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Finding a Merchant Service Provider
Now that your website is nearly
complete and your products, categories, logos, and color scheme
is lined out it is time to setup a way for your customers to pay
you. We already created one method in section 9 when we created
a PayPal account. We will now show you how to setup for your
customers to pay you directly with their credit cards.
People enjoy shopping online because it is fast, secure, and
convenient. The most common method of payment comes from credit
cards. You need a way for your customers to pay you with their
credit cards and this is where a merchant account and payment
gateway comes in. In this chapter we will explore merchant
account and payment gateway terms and fees and how to understand
these.
UNDERSTANDING MERCHANT ACCOUNT TERMS
A merchant account is a contract under which an acquiring
bank extends a line of credit to a merchant, who wishes to
accept payments via credit card. If you have used your credit or
debit card at any store, that store had a merchant account. The
terminal where you swiped your card is called the terminal.
There are many merchant account companies out there and to be
honest many of them are junk. The merchant account industry is
filled with a ton of overcharging, unethical companies and
individuals. Luckily, there are many companies that are ethical
and have fair pricing structures. We will show you how to not
get ripped off and choose the best merchant account, at the best
price.
Since you will be accepting credit cards via your
website you will need a merchant account and a virtual terminal.
A virtual terminal is similar to the device you swipe your card
through at local retail stores. The only difference is your
terminal is online, note the word “virtual.” The merchant
account is the system through which the credit card transaction
is processed through the banking system.
To understand
the entire process let’s examine the following diagram:
Step 1: The
merchant submits a credit card transaction to the Payment
Gateway on behalf of a customer via secure Web site connection,
retail store, MOTO center or wireless device.
Step 2: The Payment Gateway receives the secure
transaction information and passes it via a secure connection to
the Merchant Bank’s Processor.
Step 3:
The Merchant Bank’s Processor submits the transaction to the
Credit Card Network (a system of financial entities that
communicate to manage the processing, clearing, and settlement
of credit card transactions).
Step 4:
The Credit Card Network routes the transaction to the Customer’s
Credit Card Issuing Bank.
Step 5: The
Customer’s Credit Card Issuing Bank approves or declines the
transaction based on the customer’s available funds and passes
the transaction results back to the Credit Card Network.
Step 6: The Credit Card Network relays the
transaction results to the Merchant Bank’s Processor.
Step 7: The Merchant Bank’s Processor relays
the transaction results to Payment Gateway.
Step
8: The Payment Gateway stores the transaction results
and sends them to the customer and/or the merchant. This step
completes the authorization process – all in about three seconds
or less!
Step 9: The Customer’s Credit
Card Issuing Bank sends the appropriate funds for the
transaction to the Credit Card Network, which passes the funds
to the Merchant’s Bank. The bank then deposits the funds into
the merchant’s bank account. This step is known as the
settlement process and typically the transaction funds are
deposited into your primary bank account within two to four
business days.
Now that you understand how your merchant
account and payment gateway works it is time to review the fees
involved with having a merchant account for your business.
You need to have decent credit to obtain a merchant account.
The bank needs to know that you aren’t going to scam people and
one of the only ways they can tell is by your credit score. You
may need a cosigner or need to have someone else apply for the
merchant account if you have poor credit. The general rule of
thumb is that even if you have collection accounts, judgments,
bankruptcies, repossessions or anything of that nature on your
credit report you CAN be approved if these are reported as PAID
on your credit report. Open collection accounts, tax liens or
judgments on your credit report will most likely get you
declined, or require you to have a cosigner. Don’t be
discouraged if you get declined once or twice, you can always
reapply with a different company.
When you apply for your
merchant account everything is taken care of for you. Your
merchant account, payment gateway, and instructions are all
included when you apply. This way you do not have to apply to
multiple companies and everything is simplified.
MERCHANT ACCOUNT AND PAYMENT GATEWAY FEES
Payment Gateways and Merchant Accounts have fees that they
charge you. Let’s examine some of the fees involved with owning
a merchant account and payment gateway. The most popular payment
gateway is Authorize.net. Do not signup with the yet.
MERCHANT ACCOUNT FEES
Discount Rate: This is a percentage of each transaction
amount that is typically charged by the credit card company. It
also usually includes a percentage for the merchant account
provider. The monthly amount of this fee depends on the
transaction amounts processed during the month. Some merchant
accounts have a monthly minimum discount fee (around $25.00)
that you would pay if the discount does not reach that level.
