to your advantage, regardless of the size of your business. Check out our article on negotiating your credit card processing deal for some helpful tips.
What About Square & Other Payment Service Providers (PSPs)? Do They Have A Contract?
Square (see our review) and other PSPs are very popular with small business owners because they allow you to set up an account through their website without having to submit a small mountain of information about your business and wait for an underwriting department to go through it all before approving (or denying) your account. Approval is quick and, in most cases, nearly automatic.
But do they have a contract? As weâve emphasized above, thereâs always a contract. In this case, Square has conveniently posted their standard Terms of Service right on their website. Unlike most merchant services agreements, itâs relatively short and written in plain English. We highly encourage you to read it before you decide to sign up with Square. The only downside to this approach is that you canât negotiate the terms of a one-size-fits-all contract like this. However, since Square already offers month-to-month billing, no monthly fees, and fully disclosed flat-rate pricing, there really isnât much to negotiate anyway.
The Most Important Parts Of A Merchant Agreement (For A Merchant)
As weâve mentioned above, most of the content in a merchant agreement will be nearly the same from one provider to the next. However, this wonât make the job of deciphering your contract any easier. No two merchant agreements are identical. Every provider has their own way of organizing their contract documents, and some providers even have multiple versions of their contracts, depending on which backend processor is underwriting your account.
Merchant agreements can run anywhere from as few as four pages to over 60 pages, depending on how theyâre organized and how many additional agreements are included with them. At a minimum, you can expect your agreement to include two distinct parts: a Merchant Application and a set of Terms and Conditions. You might also have one or more Third-Party Agreements as well, either incorporated into the main document or published separately. Hereâs a breakdown of what to look for in each part of your agreement:
Merchant Application
Before you can open a credit card processing account, youâll need to fill out a Merchant Application. This document, often only one or two pages in length, collects information about you and your business. Besides obvious facts such as what industry youâre in and whether you operate out of a retail location or sell online, youâll also have to provide reasonable estimates for what percentage of your sales are in cash, by credit or debit card, or via another payment method. You might also need to provide enough financial information for the provider to run a check on your personal credit.
One word of caution is in order here: providers often ask for information about your business bank account, including account and routing numbers. While they legitimately need this information to deposit funds from your credit card sales into your account, they can also take money out as well. Unscrupulous providers can sign you up for a merchant account without your knowledge and begin extracting any number of fees immediately, even if you donât process any credit card sales. We recommend that you wait to provide this information until youâve read your contract thoroughly and are certain that you want to open an account with your chosen provider.
Merchant applications also provide a space to lay out all the information that will be unique to your account in one location. This will include all applicable processing rates and recurring fees that vary from one merchant to the next. Incidental fees, which are typically the same for everyone, will usually be found somewhere in the Terms and Conditions portion of your contract. Hereâs a sample Merchant Application from CardConnect to give you an idea of what to expect.
Merchant applications arenât as chock full of legalese as the Terms and Conditions section of your contract, but itâs still critical to review them very carefully. One particularly important thing to look for is the presence of mid-qualified and non-qualified processing rates. This is a sure sign that your sales agent has signed you up for an expensive tiered pricing rate plan. Sales agents have a bad habit of only verbally disclosing the qualified rate for your plan, without mentioning the mid-qualified or non-qualified rates. These rates are much higher, and today most of your credit card transactions will fall into one of these two types of rates instead of the lower qualified rates.
Terms & Conditions
Just as the Merchant Application contains all the information that applies specifically to your account, the Terms and Conditions section of your contract includes all the stuff that applies equally to every merchant account maintained by the provider. And itâs a lot of stuff. Terms and Conditions sections invariably run for many pages and include a tremendous number of rules and policies that govern how you use your account, all spelled out in exacting legalese that can be painfully difficult to read. Some providers have started to call this section a Program Guide, perhaps in an effort to make it sound a little less daunting. Most of the information contained here is industry-standard, with very little real variation from one provider to another. However, there are also some really important policies buried in here that can have a serious impact on your relationship with your provider. The most important things to look for in the Terms and Conditions are going to be clauses that define the length of your contract term, the automatic renewal clause (which will usually be included), early termination policies, and instructions for properly closing your account. You should also familiarize yourself with clauses that require you to submit to mandatory arbitration or specify a choice of jurisdiction in the event that you find yourself in a legal dispute with your provider.
Contract Length Clauses
How long is your contract? Your sales agent should answer this question for you in detail before you sign up, but itâs not unusual for them to conveniently âforgetâ to do so. The typical, industry-standard merchant agreement has an initial term of three years, or 36 months to align with your accountâs monthly billing cycle. While a three-year initial term is the most common, weâve seen contracts where this term is as short as one year, and occasionally as long as four (or even five) years. Automatic renewal clauses extend the term of your contract, typically for an additional twelve months at a time. Again, thereâs some variation among providers, with subsequent terms ranging from six months to two years at a time. Note that Canadian law limits contract extensions to no more than six months at a time.
Long-term contracts have always been unpopular with merchants, as they make it very difficult to get out of your contract if you want to switch providers. The trend within the industry now favors month-to-month billing, which is much more flexible. Be aware, however, that you are still under a commitment even with month-to-month contracts. Look for verbiage in your Terms and Conditions that specifies an initial term of 30 days, with automatic renewal periods of an additional 30 days at a time thereafter. With no early termination fee imposed, month-to-month contracts allow you the freedom to close your account at practically any time without penalty. At most, you might have to pay recurring fees for one additional billing cycle.
Early Termination Policies
One of the worst aspects of merchant agreements is when providers impose an expensive penalty for closing your account before the end of the current term. The most common practice is to charge a fixed early termination fee (usually between $295 and $495), regardless of how much time is remaining on your current contract term. Some providers will offer proration based on the number of years left on your contract, which lowers (but doesnât eliminate) the penalty if you stay with them for over a year or two. In some cases, providers will use a liquidated damages clause instead of a fixed fee. Liquidated damages are based on a combination of your average monthly processing volume and the length of time remaining on your contract. A liquidated damages clause can potentially be very expensive, particularly if you have a high monthly processing volume and close your account within the first few months of opening it.
When you read the early termination provisions of your contract, one aspect that will probably upset you the most is the dramatically unequal way in which early termination applies between you and your provider. While you, the merchant, are contractually obligated to keep your account open for years at a time and pay a host of recurring fees, whether you use the account or not, your provider can close your account unilaterally at any time for practically any reason. While theyâre highly unlikely to do so as long as theyâre making money off of your business, a sudden closure could leave you without the ability to accept credit or debit cards until you can line up a new provider.
Account Closure Instructions
While lengthy contract terms and automatic renewal clauses are designed to keep you on the hook indefinitely, it is possible to close your account without penalty. Every merchant agreement contains specific instructions for closing your account. Providers donât make it easy, but if you follow the directions in your contract very carefully, you can terminate your contract at the end of the current term without being charged an early termination fee or liquidated damages. Almost all providers require written notice of your intent not to renew your contract, provided within a specified number of days before the end of your current term. Unfortunately, providers often make it difficult to find out the exact date of your contract renewal, so youâll want to pin this down and send in your notice well in advance of the minimum required period. Providers typically require 30 daysâ notice, although weâve seen some contracts where the required notice period was as long as 90 days prior to termination. You should also beware of providers that require that the notice be submitted on a special written form, which they jealously guard and will only provide to you upon request.
Hereâs an extract from an old Sage Payment Solutions (now Paya) contract that includes examples of all the clauses and terms weâve discussed above:
 Clauses Affecting Legal Disputes
Although they donât happen nearly as often as you might expect, legal disputes between merchants and their providers are always a possibility, and providers will attempt to protect themselves by including language in their contracts that makes it more difficult for you to pursue this kind of remedy. Usually located near the very end of your Terms and Conditions, youâll almost always find a few provisions that cover any type of legal action you might wish to pursue.
Mandatory arbitration clauses are the most common kind of limitation youâll find, and theyâre a standard feature of almost all merchant services agreements today. These clauses simply require you to submit to mandatory arbitration in lieu of filing a lawsuit. In most cases, courts will send you to arbitration prior to hearing your case anyway, so these clauses donât have much impact on your ability to pursue a legal remedy.
Choice of jurisdiction clauses are also included in every merchant services contract today. In almost all cases, the provider will limit jurisdiction to courts in the state where their headquarters is located. While this doesnât prevent you from pursuing legal action against them, it can throw up a significant roadblock if you donât live in the same state. Youâll be responsible for any costs you incur traveling to court appearances, depositions, etc. While we donât recommend that you choose a provider based solely on geographic proximity to your place of business, you should be aware of the impact this kind of contractual limitation can have if you end up trying to sue your provider.
Third-Party Agreements
If your merchant account includes a product or service provided by a third party, youâll have a separate agreement with that party included as part of your contract documents. Payment gateways and equipment leases (which you should avoid) are the most common examples of these additional agreements.
Third-party agreements may be separate documents, or they may be included within the body of your Terms and Conditions. For example, if you need a payment gateway and your provider uses Authorize.Net (see our review) exclusively, youâll have an agreement that applies between you and Authorize.Net.
With equipment leases, many providers will use a separate company to provide the equipment and administer the lease. In most cases, this âcompanyâ is actually a wholly-owned subsidiary of the provider, often located at the same physical address. Be aware that the length of your equipment lease is separate from the initial term of your merchant account agreement. In fact, itâs often longer â keeping you on the hook for monthly lease payments even if you close your merchant account at the end of the initial term.
Standard Credit Card Processing Fees: What To Look For & Where To Find Them In Your Contract
As weâve discussed above, your merchant agreement will define the type of processing rate plan you have and identify the rates that apply to your account. Rate plans can be flat-rate, tiered, interchange-plus, or subscription-based. Unfortunately, most providers donât spell out exactly which type of rate plan youâre on in their contracts (particularly if youâre on an expensive tiered plan). You will almost always find this information in the Merchant Application section of your agreement. Make sure that your agent fills this section of the agreement out completely before you sign anything. Processing rate information can get complex very quickly, with separate rates for credit cards, debit cards, ACH payments, American Express cards, etc. Youâll want to know which rates apply to your account and the circumstances under which each rate will apply to a given transaction. For help in identifying your processing rate plan type, see our article on identifying your pricing model on your processing statement.
Be aware that interchange fees will not be disclosed on your merchant agreement, even if youâre on an interchange-plus pricing plan. These fees are set by Visa, Mastercard, and other card brands, and are usually updated twice a year. See our article on interchange fees for more information.
Your Merchant Services Agreement Could Contain Hidden Fees
In addition to processing rates, your merchant account will be subject to a bewildering number of recurring and incidental fees. Rest assured that these fees are all spelled out somewhere in your contract. Finding them, however, can be a challenge. Most fee information will be filled out in the Merchant Application section of your contract documents. The Terms and Conditions section, on the other hand, rarely discloses fee information unless that amount charged is identical for all merchants using that provider. Chargeback fees, for example, are often disclosed and discussed here. Be aware that some providers will include clauses in their agreements that allow them to change or modify other fees not disclosed in the contract, at their discretion. For an in-depth discussion on merchant account fees, see our post on credit card processing rates and fees.
