Solve the Payment Processing Problem

During the early stages of launching your online store, you’ll need to make a number of critical decisions. Perhaps the most important of these is the way in which you’ll process your customer payments. You can choose to process the orders yourself using a true merchant account, or use a third-party processor. The method that you decide on could affect the implementation of your entire web site.

But how do you choose? Is price the single most important factor? What other factors are involved? In this article, we’ll uncover the answers to these questions by comparing a true merchant account to third-party processors. We’ll expose the differences between the two methods by comparing them side-by-side in real world examples, using a custom-built PHP calculator to aid us in our quest. Let’s not waste any more time!
The Basics

Before we dive into the comparisons, let’s take a closer look at these two methods. With a true merchant account, you, the merchant, apply with a processing bank (usually through a sales agent) for the right to have a merchant account dedicated solely to your business. The merchant account is for your business alone and you are responsible for it in every way. You’re also responsible for providing a gateway to it, as this is not included with the account. (While some processing companies or sales agents will bundle a gateway with the merchant account for convenience, they’re separate entities and you’re usually free to use any gateway that you prefer). Basically, your merchant account is a direct account with Visa and Mastercard (and American Express and Discover Card, should you choose to accept payments from their members), so you must abide by their rules.

A third-party processor allows businesses and individuals to accept credit card payments through its own merchant account. Instead of applying directly through a processing bank, you apply through the third-party processor, which uses its own set of criteria to decide whether or not you’ll be eligible to use their services — the third party processor’s bank doesn’t even know you exist! A payment gateway of some form is automatically included as you must process all sales through the third-party processor’s system. The third-party processor holds all the cards, as they make all the rules by which you must abide, and they will hold you responsible for how your transactions affect their merchant account (the one that they’re allowing you to share).

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Tags: - Payment gateway, Payment gateway

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