Seven Red Flags That A Sales Rep Is Pressuring You Into A Merchant Agreement Scam
Nowhere is the credit card processing industry sleazier and more dishonest than in the sales practices it employs to sign merchants up for accounts. Many providers lower their costs by relying on independent sales agents, who often work on a commission-only basis, and need to sell accounts to put food on the table. While there certainly are honest, experienced people working as independent sales agents, the truth is that youâre more likely to encounter an agent whoâs more than willing to take some ethical shortcuts in order to close the deal and sign you up for an account. Hereâs a rundown of the most important âred flagsâ that can help you to identify and steer clear of a dishonest agent whoâs basically scamming you:
The agent fails to disclose that the contract contains an early termination fee. This is the most common complaint from merchants whoâve had a bad sales experience. Agents know that you donât want to have to pay an ETF if you later decide to close your account, so they simply âforgetâ to mention it unless you directly ask them about it. In extreme cases, agents will outright lie, claiming that the contract doesnât include an ETF, when itâs clearly spelled out in the Terms and Conditions.
The agent offers a verbal waiver of the early termination fee, but doesnât provide it in writing. Never rely on the verbal assurances of a sales agent! Agents are quick to promise you a waiver just to get you to sign up, but unless you have written proof to back it up, you could still be liable for paying the ETF down the road. In fact, some providers explicitly state that verbal agreements are not part of your contract. While this provision is meant to protect them from false claims by merchants, it also gives sales agents complete freedom to lie to you.
The agent fails to disclose the terms of the leasing contract. Few, if any, merchants would ever agree to a lease if they understood the noncancelable nature of the leasing contract and the true cost of the lease relative to the value of the equipment provided. Our best advice is never to lease your equipment. If you find yourself short on cash and tempted by the apparently low monthly lease payments, read your leasing contract before signing up. That should be sufficient to change your mind about entering into a lease.
The agent pressures you to sign the agreement before youâve had an opportunity to review it. This is a very common tactic in the processing industry. Agents know that you might back out of the deal or attempt to renegotiate the terms if you actually read the fine print, so they apply tremendous pressure to get you to sign up right away. The latest trick weâve heard about is agents physically coming into retail locations with iPads and other tablets to collect digital signatures from merchants without giving them an opportunity to review the documents. Donât fall for it!
The agent pressures you to sign the Merchant Application without telling you that doing so can actually bind you to a contract. Because the Merchant Application is used to collect information about your business, itâs easy to fool merchants into thinking that itâs just an application. Itâs not. The Terms and Conditions section of the contract does not require a signature, so an agent can submit your signed Application to underwriting without you ever seeing the Terms and Conditions. If itâs approved (and it usually will be), youâre now stuck in a long-term contract.
The agent fails to provide a physical or digital copy of contract documents. This is becoming more of a problem as providers migrate toward using web-based signup processes and digital signatures. Often, an agent will promise to send a merchant a physical copy after the account is approved, but then fail to do so. Do not let this happen to you! As a minimum, you should keep digital copies of all your contract documents. If the agent has written anything onto a paper copy of the contract (such as crossing out the early termination clause), keep a physical copy as well.
The agent forges your signature onto your contract documents and submits them to underwriting without your knowledge or consent. Yes, this actually happens â even though itâs a violation of criminal law and the agent could end up with a felony conviction and a prison sentence if he or she gets caught. Unfortunately, these incidents are rarely reported to the proper authorities for investigation. What usually happens is that the agent gets fired, and the provider quickly releases the merchant from their contract.
What To Do When Your Credit Card Processing Agreement Has Failed
Being stuck in a long-term contract might not seem so bad when your business is humming along, but things can go south very quickly for a number of reasons. Maybe your processor has raised your rates, or youâve had a bad experience with customer service. Maybe youâve found a better provider with lower rates and no long-term contracts. Maybe you just need to close your account because youâre retiring, shutting down your business, or selling it. Whatever the reason, early termination fees and automatic renewal clauses can make it difficult to exit your agreement without paying a substantial penalty. Unfortunately, providers donât like losing customers and are rarely sympathetic to whatever legitimate reasons you might have for leaving.
Unless itâs an emergency situation where you need to get out of your contract immediately, we recommend that you wait until the end of your current contract term and close your account by following the specific instructions contained in your contract. The aim here is to give your provider sufficient notice that you wonât be renewing your contract, so it doesnât auto-renew, and you wonât be assessed an early termination fee. Providers are notorious for making this process as difficult as possible, but as long as you get the ball rolling ahead of time, you should be able to submit the proper documentation and provide the required notice to terminate your contract.
If youâre only a few months into a long-term contract and itâs obvious that things just arenât working out, closing your account without penalty will be more difficult. Providers are usually more willing to work with you in situations where the business is closing or changing hands, but if youâre just trying to switch to a competitor, theyâre not going to help you out. However, the processing industry is so competitive that some providers will offer to pay your early termination fee for you if you switch to them. Just be aware that if you do this, youâre almost certainly going to be trading one long-term contract for another. If youâre going to switch providers, we recommend that you switch to a company that will offer you true month-to-month billing with no long-term commitment at all.
Finally, if youâve had a really bad experience with your provider and they wonât let you out of your contract, you should consider filing a complaint against them with the BBB. Despite all the shady practices commonly found in the processing industry, merchant services providers are just as sensitive about their reputations with the public as any other business. Weâve seen plenty of situations where an aggrieved merchant went public with a BBB complaint, and the provider quickly released them from their contract and refunded their early termination fee.
Your Merchant Agreement Is A Contract, Not A Death Sentence
If youâve read this far, you might be starting to wonder if accepting credit cards and having a merchant account is even worth the effort. For most businesses, the answer is clearly yes. With customers increasingly relying on credit and debit cards for nearly all of their purchases, the additional sales that come with having a merchant account will usually more than make up for the hassle and expense of setting one up. The real trick, of course, is to identify and sign up with the provider that can offer you the best combination of low fees, reasonable contract terms, and high-quality customer service.
Unfortunately, the processing industry is simply not the sort of place where you can expect everyone to be honest and treat you fairly. People in this business can and will take advantage of you â if you let them. Reading your contract before you sign up is your last line of defense against being stuck in a bad deal. With that in mind, here are some practical tips for actually reading your contract without missing anything important:
Pick a time when youâre rested and alert. You should plan to devote at least an hour to this chore, although it might take as many as 3-4 hours if youâve never done it before.
A cup of coffee or tea can help you to maintain your focus while wading through all the legalese. Save any celebratory adult beverages for after youâre finished.
Highlight key sections of your contract and take notes. This advice especially applies to the termination clauses of your contract. If needed, contact your sales agent for clarification of any provisions that you donât understand.
Obtain a digital version of your contract (usually in PDF format), if at all possible. You can magnify the fine print to a size thatâs actually readable and use the search function to find important terms quickly.
Keep a physical copy of your contract if one is provided, especially if it includes changes made by your agent (such a waiver of the early termination fee). This action can protect you in case a dispute arises later regarding the terms of your contract.
First-time business owners should read every word of their contract and make sure they understand it fully. More experienced merchants can carefully skim through the boilerplate provisions and focus on the important clauses that weâve discussed above.
We highly recommend that you read your contract thoroughly regardless of which merchant services provider youâre about to sign up with. Even with the most reputable providers, youâll want to have a clear understanding of the obligations youâre undertaking when you sign your contract. At the same time, itâs important to understand that most of the problems weâve discussed above will not be an issue if you sign up with a top-notch provider. The best providers in the industry fully disclose their pricing and contract terms on their websites, rather than burying this information in the fine print of a contract. They also employ in-house sales teams who arenât under pressure to earn a commission.
Finally, our favorite providers all offer true month-to-month billing with no long-term contracts and no early termination fees. Check out our Merchant Account Comparison Chart for a side-by-side comparison of the best providers in the industry!
The post How To Read, Understand, & Successfully Negotiate A Merchant Agreement For Your Small Business appeared first on Merchant Maverick.
So you want to start a subscription box company. I bet you’ve come here with questions, and if so, you’re in the right spot! We’ve got answers, inspiration, and plenty of resources ready for you to check out. Keep reading to discover how you to find niche subscription box ideas that will turn heads, how to keep your company running like a well-oiled machine, and how to reach more customers and expand your business once you launch. Let’s get going!
Step 1: You Need An Interesting Subscription Box Idea To Succeed
How will you find that amazing idea to dazzle your would-be subscribers? In part, the foundation of a successful subscription box company is that extra something that sets you apart. Interestingly, one of the most successful boxes in the last few years started with a regular old hygiene product we all probably purchase. I’m thinking about what the Dollar Shave Club did with a simple self-care item: the razor. Their campaign used visual textures, packaging, and smart, fun messaging to connect with potential subscribers. While they initially marketed to men, their brand has grown to target both men and women. The idea is that people sign up to save on a razor (something everyone needs anyway) and soon enough they’re adding non-essentials to their box as well. While you might have more of a whimsical idea than just a plain razor, this company shows that anything is possible with the right planning and execution.
There are a lot of exciting possibilities out there, so get a notepad out, grab a refreshing beverage, and let’s explore how to create a very successful subscription box business.
14 Subscription Box Business Ideas To Get You Started
The sky is the limit when it comes to curating a subscription box. It’s true that subscription boxes are becoming a competitive market, but that doesn’t mean you can’t reach a particular group with a new angle. As we saw with the Dollar Shave Club, sometimes it’s the simplest ideas that take off when coupled with a good message and imagery.
First, you’ll want to figure out your target audience and demographic and do the needed research on these folks. Will your box provide convenience, discovery, whimsy, and/or special interest? Here are some general ideas to help you narrow down the focus and come up with something unique for your subscribers:
Gourmet foods, exotic snacks, coffee, tea, candy, etc.
Pregnancy and baby
Arts and crafts
Gaming and “geek” interests
Fitness and health
Curated clothing and accessories
Educational
Self-care and pampering
Inspirational / encouraging
Romantic gift-giving
Beauty and grooming
Kids’ toys
Pet care and toy
Home (plants, cleaning, candles, art)
If you are feeling inspired, keeping brainstorming those ideas and write them down — you’ll need them for the research and discovery steps coming up. Keep reading to find out what you need to know to expand your business or start a brand-new business based on the subscription box model.
Step 2: Before You Start Planning In Earnest, Make A Business Plan
A business plan acts as a blueprint for success. It keeps you on track, aligns your goals, and helps you cover the basics. You’ll also need a business plan should you seek out funding or investors for your subscription box endeavor. The most important person this business plan serves is you, however.
Of course, you’ll need to do some more preliminary research and get your ducks in a row before creating your plan, but it certainly does not have to be complicated. We suggest starting with a lean business plan, which is a one-page document that follows this basic structure:
Business overview
Objectives
Experience
Target market
Your competition
Financial summary
Marketing strategy
If you need a little more direction, check out our post, The How-To For One Page Business Plans
Research The Competition & Check Out Other Subscription Box Companies
As a part of your business plan, you’ll want to research the competition. The best way to start that is via a Google search. Go through the first few pages and click through the businesses there. The most important thing you can learn here is the average price point. You also can find product ideas there, but it’s more useful to identify what’s not in those boxes so that you can provide a unique angle.
Step 3: Consider How To Fund Your Subscription Box Business
There are several ways to go about funding expenses. You’ll need to consider a few things to help you assess what exactly you’ll need here.
Will you be paying the full price for some or all items?
Can you source wholesale to save costs?
Can you approach local artists or specialty shops for unique and specially priced inclusions?
Can you reach out to pitch suppliers for special pricing or free samples (more on this later)?
You can certainly do a combination of the above list. But whatever you decide, you’ll need to cover initial costs in marketing, setup, shipping, and inventory. Once you have an idea of what’s going in the box and your costs to fill it, then you can consider how you’ll go about funding the business.
Here are some options to consider:
Borrow money with a startup loan.
Use funds from advanced orders from subscribers.
Utilize a business credit card.
Another approach is to start small and limit quantities initially so you can cover your own costs. By doing this you can reduce your financial risk, not to mention create some urgency in the sale thanks to limited inventory.
Should You Crowdfund Your Subscription Box?
You could think about crowdfunding your fledgling business idea. Crowdfunding certainly has its advantages, along with some unique challenges. For one, you’ll need to devote marketing dollars to outreach and exposure for your campaign. And with that, you’ll need to lead with a great story to stand out and get attention. The best part of all this strategy, however, is that if you get your backers to support your start-up costs, you can reduce your debt and gain supporters while you’re at it. This strategy would likely be best for unique, cause-related, and highly niche ideas, as you’ll have the most potential for excitement from your backers.
There are several types of crowdfunding and (even more platforms to choose from), but rewards-based crowdfunding is likely the most appropriate choice for your subscription box business. Interested in exploring this option for your business? For more ideas and information on crowdfunding, check out Crowdfunding for Startups: 8 Tips For Launching.
Step 4: Seek Out A Supplier For Your Subscription Box Service
You’ve got a few options on how you’ll actually fill your box. You could choose to purchase directly from a wholesale company, pay full-price, or use a combination of both. For some or all of your products, initiating a long-term relationship with a supplier becomes the smartest option.
You can start finding some amazing things for your subscription box by networking and establishing good relationships with vendors, suppliers, or artists. Those of you who focus on unique or one-of-a-kind items will particularly need to get relationships going with specialty shops, sellers at trade shows, local artists, and crafters. Etsy can be a wonderful source for contacting niche and specialty item sellers in all kinds of categories — not just handmade items. Many sellers would be more than happy to supply samples or a discount, and some may even be open to sharing in exchange for exposure.
If you end up creating a full website for yourself (more on that coming up), make it easy for vendors to get in touch with you through a dedicated page and instructions for how to submit a request. While you may not be fielding a lot of inquiries when you launch, get it set up so you’re ready to respond to those requests when they start pouring in.
Why You Need To Perfect Your Pitch Before You Talk To Suppliers
We recommend creating your one-page business plan (discussed in Step 2) before approaching suppliers. If you already have an email list or social following, lead with these resources; suppliers will be more than happy to work with you if additional exposure to their product is in the mix. Whether you’re asking for sample sizes or a discount, remember that transparency, a good plan, and confidence in your approach will go a long way in your pitch.
Step 5: Build Your Web Presence & Customer Service Channels
You can approach selling your subscription boxes online a few different ways:
Hire a firm or freelancer to build a fully custom site.
Integrate a shopping cart with an existing site.
Choose an eCommerce platform including a site builder with website templates and a payment gateway all in one (e.g. Shopify, Read our review).
Sell via social channels only with a Facebook Store or Instagram Shoppable posts.
If the website part makes you a bit nervous, I have some good news for you. It really has never been easier to sell online — with little to no experience or technical expertise — by going with a website builder. Some platforms even offer all-in-one solutions with payments (including recurring billing), website templates, and a plethora of integrations for easier shipping and tracking built right in, too!
Where To Find eCommerce-Friendly Website Builders
Because they are both feature-rich, easy to use, and provide a lot of room to scale, we recommend Shopify and Square to business owners who are starting from the ground up with little to no tech expertise. And for those that do have coding expertise, you’ll have customization tools at your disposal, too! What makes me most excited about Shopify is that it enables multi-channel selling across platforms, including Facebook stores, Facebook Messenger, Instagram, and Amazon. With these options, you can take advantage of more opportunities for growth while meeting potential customers where they’re hanging out anyway. And what I love is that everything including your inventory and reporting is all synced no matter where you sell!
Whether you’re looking for just a shopping cart integration or a full all-in-one platform, I recommend checking out The Best eCommerce Platforms For Your Small Business as you can compare options side-by-side and get a lot more information regarding what to look for to match what you need.
I will leave one final thought in regards to eCommerce website builders â take advantage of any trial periods or demos to give yourself time to play around and explore your possibilities.
Why Your Choice Of Payment Processor Matters
Your payment processor is how you’ll actually accept payments, so this is an important business consideration. If you’re a fledgling entrepreneur, you’ll likely find yourself below the monthly volume of what many traditional payment processors serve.
Third-party processors like Square, PayPal, and Stripe (the backend processor of Shopify) make it possible for smaller businesses to start taking payments, and they provide an exhaustive set of (oftentimes free) tools to help you manage your business. This convenience comes at a cost however: an increased risk of account freezes if you have an uptick in chargebacks or your account is considered higher risk.
Regardless of what type of merchant account you go with, however, you will have this risk, unfortunately. That’s why we recommend arming yourself with knowledge. Check out How To Keep Your Payment Processor From Holding Funds Or Terminating Your Account.
So what should you look for in a merchant account? Here is what you can keep in mind as you research companies:
Product Features: What comes with the account? Are there any beneficial add-on services like email marketing? Reporting tools?
Recurrent Billing: Allowing your customers to save and automatically be charged is a must!
ACH: Automatic bank transfers can lower your processing costs, and it’s another payment method to offer your customers.
Forms of Payment: Some payment flows like Shopify Payments let you easily add PayPal and digital wallets to your checkout.
Card Automatic Updating: This feature can prevent billing issues and ensures you don’t have to chase someone down for updating billing information if their card expires or gets replaced.
Check The Contract: Always read your contract! We recommend merchants avoid long-term contracts as they are often also laced with lots of fees.
Customer Service: It’s important to get the help you need when you need it. Companies that have several active customer service channels and generous customer service hours are a must for the eCommerce subscription box business.
Check out some of our top picks in payment gateways for online payment processing in our post The Best Payment Gateways For Online Payment Processing.
Solving The Customer Service Question
The customer service issue can also happily be solved with the right eCommerce platform, too. For instance, many web builders, like Wix, for instance, now include chatbots that allow you to communicate in real-time to field any incoming questions. Some companies direct their customers to send any order issues or inquiries via Facebook Messenger. If you’ve linked a Facebook business account with Shopify, for example, you can take advantage of order tracking as well. Of course, there are always reliable phone and email options. Whatever you decide, make it clear how your customers can contact you, along with the expected response time.
Regardless of customer service channels you ultimately choose, we suggest making it easy for your subscribers to alter their box or skip a month. Enabling them to easily skip a month may feel like losing a sale, but you’ll likely retain them for longer (and keep them less frustrated).
Step 6: Build A Marketing Plan To Draw In Customers
Getting a marketing plan down on paper is an absolute must, but it doesn’t have to be as overwhelming as it sounds. The subscription box biz is a bit competitive at the moment, and that’s where being savvy and making the most of the opportunities you already have can go a long way.
Social Media Marketing For Your Subscription Box
Social media can work wonders to establish your brand and get people excited. Follow the strategies below:
Start Posting Regularly: If you already have followers on social, you’re at an advantage, but if you don’t, consider building your following by posting regular content, tagging larger accounts, and networking.
Test A Paid Social Ad: If you’re up to it, I recommend testing a sponsored post or two to get people excited during your pre-launch focus and beyond. Facebook advertising is a very cheap way ($20-30 bucks) to get in front of potentially thousands of people, and your ad will go to Instagram automatically, too. It’s also easy to target your campaign (even down to niche interests).
Excite With a Giveaway: A giveaway is a tried-and-true method of increasing your footprint with every post! Ask your followers to tag friends, share, and direct them to your site to sign up with an email. You increase your reach exponentially while building an email list of people who are interested in you. It’s a win-win.
Tap Into Influencer Marketing: Whether you have a lot of followers or not, an inexpensive way to boost your brand is through influencer marketing. By offering your box to an established YouTube personality in exchange for a shout-out or review on their page, you can reach potentially thousands with your brand name. Influencers will likely be happy about to devote some screen-time to your sub box, as it’s not always easy coming up with fresh content.
Email Marketing For Your Subscription Box
If you already have an established business or a robust email list, email marketing is a great way to promote your subscription box service. Email is still one of the cheapest and easiest ways to advertise new products and services. I love that Square offers this as an add-on service for only $15/month and includes analytics, templates, and targeting.
Don’t have a list? Consider reaching out to another local business and paying a small fee for a shout-out in their next newsletter. Make sure you create an email form on your site to make it easy for people to show their interest in your box. You could even use a credit card number to reserve a spot for a limited quantity of boxes before you’ve even launched! Fanning the flames of FOMO (fear of missing out) is never a bad idea in marketing.
To get the most bang for your buck when it comes to emails, check out How To Create A Successful Email Marketing Strategy (all skill levels).
Step 7: Create A Strategy For Headache-Free Shipping & Fulfillment
There are two major pathways to take with shipping and fulfillment: doing it yourself or outsourcing fulfillment. Of course, the size of your operation and your budget are factors, as well as logistical and space considerations.
Creating a strategy that gets your boxes out on time is key, but you are probably looking for the lowest possible overhead and tools that can help you save time. There are a plethora of integrations that work with Shopify and other eCommerce platforms to make it easy to print labels and ship from your home.
When it comes to costs, your shipping fees can vary widely depending on what’s in your box, size, and materials you need. In your planning stages, do research on which carriers are most economical and if it’s best to use multiple carriers. Most importantly, when it comes to packing up your goodies and shipping out your subscription box, keeping everything protected and beautiful (not to mention eco-friendly) goes a long way in customer retention. The truth is that when you’re starting out, you’re building your reputation one box at a time.
Thankfully, we have a library of comprehensive and easy-to-digest resources to help you find the right solutions and make the best choices for your business. For answers to questions about shipping and fulfillment, check out our posts, 8 Hacks For Saving On Shipping Costs and Learn To Delegate: What It Means To Outsource Your eCommerce Fulfillment.
5 Tips To Keep Your Subscription Box Business Growing
Create Referral Campaigns:Â Make the time-tested and powerful technique of word-of-mouth advertising work for you through a referral campaign. All you need to do is incentivize current subscribers to refer your box to their friends and family. Whether that’s through a bonus box or a few extra treats in their next shipment, those who successfully recruit friends and family to your brand deserve some celebration!
Stellar Customer Service:Â Nothing creates a solid reputation better than stellar customer service. To be the best, it’s not just about answering inquiries or solving problems, it’s about being proactive and listening to your current customers. Send them an email and ask them how they like their box, make amends right away for any issues (even if they weren’t your fault), and generally bring a “service with a smile” approach. Turning a customer into a brand ambassador is the ultimate sign of customer loyalty, and providing excellent care is how you’ll accomplish it.
Check Your Reports & Recognize Trends: Whatever eCommerce platform you go with, take advantage of any and all reporting and insights. Is there a certain geographical area that stands out? A peak time of year for sales growth? What is your “deadzone” in terms of new signups? Knowing the answers to these questions can help you target marketing and encourage growth through marketing when you need it most.
Identify Opportunities & Always Be Closing:Â Knowing what your customers love most about your boxes and looking at your sales reports gives you key insights into what items to purchase for upcoming boxes and new opportunities for growth. Once you have established customers, consider offering related or additional products that you know they’ll get excited about (because you’ve done your research). Remember Dollar Shave Club’s expansion from just the humble razor to a full line of personal care products? You want that potential growth for your business, too! Whether that’s through expanding into a new niche, identifying a new under-served market, or just boosting your sales with your current subscribers, always be closing!
Understand Cash Flow & Plan Ahead:Â Absolutely essential for any small business, including your subscription box company, is knowing your cash flow. You’ll need to figure out your cash flow so that you can make better decisions about your finances. To do this, you must understand how to create a cash flow statement, which breaks down your operating cash flow, cash flow of investments, financial activities, and net cash flow. We make this easier to understand and show you what tools can help in our post, How To Calculate & Analyze Business Cash Flow.Â
Are You Ready To Launch Your Subscription Box Company?
Launching a successful subscription box service requires some smart legwork, including researching your potential customers, curating irresistible products, buzz-building advertising, and structuring a plan of action. With the right eCommerce tools and a well-thought-out business plan, you can whittle down what feels like a giant, overwhelming project into something that’s more manageable.
For more startup resources, check out Small Business Startup Loans: Your 8 Best Options and The Beginner’s Guide To Starting An Online Store.
The post How To Start A Subscription Box: 7 Steps To Launch A Thriving Business appeared first on Merchant Maverick.
Unless you’re really paying attention, Stripe can almost seem like a conspiracy: it’s everywhere — but not always in plain sight. The truth is, Stripe is a “full-stack payment processor,” which is a fancy way of saying that it serves as both a third party payment processor and a payment gateway. What this means is that Stripe allows your business to process credit and debit cards, as well as automated clearing house (ACH) transactions, both online and offline.
Founded in 2010, Stripe now powers the transactions of some of the biggest brands out there, including Lyft, Under Armour, Blue Apron, and Pinterest. In fact, the company claims that 89% of all credit cards have been processed on a Stripe network at some point. With the ability to handle 135 currencies, it’s a common solution for companies that do business internationally.
Stripe has a tremendous amount of potential power under its hood, but not every business will have the resources (or even the need) to utilize everything it can do. Read on for an in-depth look into how Stripe works and what it can offer your business.
How Does Stripe Work?
Stripe Payments is a payment processing platform. It allows you to transfer money from a customer’s bank account into your business’s account by way of a credit or debit card transaction. That’s a pretty simplified explanation, but we’ll get more into the nitty-gritty details later.
While Stripe can be used for all kinds of transactions, chances are you’re considering it because you’re looking for an eCommerce solution. Keep reading for a comprehensive overview of how Stripe works in an online retail setting.
Stripe Payments Tools For Online Businesses
To process online transactions you need both a payment gateway and payment processor. The gateway securely captures and transmits the customer’s credit card payment information to the processor, which then actually processes the transaction. Funds from the customer’s bank are then temporarily routed to a merchant account (in this case of a third party processor like Stripe, it’s an aggregated account — more on that later), where credit card-related fees are deducted from the sum. The payment is then routed to the merchant’s bank account. It’s actually a lot more complicated than that if you want to dive down the rabbit hole, but for our purposes, this works as a general overview.
Stripe combines gateway functionality and payment processing, making it a convenient (if not necessarily the cheapest) way to handle eCommerce. Now let’s take a look at how Stripe makes it happen.
Stripe Developer Tools
Stripe bills itself as a developer-friendly solution:
We believe that payments is a problem rooted in code, not finance. We obsessively seek out elegant, composable abstractions that enable robust, scalable, flexible integrations. Because we eliminate needless complexity and extraneous details, you can get up and running with Stripe in just a couple of minutes.
Stripe’s online developer resources are certainly impressive and, unlike many of its competitors, they’re completely public, so you can get a sense of the work involved in setting it up.
You’ll need two pairs of keys to use Stripe’s REST API: one for testing, the other for when you go live. You can find them in your Stripe Dashboard under Developers —> API Keys. You can toggle between Live and Test keys once your account is activated.
Stripe plays nicely with popular server-side languages/frameworks, with particular care given to Ruby, Python, PHP, Java, Node.js, Go, and .NET. The minimal setup up for Stripe is actually pretty simple and, if you’re using a pre-built checkout like Stripe Checkout, is probably manageable for developers with limited experience (we’re talking less than 15 lines of code to test the API call).
The first thing you’ll need to do is install the language-appropriate Stripe library. You can do this with package managers like npm for Node.js, pip for Python, etc. From there, it’s just a matter of setting your API keys and creating an object containing your payment intent with properties for amount, currency, payment method, and the email address the receipt will be sent to. If you’re successful, Stripe will return an object containing transaction details.
From here, Stripe stops holding your hand quite so tightly and instead offers a few different paths you can take to build your eCommerce page (or in the case of Stripe Checkout, integrate it into your page).
The guides are all as concise as the basic setup guide, with plenty of code snippets and links to other relevant parts of the Stripe Docs. If you don’t want to start from scratch, you can clone one of many existing boilerplate projects through GitHub.
Stripe Plug & Play Setup Using Integrations
Did your eyes glaze over on the previous section? Understandable. Not every business is going to have access to a developer. While Stripe itself is developer-focused, there are ways to work it into your payment processing pipeline without having an in-house tech team:
Contract with one of Stripe’s partnered developers.
Use a pre-built eCommerce solution that supports Stripe integration.
You’ll see a lot of familiar names if you consider the second option. Let’s use WooCommerce as a case study. (The exact process with other integrations may be a little different, but the big commonality is that you’ll need to enable Stripe via two keys provided by the processor.)
WooCommerce exists both as a WordPress theme and an integration that can be plugged into other WordPress themes. Make sure you’ve installed WooCommerce’s Stripe Payment Gateway plugin. Once you have, you’ll find the necessary settings under (wait for it) WooCommerce —> Settings in your CMS sidebar. Click over to the Checkout tab and then look for the Stripe submenu link.
You’ll then have the option to Enable/Disable Stripe and make custom fields for your shopping cart. At this point, you can Enable Test Mode to try out the test credit numbers provided by Stripe. You’ll need your Test Secret Key and Test Publishable keys to do so (if you disable Test Mode, the plugin will instead ask for the Live versions).
From here, there are a few options you can enable or disable at your taste, including the ability to automatically capture credit card information or have to manually authorize it (beware, you have a limited window to do so), use Stripe Checkout’s prebuilt fields and assets, enable Apple Pay, enable payment via saved cards, and set languages. Note that card data is saved to Stripe’s servers, not yours, which should be a relief to you.
And that’s about it. You can start accepting eCommerce payments with Stripe! While this kind of set up doesn’t involve any coding, be aware that you’ll still need some familiarity with navigating your website’s CMS and submenus. Luckily, most of the bigger pre-built shopping carts have a wealth of tutorials online that should get you through the most commonly encountered problems.
Is Stripe Safe For Customers?
Stripe has a reputation for taking security very seriously, and it appears to be well-earned. Stripe is a certified PCI Service Provider Level 1, which means it meets the most stringent security standards in the industry.
Stripe uses HTTPS for all services using TLS(SSL), even for their public website and dashboard. Credit card numbers are encrypted, with decryption keys stored on separate machines.
That said, nobody’s perfect. Stripe offers an incentive program to anyone who identifies a qualifying security-related bug and reports it to Stripe’s security team. Major bugs earn a minimum $500-reward. Lesser vulnerabilities may be rewarded a minimum of $100.
If you’re still concerned about fraud, Stripe does offer an advanced fraud detection service called Radar. Radar will probably be overkill for most businesses, but it uses machine learning to predict the likelihood that any particular transaction is fraudulent by factoring in data from your business and information Stripe has about the card being used. Radar is free with accounts paying the standard Stripe fee, or as a $0.04/transaction add-on. You can also buy chargeback protection for a 0.04% fee per transaction.
You can also utilize standard fraud prevention tools like address verification service and CVV checks.
Why Stripe Is Great For International Businesses
If you’re considering Stripe over a more cost-effective solution, there’s a good chance it’s because you’re interested in selling across international borders. Stripe markets itself as the premier payment services company for international business and, while its claim to the throne is debatable, it’s definitely a contender.
Stripe is available in 34 countries. That is, it’s available to merchants whose businesses are based in those countries, but it can accommodate over 135 different currencies. Better still, if the charge currency (yours) differs from the customer’s credit card currency, Stripe can convert the payment to your currency for a small fee based on daily mid-market exchange rates. You can avoid the currency conversion fee if you have a connected bank account that uses the credit card’s currency.
Another nice feature for international businesses is that Stripe allows you to display the cost of your products in the viewer’s native currency. So even if your hipster barber business is based in New York, you can sell your whisker trimmers in pounds sterling in London.
Finally, Stripe accepts a large number of payment types, including ones popular in foreign markets. We’ll take a look at them in the next section.
Stripe Payment Methods
Stripe supports a large number of payment methods, making it a convenient choice for doing business in foreign markets. Stripe even takes the rare approach of supporting local payment types in addition to the more common “universal” ones, which a particular focus on types that are popular in the EU and China.
Stripe’s Payments API supports the following universal payment types (these are supported in all markets):
Alipay
Apple Pay
Google Pay
Microsoft Pay
Amex Express Checkout
Masterpass by Mastercard
Visa Checkout
WeChat Pay
Additionally, Stripe supports local payment types in the markets where they’re popular. They are:
ACH
Bancontact
EPS
Giropay
iDEAL
Klarna
Multibanco
P24
SEPA Direct Debit
SOFORT
Here’s a handy chart to get an idea of what you can use, and where.
Check out our pricing article for more information on what all this costs.
Stripe Prohibited Businesses: What You Can & Cannot Sell
Most payment services, whether due to security concerns, legal concerns, or moral convictions, won’t work with every industry. Stripe, it turns out, is no different. Because Stripe is a third-party processor, meaning it aggregates all of its clients into a single merchant account, it’s taking on a bit more risk than if each customer had their own merchant account. If you’re in a “problem” industry and still need to accept card payments, you may want to consider getting a merchant account from a company like Payment Cloud instead.
So first the obvious: Stripe will not do business with entities that sell illegal or products or services, no exceptions. Beyond that, Stripe’s restrictions are a little soft: you may be able to plead your case to Stripe to get them to make an exemption for you.
Stripe restricts:
Financial and professional services:
Investment & credit services
Money & legal services
Virtual currency
IP Infringement, regulated, or illegal products and services
Anything infringing on IP right
Counterfeit goods
Gambling
Regulated products (tobacco, cannabis, and related products)
Adult content & services
Unfair, predatory, or deceptive practices
Get rich quick schemes
Mug shot publications or pay-to-remove sites
No-value-added-services
Products or services restricted by Stripe’s financial partners
Aggregation of funds, factoring, payment facilitation
Drug paraphernalia
High-risk businesses
Multi-level marketing
Pseudo pharmaceuticals
Social media activity
Substances designed to mimic illegal drugs
Video game/virtual world credits
They also don’t like to see Stripe used in a manner inconsistent with its intended purpose or manner prohibited by its Stripe Services Agreement.
Is Stripe Right For Your Business?
Stripe is a great option for businesses that do a lot of eCommerce, want the best security the industry has to offer, and do business across international borders. If you’re a programmer or have one on your team, Stripe also provides some of the best developer tools in the payment processing industry, period. The prefab integrations aren’t quite as exciting, but they’re serviceable if you need access to Stripe’s features.
That said, Stripe can be overkill. It’s not the cheapest option, and you can’t just use it as a gateway. You get a lot of services for your money, but it’s very possible, perhaps even likely, that you won’t need or use all of them. And, like all third-party processors, it comes with a heightened risk of unexplained account holds and freezes.
If you like what Stripe has to offer but are a little overwhelmed by its scope, check out our Stripe alternatives. Is your industry not served by Stripe? Find a payment processor that works with your business amoung our favorite online payment gateways and credit card processors.
The post How Does Stripe Work? Everything You Need To Know About Processing Payments With Stripe appeared first on Merchant Maverick.
Itâs hard to overstate the significance of the impact that eCommerce has had on the quality of our lives here in the early 21st Century. While in the past, consumers were limited to the choices provided by their local retailers and the closest big-box store, today anyone with a computer, an internet connection, and a credit card can obtain nearly any product or service they want from just about anywhere in the world. Unfortunately, it also makes it much easier for criminals to steal goods and services if they have access to these same tools.
Online payment fraud is simply any false or illegal transaction committed via the internet. It deprives the victim of goods, services, funds, or sensitive information â often without them being aware that this has happened to them until much later. In many cases, there will actually be two victims: the consumer whose information was stolen, and you, the merchant. Online fraud can involve not only fraudulent transactions, but also lost or stolen merchandise, or falsified requests for a refund. Fraud can be committed through email, instant messaging, or online auction sites. It can also occur through text messaging or even phone calls.
One common misconception among small business owners that weâd like to clear up right now is that they arenât as lucrative a target for cybercriminals as the larger retailers, and therefore donât need to be as thorough in protecting themselves from fraudulent activity. Unfortunately, this âit will never happen to meâ attitude can make it far more likely that itwillhappen to you sooner or later.
The truth is that large businesses are a âhard target,â because they have the resources to fully defend themselves against fraud. Smaller companies lack these resources, and thus often present a much easier target to cyberthieves. A cybercriminal knows that he or she can make more money by exploiting several inadequately protected smaller businesses than by wasting time trying to break into a fully-defended larger business. Fortunately, there are many tools available to even the smallest companies that can dramatically lessen the likelihood that youâll become a victim of online fraud.
In this article, weâll discuss the various types of online payment fraud, whether itâs committed via credit card, debit card, eCheck/ACH, or any other payment method. Weâll also present some sobering statistics about the growth of online fraud in recent years. Weâll discuss the importance of having a strategy to deal with fraud, and describe the many âred flagsâ that can indicate a fraudulent payment. Finally, weâll explain the numerous tools available to you that will help to protect your business from fraud. While the risk of becoming a cybercrime victim can never be completely eliminated, the use of all of these tools can protect your business and dramatically reduce the chance that youâll experience a loss due to online payment fraud.
What Is Credit Card Fraud? Eight Types You Need To Beware Of
Credit cards are usually the easiest and most convenient way for consumers to pay for their online purchases, so itâs no surprise that the majority of incidences of online fraud involve credit cards. However, other payment methods (including debit cards, eCheck/ACH payments, etc.) are just as susceptible to being used fraudulently if the consumerâs account information is compromised. Hereâs a brief rundown of the eight most-commonly recognized types of online payment fraud:
Account Takeover Fraud (Phishing)
Youâve probably already heard of phishing (more formally known as account takeover fraud). This is when a hacker obtains a victimâs online account information and uses it to make a fraudulent purchase. Unfortunately, phishing attacks often work by convincing the victim to voluntarily disclose this information. While a hacker might not break into your credit card account directly, they can sometimes get into other accounts for major online shopping sites and gain access to your stored payment method information.
Card Testing Fraud
Sometimes thieves will âtestâ stolen credit card information by attempting to make a small, insignificant purchase. If the transaction is approved, they go on to make larger, more lucrative purchases with the valid card information. Sometimes thieves will file chargebacks on each of these purchases. At around $15-25 per chargeback investigation, this can quickly get very expensive for merchants, with the cost in chargeback fees vastly exceeding the value of the stolen merchandise.
âFriendlyâ Fraud
Sometimes, a cybercriminal doesnât have to steal someone elseâs credit card information to commit fraud. With âfriendlyâ fraud, a thief will use their personal credit card to make a purchase, then file a chargeback, claiming that the goods were never delivered. They get the goods for free after the issuing bank refunds their money, and youâre out the cost of the products and a chargeback fee.
A common scheme is for a thief to order a pizza, then file a chargeback after itâs been delivered. In this case, the thief has literally eaten the evidence! Unfortunately, âfriendlyâ fraud is becoming more common as thieves have learned to take advantage of consumer-friendly policies in the processing industry. (And it’s not just thieves who commit friendly fraud — unhappy customers do too!)
Merchant Identity Fraud
Sometimes, the merchant is the criminal. Merchant identity fraud occurs when hackers present themselves as a legitimate business. They then solicit funds from unknowing victims or offer goods or services that are never delivered. While merchant services providers have gotten better at sniffing out this sort of activity, itâs still possible for a cybercriminal to sign up with a legitimate payment processing service and collect money from unknowing victims. If the hackers cannot be identified and held responsible, the merchant services provider will end up being held liable for the losses. This is one reason why a prospective merchant services provider will go to great lengths to investigate the nature of your business before approving you for an account.
Refund Fraud
Sometimes cyber thieves donât want a particular product â they just want cash. Buying something online with stolen credit card information and then returning it for a refund thatâs issued to the thief is an easy and increasingly popular way to score some quick cash at someone elseâs expense.
True Fraud
True fraud is more commonly known as identity theft, and itâs probably the form of online fraud that youâre most familiar with. This type of fraud involves the classic scenario where a hacker illegally obtains a victimâs online account information (i.e., username and password) or their credit card information, and then uses that information to make purchases. They get the goods, and the victim gets the bill. Because issuing banks have made it relatively easy for victims of this type of fraud to dispute transactions they didnât make, liability for the illicit purchase usually falls on you, the merchant.
Website Redirection
This form of fraud is also known as âpagejacking.â Sophisticated hackers are able to redirect traffic from your website onto a similar site that theyâve set up, where theyâre able to obtain personal information or credit card data from unsuspecting customers.
Wire Transfer Fraud
This form of fraud involves the use of the banksâ wire transfer services for fraudulent purposes. A cybercriminal will pose as a legitimate business or government agency, then contact a victim and attempt to induce them to send money to a fraudulent address. These types of solicitations usually occur over the telephone, but can also occur online through email. Common scams of this nature typically involve telling the victim that they have won a large sum of money, but need to pay a âfeeâ to have it released.
The State Of eCommerce Fraud
Ever since eCommerce began in the 1990s, online fraud has been a problem. Online merchants can never have access to a customerâs physical credit or debit card, relying instead on account information such as card numbers, expiration dates, and CVV codes to authenticate transactions. While this information is sufficient to confirm the authenticity of an account, itâs never enough to firmly identify that the customer making the purchase is indeed the true owner of that account. Although many steps have been taken over the years to improve the security of online transactions, a 100% foolproof solution has yet to emerge.
In 2015, credit and debit cards with EMV (Eurocard, Mastercard, and Visa) or âchipâ technology were introduced in the United States. Although the transition from the older magstripe technology to EMV hasnât been very smooth, it has resulted in a dramatic decrease in card-present fraud due to the encryption features available with EMV. Retail credit card fraud rates dropped a whopping 82% between 2015 and 2018, and continue to be very low.
Unfortunately, the drop-off in card-present fraud has resulted in a dramatic increase in card-not-present fraud since EMV cards were introduced. Put simply, criminals whoâve been shut out of opportunities to commit retail fraud are now setting their sights on the lucrative (and still relatively vulnerable) eCommerce market instead. In 2016 alone, online fraud rates rose 33%. In 2017 and 2018, they rose an additional 30% per year.
According to LexisNexis, online fraud cost the eCommerce community 2.38% of total revenue in 2018 alone, and this rate continues to rise. Online fraud is expensive on both a per-transaction basis and as a percentage of total revenue. As of this year, the average online fraud incident costs a merchant $408 in lost goods or services. In comparison, the average legitimate online transaction is only $213. However, the cost of fraud far exceeds just the value of the stolen merchandise or services. On average, a merchant will suffer a loss of over $1100 per incident of fraud due to chargeback fees and other expenses incurred in fighting the chargeback.
Why Not Having A Strategy To Deal With Credit Card Fraud Could Put You Out Of Business
Itâs far too easy for merchants to stoically accept that an occasional fraudulent transaction is just part of the âcost of doing business.â However, the statistics above show that total losses due to fraud can far exceed the cost of the fraudulent transaction itself. Chargeback fees, expenses incurred in investigating and fighting the chargeback, lost shipping costs, and other expenses can add up to far more than just the amount of a fraudulent order.
As a merchant, you should also consider that a single incident of fraud can lead to further fraudulent transactions. Once a cybercriminal does a âtest runâ and determines that youâre relatively unprotected, you can and should anticipate that youâll be subject to many follow-on attempts to defraud your business. If you suffer a fraudulent transaction â even a very small one â itâs imperative that you identify the shortcoming in your security procedures that led to the incident and immediately take steps to strengthen your defenses before the cybercriminals try again.
Suffering from fraud can also lead to the loss of your merchant account, and with it the ability to accept credit and debit cards. Fraudulent transactions inevitably lead to chargebacks, and too many chargebacks over time may cause your provider to close your merchant account â often without prior warning. If this happens, you might be able to get a high-risk merchant account from a different provider, but these accounts are much more expensive than traditional low-risk accounts. If all of your sales are online, however, being without the capability to accept credit or debit cards for a significant length of time can quickly put you out of business altogether.
Six Red Flags That Can Signal Online Credit Card Fraud
Any online transaction can potentially be fraudulent, but some transactions should raise your suspicions more than others. Unusual transactions should be scrutinized more carefully than others before being approved and processed. While not constituting conclusive proof of fraud, the following âred flagsâ indicate a higher probability of fraud and should merit further investigation:
Different shipping and billing addresses. Obviously, there are any number of legitimate reasons why a customer would want to ship an order to a different address. However, fraudsters almost always ship orders to somewhere other than their victimâs billing address. Itâs in your best interest to verify the shipping address â just in case.
Multiple orders of the same item. Itâs not out of the ordinary for a customer to order multiple quantities of an item. However, if you see an order for an unusually large number of the same item from an individual customer (not a B2B order), you might want to check it out before you ship anything.
Abnormally large orders. If an order represents a much larger ticket size than what your business normally averages, you should probably confirm that itâs legitimate before processing the transaction and shipping the goods. This not only protects you from fraud, but might also save you from having your merchant account shut down or the transaction held by your processor due to the unusually large ticket size.
Multiple orders to the same shipping address with different payment cards. Again, we have to emphasize that there are plenty of legitimate reasons why a customer might want to do this instead of just putting all orders on the same card. However, itâs a hallmark of fraudulent activity and you should definitely make an inquiry with the customer before processing the orders.
Unexpected international orders. If your business normally only processes orders in your home country, a sudden order that needs to be shipped to a foreign country should get your attention and warrant further inquiry before approval. As weâll see below, some countries have significantly higher rates of online fraud than others.
Velocity attacks. A velocity attack occurs when a hacker makes multiple attempts to run different credit card numbers in rapid succession. Often using bots, the idea is to keep trying until a number is found that works. While this is obviously fraudulent, a customer whoâs having a hard time typing in their credit card number correctly can resemble a velocity attack.
How To Prevent Credit Card Fraud: 19 Tools For Detecting & Preventing Fraudulent Transactions
If the above information has you convinced that thereâs nothing you can do to prevent online fraud from impacting your business, donât worry. There are plenty of tools â both manual and automatic â that can flag suspicious transactions for you and lower the risk of a fraudulent transaction slipping through. While itâs not possible to ensure 100% total protection, using all of the tools described below will give you the best level of protection available today. Be aware, however, that this list is not inclusive. Processors are continually working to develop new anti-fraud tools, and your provider might have other services available to help secure your account than just the ones listed below.
Use a verified merchant services provider. Although all providers claim to offer a complete suite of automated tools and features to protect against fraud, some are more effective than others. Look for good reviews (like ours!) and watch out for complaints from other merchants regarding poor account security. Youâll also want to determine whether a prospective provider offers anti-fraud tools as a standard account feature, or if theyâre only available as an optional add-on. While itâs definitely worth paying a little extra for additional security, we generally prefer to see providers offer fraud protection without charging extra for it.
Use manual (human) screening. Both you and your employees should understand how to spot suspicious buying activity that raises one of the âred flagsâ weâve discussed above. In most cases, itâs a better idea to contact the customer directly to verify the order, rather than blocking it automatically and potentially alienating a legitimate shopper.
Use the Address Verification Service (AVS). An AVS mismatch is a strong indicator that the order is fraudulent, as a hacker using stolen payment information is unlikely to know the actual card ownerâs physical address. Most merchant services providers mandate the use of AVS for all eCommerce transactions, so this tool is already part of your merchant account.
Confirm the buyerâs location. Geolocation and IP address verification tools can confirm with reasonable certainty that the customerâs IP address matches the billing and shipping addresses provided. This method of detecting fraud will not be 100% effective if a legitimate customer is placing an order while traveling, but can often catch suspicious transactions in most other circumstances. Unfortunately, some countries have significantly higher rates of online fraud than others. The âusual suspectsâ include countries such as Russia, Nigeria, Pakistan, and Indonesia. However, other countries such as Romania, Bulgaria, and even Israel also have high rates of online fraud. Note that âproxy piercingâ technology provides some defense against hackers who intentionally mask their IP address using tools available on the Dark Web.
Use CVV (and CVC) checks. Card Verification Values (CVV) and Card Verification Codes (CVC) are three- or four-digit codes that are printed on the back of all credit and debit cards. Whenever possible, youâll want to obtain and match the cardholderâs code against the value submitted with an order. Unless the card in question has been physically stolen, itâs unlikely that a hacker will have access to this information. As with AVS, many merchant services providers will require the use of CVV/CVC checks before accepting any online transaction.
Use Verified by Visa and 3D Secure. These anti-fraud tools allow customers to create a unique Personal Identification Number (PIN) to authenticate their identity when placing an online order. For more information on these two programs, see our article, What Are Verified By Visa And 3D Secure?.
Use device fingerprinting. Device fingerprinting looks at a computer deviceâs operating system, unique device identification number, and other available information to see if that device has been used to make fraudulent transactions in the past. Device fingerprinting tools are usually available via third-party providers, such as ThreatMatrix.
Use tokenization and encryption. These security measures are now standard features of most modern payment gateways. Both methods protect your customersâ credit card data from being stolen during a legitimate online transaction. The use of tokenization and encryption is an essential step in keeping your merchant account PCI compliant.
Use velocity attack protection tools. As weâve noted above, velocity attacks involve repeated attempts to place an order with different credit card numbers, often with the use of a bot. These types of attacks can be detected and blocked by IP address using payment gateway security tools.
Use biometric identity verification tools. As you might imagine, biometric tools, such as fingerprint readers, are not ordinarily available to eCommerce merchants. However, they can be set up if you allow users to pay on your site using digital wallets, such as Apple Pay on the Web or Google Pay. In this case, the userâs device becomes the biometric tool, using a built-in fingerprint reader or Face ID technology to authenticate the consumerâs identity.
Set flexible refund policies. Buyers are more likely to file a chargeback if they canât return an item due to an overly strict refund policy (i.e., the allowed refund window is too short). You can cut down on âfriendlyâ fraud by giving your legitimate customers a reasonable amount of time to complete a return.
Emphasize order fulfillment. Ensure that all orders ship promptly and verify that theyâve been delivered. Delivery tracking can provide proof that the goods were delivered and received, helping to protect against âfriendlyâ fraud.
Ensure high-quality customer service. Quite frankly, offering poor customer service will increase your risk of fraud as customers become frustrated with doing business with you. Strive to provide the best possible customer service during business hours, and, if you have the resources, offer 24/7 customer service via both telephone and email. After-hours customer service can be outsourced (just in case you like to be able to sleep at night).
Provide high-quality employee training. Employee training goes hand-in-hand with manually screening all orders (see above). You must ensure that all employees who handle orders are adequately trained to spot signs of fraud and know what to do if they see something suspicious. This training needs to be an ongoing process, with frequent refreshers to remind employees of what to look for and to update them on the latest developments in anti-fraud procedures.
Ensure that your merchant account is PCI-compliant. This one is not optional. You must maintain PCI compliance standards to safeguard your customersâ credit card data. Being out of compliance will increase the risk of a data breach, which in turn will result in more incidents of fraud as hackers exploit the data theyâve stolen. Even if you donât suffer a data breach, your merchant account provider will penalize you with a PCI non-compliance fee (on top of whatever theyâre charging you for PCI compliance) for every month that your account is out of compliance. Note that following the proper PCI compliance steps will not completely eliminate the chance of a fraudulent transaction. However, it serves as a strong defense when an incident occurs. The most critical steps in PCI compliance include configuring and using a firewall to secure your website, performing frequent antivirus scans, following good password security measures, and using SSL certificates (i.e., âhttps:â) for your site.
Analyze actual incidents of fraud. If you experience an actual fraudulent transaction, youâll want to go back and determine how it happened and what you can do to make it less likely that it will happen again in the future. If you uncover any weaknesses in your defenses, youâll obviously want to make some changes.
Practice good chargeback mitigation strategies. Chargebacks and fraud are two separate subjects, but they tend to go hand-in-hand in many cases. Youâll want to implement the commonly recognized best practices to prevent chargebacks and successfully defend against them. See our article, The Complete Guide To Preventing And Winning Chargebacks, for more information.
Upgrade to the latest in payment technology. If your business also makes retail sales, youâll want to use EMV-compliant equipment exclusively for accepting credit and debit cards. EMV has been the default standard in the United States for card-present transactions, although there are still many businesses that havenât adopted it and are putting themselves at risk for fraud. NFC payment methods (such as Apple Pay and Google Pay) should also be added, if you havenât done so already. NFC is more convenient for consumers and even more secure than either magstripe or EMV payment methods.
Use multiple fraud detection tools. Itâs essential that you donât rely exclusively on any one tool weâve discussed above. Instead, use a layered approach that incorporates firewalls, good password security measures, use of AVS, and CVV/CVC checks to protect your business. Automated fraud scoring tools, such as IP geolocation, AVS, CVV, and device fingerprinting tools can be used together to determine a fraud probability score. You can then set your payment gateway to automatically flag or decline transactions that score high enough to raise a reasonable suspicion of being fraudulent. Also, be sure to re-screen orders that are modified by the customer after being placed, but before the goods have been shipped. At the same time, donât be too trigger-happy when it comes to blocking transactions. Frequently screening out legitimate transactions will frustrate your customers and cost you their business. In an era where anyone can post their opinion of a business online, this could really hurt you in the long run.
The Final Word On Credit Card Fraud Detection
As youâve probably gathered from all the information weâve presented so far, payment fraud is a real and growing threat to your online business. While itâs not possible at this time to build a completely foolproof defense against it, you can minimize your chances of letting a fraudulent transaction slip through by following common-sense practices and implementing the anti-fraud tools weâve discussed above.
Protecting your business from fraud is an ongoing process, as fraudsters are constantly finding new ways to get around the latest anti-fraud measures. They arenât going to give up just because one particular avenue of attack has closed on them, and neither should you. Securing your account is a never-ending effort that will require coordination between you, your employees, and your merchant account provider.
Many of the tools weâve discussed above can be implemented by you as the business owner without the help of other parties. At the same time, a lot of the newer anti-fraud measures available today will require installation and configuration by your merchant services provider or gateway provider.
One thing weâve noted over the course of reviewing dozens of merchant services providers is that they all take payment security and anti-fraud measures very seriously. This includes even the worst providers on the market (of which there are quite a few). The difference is that a low-quality provider will often offer you only the most basic anti-fraud tools, and theyâll usually charge you extra for them. Protecting your account from fraud is extremely important, but you shouldn’t have to pay an unreasonable amount of money for anti-fraud tools â especially when other providers include the same tools as a standard feature with your account.
In evaluating a potential merchant services provider, look carefully at what types of anti-fraud tools they offer, and whether these come with your account. The best providers will include a full range of essential anti-fraud tools with your account, although more specialized services might be offered as an optional add-on for a reasonable fee. Paying a little extra to secure your account against payment fraud is a worthwhile investment, especially considering the potential costs of suffering a data breach or a fraudulent transaction that slips through your defenses. For some recommendations of great merchant services providers that specialize in serving the eCommerce community, check out our article, The Best Online Credit Card Payment Processing Companies.
The post How To Detect (And Prevent) Online Credit Card Fraud â And Why You Need A Solid Strategy To Manage Fraud For Your eCommerce Business To Succeed appeared first on Merchant Maverick.
Being a first-time business owner can be a daunting experience. In addition to having to comply with a dizzying array of legal requirements, youâll also have to have at least a working knowledge of credit card processing, inventory management, and other topics. At one point or another, youâre going to encounter the term merchant services, and youâll want to know what it’s all about.
To put it in the simplest terms, unless youâre only going to accept cash and paper check payments in your business, youâll need to understand merchant services: what they are and where to get them from. Merchant services â and the providers who offer them â are essential to providing your customers with the largest range of convenient and secure payment methods. Signing up through a merchant services provider will â provided you choose the right one for your business â result in increased sales that more than offset the cost of those services.
In this article, weâll explain what merchant services are, and provide explanations of each of the primary products that are available from merchant services providers. Weâll also tell you how to find the best merchant services for your business, and what features you should look for in choosing a provider. Finally, weâll give you a brief overview of the best merchant services providers in the industry for small businesses, and explain which providers are the best choice for certain types of companies.
What Are Merchant Services?
The term âmerchant servicesâ can be confusing, because there are a lot of different definitions floating around out there, and they donât all agree on every detail. For our purposes, weâll define merchant services as the products and services a business needs to accept and process any form of payment other than cash or paper checks. This includes processing services for credit cards, debit cards, eChecks, ACH payments, and the newer mobile wallet services such as Apple Pay and Google Pay. It also encompasses hardware and software, such as credit card terminals, point-of-sale (POS) systems, payment gateways, virtual terminals, and mobile processing systems.
Note that there are also a variety of ancillary services that are often bundled with merchant services, including inventory management software, gift card/loyalty programs, online reporting features, merchant cash advances, and many others. These are not considered to fall under the rubric of merchant services, as theyâre not strictly necessary to enable your business to process credit card transactions. They can still be pretty useful, however.
Where do you go to get merchant services? Why, to a merchant services provider (MSP), of course! Again, the term âmerchant services providerâ is an umbrella term that covers any type of business offering merchant services. However, there are really two main types of merchant services providers: (1) merchant account providers, who offer true full-service merchant accounts with a unique merchant identification number for your business, and (2) payment services providers (PSPs), who offer credit card processing services, but donât provide a true merchant account. PSPs aggregate your account with that of other businesses using their services â a low-cost solution that can be very affordable for a small business thatâs just starting out.
Hereâs a brief description of the primary merchant services that your business will need to accept credit cards, debit cards, and eCheck/ACH payments:
Credit/Debit Card Processing: Of all the merchant services you might want to add to your business, credit (and debit) card processing is obviously the most important one. If a customer pays for a purchase with a credit card, youâll undoubtedly want some cold, hard cash to make its way into your bank account â and that wonât happen unless you have a service to process the transaction. As weâve noted above, you can get credit card processing through either a merchant account provider or a payment services provider (PSP). In either case, your provider will usually rely on a larger, direct processor (also called a backend processor) to approve and process transactions. While large direct processors such as First Data and Elavon offer merchant services, they arenât good choices for a small business. Popular payment services providers (PSPs) include Square (see our review) and Stripe. Traditional merchant account providers are much more numerous, with Dharma Merchant Services (see our review), National Processing (see our review), and Payment Depot (see our review) among the best choices for small and medium-sized businesses.
eCheck/ACH Processing: In addition to accepting credit and debit cards, you might also want to allow your customers to pay by check. While old-fashioned paper checks are rapidly declining in popularity, they can be accepted without the need for a check processing service. However, youâll have to take the check to the bank yourself, wait for it to clear, and hope that it doesnât bounce. eCheck and ACH (Automated Clearing House) payments bring advanced security and convenience to paying by check, allowing you to scan physical checks for processing or accept an ACH payment from a customer on your website. While some providers include these features with every merchant account, itâs more common for them to be offered as optional add-ons. In this case, youâll usually pay an additional monthly fee (typically around $20 – $30) for the service. For more information about these alternative payment methods, see our articles Everything You Need To Know About Accepting ACH Payments and The Complete eCheck Payment Guide.
Credit Card Terminals: Obviously, youâre going to need some type of physical credit card terminal to accept card-present transactions in a traditional retail setting. Options range from simple mobile card readers that require a smartphone or tablet (and the appropriate app) to function all the way up to complex point-of-sale (POS) systems that also include a variety of software features to help you run your business. While magstripe technology was the only option for many years, today EMV (i.e., chip card) is the standard acceptance method in the United States, Canada, and Europe. We also recommend that you seriously consider investing in hardware that also accepts NFC-based payment methods such as Apple Pay and Google Pay, as theyâre rapidly gaining in popularity and offer a higher degree of security than either magstripe or EMV. We also recommend that you buy your equipment outright. Terminal leases are wildly over-priced and should be avoided at all costs. Buying your hardware directly from your processor is usually the best option, but in some cases, you can save money by buying from a third party and having your equipment reprogrammed by your provider. For an overview of some great equipment options, see our article The Best Credit Card Machines And Terminals.
Point-Of-Sale (POS) Systems: As weâve mentioned above, a POS system is basically a credit card terminal with additional integrated software services built-in. Inventory management is a popular option, but there are also software add-ons for employee management and scheduling, online reporting, customer information management, and many others. While a POS system is a worthwhile investment for some businesses (such as restaurants), theyâre overkill for others. Beware of sales representatives trying to sell you a POS system if your business doesnât really need one. For more information on how to select a POS system thatâs right for your business, see our article POS 101: Choosing A POS System.
Payment Gateways: If your business has an online presence and makes sales through your website, youâre going to need a payment gateway to process those transactions. Payment gateways essentially perform the same function as physical credit card terminals, connecting your customerâs payment information with your providerâs processing network to approve the transaction and send you the money from the sale. Because not all merchants need a payment gateway, theyâre often offered as a separate feature (with an additional monthly gateway fee). However, itâs becoming increasingly common for providers to offer a gateway thatâs part of an integrated payment processing system designed to support both retail and eCommerce sales channels. For more information on what to look for in a payment gateway, see our article The Complete Guide To Online Credit Card Processing With A Payment Gateway.
Virtual Terminals: Used primarily by mail-order or telephone-order businesses, a virtual terminal is a software application that allows a laptop or desktop computer to function as a credit card terminal. Transactions can be manually keyed in or swiped/dipped with a compatible card reader (these usually connect via USB or Bluetooth). Retail merchants should be aware that, in most cases, youâll pay significantly higher processing rates if you manually enter the card data rather than using a card reader.
Integrated Payment Platforms: One common complaint we hear from merchants is that they often have to sign up with one vendor for a merchant account, another vendor for a payment gateway that has the special features they need, and possibly other vendors for things like online shopping carts or POS systems. Merchant services providers are well aware of this problem, and in recent years theyâve started to offer integrated, cloud-based processing systems that combine all these separate features into a single product. Obviously, they have a vested interest in keeping you tied to their particular ecosystem. However, there are genuine benefits to this approach for merchants as well. You wonât have to worry about compatibility problems or dealing with multiple customer service departments to keep everything humming along. Integrated systems can also (usually) save you money over signing up with multiple service providers. Finally, having all your business data accessible through the cloud is a significant advantage, even for smaller retail-only merchants who donât have a website. At the same time, youâll want to ensure that a vendorâs integrated system has all the features you need for your business before signing up.
Security & Fraud Prevention Features: Ensuring the security of your customersâ credit card data is essential for any business â retail, online, or a combination of the two. Obviously, you also want to take every step possible to minimize the chances of a fraudulent transaction. Security features such as tokenization and encryption protect your customersâ payment data and reduce the chances of experiencing a data breach. For online companies, fraud prevention features such as Address Verification Service (AVS) and card verification features such as CVV, CVV2, or CVC should be available through your provider at a minimum.
For more in-depth information on merchant services and merchant services providers, please refer to the following articles:
What Is A Merchant Services Provider?
What Is A Payment Service Provider?
What Is A Merchant Account?
High-Risk Merchant Services
Finding a good merchant services provider is challenging enough, but itâs even harder if your business is considered high-risk by the processing industry. What does it mean to be high-risk? Basically, certain business types are considered to be a riskier underwriting proposition by processors, and theyâll either refuse to give you a merchant account or put you in a high-risk account that invariably will be more limited and more expensive than what a comparable low-risk business would receive.
Besides being in an inherently high-risk business type (i.e., vape shops, online gambling, etc.), you can also find yourself in the high-risk category if you have an unusually high chargeback rate or your personal credit isnât so great. Fortunately, high-risk merchant service providers are available to serve your business. These providers usually work with a variety of banks (some of them located offshore) and direct processors to get you approved for an account. Your processing rates will be higher, and the terms of your contract wonât be so generous, but youâll have access to a stable account and youâll be able to accept credit and debit cards without any problems.
If youâre having particular difficulties in finding a high-risk account, you might want to consider an eCheck/ACH-only option. We only recommend this option for merchants who have been truly unable to get a merchant account, as youâll potentially lose sales when your customers find out that they canât use their credit cards.
For more details about high-risk industries and high-risk processing, check out our article Are You A High-Risk Merchant?.
How Do You Find Great Merchant Services?
Over the years, the question weâre most frequently asked is some variation of âWhatâs the best provider for my business?â Unfortunately, the sheer number of variables involved usually makes this question difficult to answer. As a very general rule, the best merchant services provider for your business is the one that offers the best combination of features, low processing rates, reasonable account fees, and favorable contract terms. In many cases, this might be such a close call that several providers might be able to offer you a good deal, without any single one standing out above the others.
One point we continually try to impress on merchants is that the best provider for your business is not necessarily the one with the lowest processing rates â or even the lowest costs in general. The most important thing to look for is a provider that offers the best overall value. Things like high-quality customer service are often worth paying a little extra for in the long run.
As a general rule, weâd also point out that payment services providers (PSPs) are usually a better value for small or newly-established businesses, while merchant account providers are more suited to medium-sized or larger companies that have been around for a while and have an established processing history. Signing up with a PSP is usually a good idea when youâre just starting out, but at some point, youâre going to reach a level where youâll need the stability and security of a true merchant account. It will probably cost you less money as well, as lower processing rates become more important as your monthly processing volume increases.
If youâre looking for a good merchant services provider, the resources available here at Merchant Maverick are an excellent place to start. Weâve reviewed almost all of the major players in the industry, and can give you an in-depth look at the pluses and minuses of each provider. As a starting point, we recommend that you look over our Merchant Account Comparison Chart, which compares several of the top-rated providers side-by-side.
How Much Should You Pay For Merchant Services?
No one likes to overpay for anything, and the merchant services industry makes it all too easy to pay too much without even realizing it. With complicated processing rate plans, highly-variable account fees, and surprise incidental fees that can show up on your processing statement without warning, figuring out whether youâre getting the best deal can be very difficult. If youâre new to payment processing, youâll want to evaluate pricing information and rate quotes from several providers before picking one to use for your business. This is also true if you already have a processing service and are thinking about switching to a (hopefully) less expensive provider.
Below is a quick overview of the various processing rate plans that will be the single most significant factor in determining your overall costs. Be aware that different pricing models will be more cost-effective for some businesses than others. Youâll want to have a good idea of your total monthly processing volume and your average ticket size to make valid comparisons between different providers.
Flat-Rate Pricing
The simplest pricing structure is flat-rate pricing. Despite the name, none of the providers offering this type of pricing actually use just a single rate for all transactions. However, youâll usually have only two or three rates to be concerned with, making your costs stable and predictable. Merchant services providers offering flat-rate pricing typically have a single rate for all card-present transactions, and another rate (or two) for card-not-present transactions. Often, there will be a higher rate charged for card-not-present transactions that have been manually keyed-in, rather than processed over a payment gateway.
Flat-rate pricing works best for very small businesses, mostly because you usually wonât have to pay any additional account fees. Be aware, however, that the flat rates themselves are often significantly higher than what youâd pay under an interchange-plus or subscription-based pricing plan (see below). For this reason, flat-rate pricing is usually not a good deal once your monthly processing volume exceeds a certain amount (typically around $10,000 per month).
Payment services providers (PSPs) usually offer flat-rate pricing as their only processing rate option. Popular providers offering this type of pricing include Square (see our review), Stripe, and PayPal.
Interchange-Plus Pricing
Arguably the most cost-effective pricing method for medium-sized businesses, interchange-plus pricing passes your transactionsâ interchange fees on at cost and also includes a fixed markup for your provider. For example, a typical interchange-plus rate quote might look like interchange + 0.30% + $0.15 per transaction. While the underlying interchange rates themselves can vary wildly, this pricing method is more transparent than others because youâll always know exactly how much of a cut your provider is taking.
Interchange-plus pricing is usually only available through a merchant account provider offering a full-service merchant account. Because these types of accounts also typically have a number of monthly and annual fees, they arenât the best choice for very small businesses. Depending on the provider and the particular details of your business, the threshold where youâll start to save money with interchange-plus pricing can be anywhere from $1,500 to $10,000 in monthly processing volume.
Popular providers offering interchange-plus pricing include Dharma Merchant Services and National Processing, among others. While these two companies offer interchange-plus rates exclusively, many run-of-the-mill providers offer a combination of tiered and interchange-plus pricing plans. Unless you specifically negotiate for an interchange-plus plan, youâll usually be given a tiered pricing plan. Although itâs still the most common type of pricing plan in the processing industry, we donât recommend tiered pricing under any circumstances because it makes it impossible to determine how much of a markup your provider is charging for each transaction. Itâs also the most expensive type of rate plan, in most cases.
Membership (Or Subscription) Pricing
A variation of interchange-plus pricing, membership pricing has only been available for a few years from a small number of providers. Pricing is similar to interchange-plus, except that you donât pay a percentage of each transaction as part of your processorâs markup. Thus, a typical membership pricing quote might be interchange + $0.15 per transaction. However, thatâs not all youâll pay. Membership pricing also includes a monthly membership fee that ranges from as little as $49 per month to as high as $199.00 or more per month. This fee combines all of your other account fees into a single charge, plus includes an extra amount to cover the per-transaction percentage markup that you otherwise wouldnât be paying.
Membership pricing isnât for everyone. The high monthly membership fee makes it particularly unsuitable for very small or seasonal businesses. However, high-volume businesses can save a substantial amount of money over what theyâd pay with a traditional interchange-plus pricing plan. In some cases, these savings can amount to several hundred dollars per month.
If youâre interested in seeing whether membership pricing is right for you, we highly recommend both Fattmerchant (see our review) and Payment Depot (see our review). Both of these companies provide excellent service and a full set of features to fulfill the needs of any business.
Monthly Billing VS Pay-As-You-Go
Most merchant services providers use one of two billing methods: (1) monthly billing, or (2) a pay-as-you-go billing model. With monthly billing, youâll pay a variety of separate fees for each service included with your account. These fees will be deducted once a month, at the end of your billing cycle. The processor will deduct any processing fees before sending the funds to your bank account, but if you have a statement fee, software subscription fees, etc. those will be billed at the end of the cycle. Pay-as-you-go billing, on the other hand, doesnât have monthly fees. Youâll only pay for the transactions that you actually process, and those fees are deducted before the processor deposits your funds in your bank account. If you don’t process anything in a month, you won’t pay anything — which is not true of a monthly billing plan.
If you sign up with a traditional merchant account provider, you can expect to be on a monthly billing plan, regardless of whether youâre on a long-term contract or a month-to-month arrangement. Payment services providers, on the other hand, usually use a pay-as-you-go model. This lowers costs for small businesses and also is the best option for seasonal businesses that arenât running year-round. Despite the additional fees, a monthly billing plan can actually save medium-sized or larger businesses money due to the cost savings of using an interchange-plus or membership pricing plan.
The Best Merchant Services For Small Businesses
As weâve noted above, some merchant services providers are a better fit for certain types of businesses than they are for others. Below, weâll briefly introduce our top picks for the most common types of businesses. Note that if your business falls into one of the categories described below, the provider we list wonât be the only good choice available to you. Rather, theyâre generally the best choice for most businesses that are similar to yours. If youâre interested in one of these providers, be sure to read the full review to learn more about them before deciding to sign up.
Vendor
Best For
Monthly Fee
Retail Rate
Online Rate
Contracts
Payment Depot
Mid-sized businesses ($10k-$25k/month)
$49-$199
0% + $0.15 markup*
0% + $0.15 markup
Month-to-month
Fattmerchant
High-volume businesses ($25k+/month)
$99-$199
0% + $0.15 markup*
0% + $0.15 markup
Month-to-month
Dharma Merchant Services
Non-profits
$20
0.15% + $0.07 markup*
0.20% + $0.10 markup
Month-to-month
Square
Micro-merchants & low-volume
$0.00
2.6% + $0.10 total
2.9% + $0.30 total
Month-to-month
PaymentCloud
High-risk businesses
Varies
Varies
Varies
Varies
PayPal
Online businesses
2.70%
2.9% + $0.30 total
$0.00
Month-to-month
Stripe
Tech-driven businesses
N/A
2.9% + $0.30 total
$0.00
Month-to-month
*Markup over standard interchange and assessment rate with interchange-plus pricing (our preferred pricing plan for transparency of fees).
Best For Micromerchants & Low-Volume Businesses: Square
Square (see our review) has been around since 2009, and has quickly become the leading choice for small businesses looking to accept credit cards with a minimum of fuss and paperwork. Square offers flat-rate pricing and uses a pay-as-you-go billing method that doesnât include any additional monthly account fees (unless you sign up for one of their optional services).
Square
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Squareâs most common processing rates are as follows:
2.75% for all retail and mobile (card-present) transactions
2.9% + $0.30 per transaction for all online (card-not-present) transactions
3.5% + $0.30 per transaction for all manually entered (also card-not-present) transactions
If youâre looking to minimize your up-front costs, Square offers a free mobile card reader that plugs into your smartphone or tablet. However, itâs magstripe-only. We highly recommend that you upgrade to either the $35 EMV-enabled reader or the $49 contactless + chip reader, which adds NFC compatibility and Bluetooth connectivity.
The company has expanded its services tremendously over the last ten years, and now offers far more features than we can discuss here. However, itâs still an excellent choice for merchants looking for a simple, low-cost solution. Squareâs flat-rate pricing is more expensive on a per-transaction basis than interchange-plus, but you’ll save money overall due to the lack of extra account fees. This pricing structure works best for businesses processing less than $3,000 per month, in most cases.
Best For Mid-Sized Businesses ($10K-$25K/Month): Payment Depot
For larger businesses with a stable processing history that need to upgrade to a full-service merchant account, Payment Depot (see our review) is an excellent choice. The company offers membership-based processing rates, true month-to-month billing, and a full range of products and services for retail or online businesses.
Payment Depot
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Membership fees at Payment Depot range from $49 per month up to $199 per month, depending on your monthly processing volume. This single fee covers all your merchant services, so thereâs nothing extra to have to pay. You can also receive a significant discount for paying your membership fees on an annual, rather than monthly, basis.
The companyâs processing rates start at a simple interchange + $0.15 per transaction, and go down with higher monthly processing volumes. There are four basic membership plans, which are tied to your monthly processing volume. For really large businesses, thereâs also a custom pricing option.
As long as your monthly processing volume is high enough that membership-based pricing makes sense for your business, Payment Depot is an excellent choice that will save you a significant amount of money over traditional merchant account providers. Just be aware that the company only serves US-based merchants, and they donât accept high-risk businesses.
Best For High-Volume Businesses (Over $25K/Month): Fattmerchant
Fattmerchant (see our review) also offers a membership-based pricing plan. However, their membership fees are high enough that their pricing structure only works well for an established business with a significant monthly processing volume.
Fattmerchant
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The companyâs membership fees start at $99 per month for businesses processing under $500,000 per year. Above this amount, youâll pay $199 per month. Bear in mind, however, that this one fee covers everything the company provides â unlike traditional vendors who nickel and dime you for every âextraâ service they provide. Processing rates start at interchange + $0.15 per transaction, with lower rates available for higher processing volumes.
Because of the steep monthly subscription fee, Fattmerchant isnât cost-effective for small businesses with a low monthly processing volume. However, if your volume is high enough, you can potentially save hundreds of dollars a month under this pricing structure. All accounts are billed on a month-to-month basis with no early termination fee (ETF), so you can always switch processors if things arenât working out.
Fattmerchant is an excellent choice for businesses that are large enough to benefit from the companyâs pricing structure. They offer excellent customer service and a terrific cloud-based integrated payments platform that will have you up and running in no time. However, they donât accept high-risk merchants, and theyâre only available in the United States.
Best For Online Businesses: PayPal
For a newly-established eCommerce business, you canât go wrong with PayPal. Pay-as-you-go billing means that, in most cases, youâll only pay for your transactions â and nothing else. Note, however, that the companyâs virtual terminal comes with a hefty $30 per month fee, so theyâre not such a great choice for a mail-order or telephone-order business.
PayPal
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PayPalâs flat-rate pricing structure couldnât be any simpler. Online transactions are always 2.9% + $0.30 per transaction, while manually entered and virtual terminal payments are 3.5% + $0.15 per transaction. The companyâs PayFlow Gateway comes bundled with every account, allowing you to quickly and easily integrate it with your website. There are no additional gateway fees, either.
While PayPal is a great choice for a small online business, be aware that the companyâs high processing rates will no longer be cost-effective once your business grows beyond about a $3,000 per month processing volume. At that point, you should seriously consider upgrading to a true merchant account with one of our other recommended vendors. Also, PayPal has relatively limited customer service options and doesnât serve high-risk businesses.
Best For Tech-Driven Businesses: Stripe Payments
If your business is 100% online and you donât plan to ever expand into the retail sector, Stripe Payments is a great choice for your payment processing needs. The company offers simple flat-rate pricing, pay-as-you-go billing with no monthly fees, and a host of developer tools for integrating their platform into your website.
Stripe Payments
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Pricing couldnât be more straightforward. All eCommerce credit and debit card transactions are charged 2.9% + $0.30 per transaction. International cards are also charged an additional 1.0% if currency conversion is needed. ACH payments are charged 0.8%, with a maximum charge of $5.00 per transaction.
As with any payment services provider, account approval is easy and can be accomplished online. However, the chance of later having your account shut down for any number of reasons is also higher. Stripe does a better job than most PSPs when it comes to customer service, offering live chat and telephone support on a 24/7 basis.
Overall, Stripe is a great choice for fledgling eCommerce businesses. Just be aware that your account wonât be as stable as a true merchant account, and the companyâs flat-rate pricing isnât cost-effective at higher processing volumes. Itâs also not available for high-risk merchants.
Best For Nonprofits: Dharma Merchant Services
Nonprofit businesses looking for a full-service merchant account will have a hard time finding a better choice than Dharma Merchant Services. One of our favorite processors, the company seems to be run like a nonprofit itself sometimes. Of course, itâs actually a public benefit corporation (B-corp), something thatâs almost unheard of in the processing industry.
Dharma Merchant Services
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Whether youâre a nonprofit or not, Dharma offers full-service merchant accounts that are billed on a month-to-month basis to all its users. There are no long-term contracts and no early termination fees (although you will have to pay a one-time account closure fee of $25 if you close your account). For nonprofits, the company offers special interchange-plus processing rates of interchange + 0.15% + $0.07 per transaction for retail transactions and interchange + 0.20% + $0.10 per transaction for eCommerce transactions.
Dharma offers a full range of products and services, including the popular Clover lineup of terminals and point-of-sale (POS) systems. The company also provides some of the best customer support in the industry. However, be aware that their pricing structure works best for merchants processing over $10,000 per month, and they donât support international or high-risk businesses.
Best For High-Risk Businesses: PaymentCloud
If youâve read this far, youâve probably noticed by now that most of our top choices for merchant services donât support high-risk businesses. Fortunately, if youâre in the high-risk category, there are high-quality vendors out there that specialize in serving the high-risk community and provide excellent services at a reasonable cost. PaymentCloud is one of our favorites due to their reputation for top-notch customer service and because they offer many features that are typically reserved for low-risk merchants only.
PaymentCloud
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Unlike many of our other top providers, PaymentCloud doesnât disclose their processing rates or account fees on their website. Because they work with a wide variety of banks and direct processors to get you an account, pricing is highly variable and subject to negotiation. While they have a reputation for fair pricing, you can expect to pay more than what a comparable low-risk business would pay. However, this is true with any high-risk merchant account provider.
The company offers a free credit card terminal with each account, which you can use for as long as you keep your account open. They also donât charge an account setup fee, which also helps to set them apart from most traditional high-risk providers. Finally, PaymentCloud is one of the few providers to offer support to the burgeoning CBD oil industry. However, they only allow CBD products that are applied externally â no food items or other ingestibles. If youâve had a hard time finding a merchant account for your high-risk business, be sure to check them out!
If youâre looking for additional options beyond the providers weâve profiled above, check out the following articles for more great choices:
The 5 Best Small Business Credit Card Processing Companies
The Cheapest Credit Card Processing Companies For 2019
How To Accept Credit Card Payments For Your Small Business
The Final Word On Merchant Services
Merchant services can be a complicated subject, and finding a merchant services provider thatâs a good fit for your business is often a real challenge. Youâll want to carefully evaluate the unique needs of your business, and factor in how much you can afford to pay to add the capability to accept credit and debit cards. In most cases, the added expense will more than pay for itself in additional sales.
All of the vendors weâve profiled above are excellent choices in their particular niche. However, they arenât the only good choices out there. So, we encourage you to look over the articles weâve linked to, and carefully read the full reviews of any vendor youâre considering. Most of the best merchant services providers for small businesses offer a very transparent disclosure of their processing rates and account fees on their websites, so check those out as well.
If youâre still having trouble deciding which company is best for you, youâll want to actually âcrunch the numbersâ and make a more informed analysis of what your potential costs will be. An excellent resource for doing this is our Cost Analysis Workbook, which will walk you through the steps necessary to estimate your overall costs with various providers. The workbook also includes spreadsheets to do the math for you â it couldnât be easier!
The post Everything You Need To Know About Merchant Services appeared first on Merchant Maverick.