Some merchant account providers offer a tiered discount rate
that will drop down after reaching a specified level. Merchants
with high dollar value orders should look for merchant account
providers with the lowest discount rate. Typically this should
be between 2% and 3%.
Transaction Fee:
This is a "per transaction" cost that is primarily related to
the gateway and processing the transaction. A typical fee is
$0.30 per transaction. In this situation if you had 100
transactions you would pay $30 dollars in "transaction fees".
For most merchants each order equals one transaction. Merchants
with large numbers of transactions should look for merchant
account providers with the lowest transaction fee.
Statement Fee: This is a monthly fee for your
statement to be mailed to you and is usually around $10 per
month.
Application Fee: Most merchant
account providers do not charge an application fee, but some do.
You will have to measure if the application fee is appropriate
based on the rates you have been quoted.
PAYMENT GATEWAY FEES
Setup Fee:
Some gateway companies charge you a fee to setup your payment
gateway. This fee is typically around $70 - $80.
Monthly Access Fee: This is a monthly fee usually
ranging about $10-$15.
Per Transaction Fee:
This is a fee charged per transaction. It is typically around
$0.05 per transaction.
The fees for American Express and
Discover are different, but take the same structure as all of
the fees above. Most of your transactions will be Visa and
MasterCard, but some will be American Express and Discover, so
it is important to apply for these as well.
Now that you
are familiar with all of the fees let’s go through an example of
a typical month for ACME Widgets. In June ACME Widgets had
exactly $10,000 in credit card transactions. They had 100 orders
at $100 each. ACME Widgets has a merchant account and payment
gateway with the following fees:
Now let’s calculate ACME Widget’s
fees for the entire month.
Discount Fees: $10,000 x 2.5% =
$250
Transaction Fees: 100 transactions x 0.30 = $30
Statement Fee: $10
Gateway Access: $15
Transaction Fees:
100 transactions x 0.05 = $5
ACME Widgets total fees
for the month = $310
This fee is deducted from
ACME Widgets bank account at the end of the billing period. If
ACME Widgets provides a refund for any transaction they DO NOT
pay the discount fee, but do have to pay the transaction fees.
Now that you are familiar with how payment gateways and
merchant accounts work and how the fees are calculated, let’s
take a look at some reputable merchant account providers that
some of our companies have been using for years. The two
companies listed below provide awesome rates and phenomenal
customer service.
Both of these companies are compatible
with Volusion e-commerce platform:
Electronic Transfer:
Visit this LINK and
click “Apply Today for a Merchant Account” in the middle of the
screen. Your application will be approved within 2-3 days.
E Online Data: Visit this
LINK and fill out the form to get an instant merchant
account.
We highly recommend both of the merchants above
because they offer unparallel service and rates. You can also
use a merchant account provider of your choice. You need to make
sure it is compatible with Volusion shopping cart system. You
can check that by going to the following link:
http://www.volusion.com/merchant-service-integrations.asp
Electronic Transfer is listed as Merchant Partners and E-Online
Data is listed as Authorize.net in the list at the link above.
Your merchant account will take 2-3 business days to be
approved. Once it is approved you will want to integrate the
payment solution to your shopping cart.
INTEGRATING YOUR MERCHANT
ACCOUNT TO VOLUSION
You want to complete the
following steps AFTER you go live with your shopping cart. Going
live means that you are open for business and ready to sell
products.
Go to the following spot in the administration
panel on your shopping cart. Settings >> Payment
Select Other on the Merchant
Gateway Name and then refer to
http://store.volusion.com/kb_results.asp?ID=447
to setup the appropriate information for your gateway provider.
Remember to only implement this AFTER you go live. You
also want to do a test transaction of $1 or $2 and make sure the
funds find their way to your business checking account.
You now have three different ways for your customers to pay you.
They have the option to pay via credit card, PayPal or by mail.
Remember that customers like options so we are going to provide
one additional way for your customers to pay you.
SETTING UP GOOGLE
CHECKOUT
Google checkout allows your customers
to pay you conveniently through their google account. The
service is similar to PayPal and you should offer it as a
payment option for your customers.
To get setup you need
to visit
http://checkout.google.com/sell and sign up for the service.
Google will place a small deposit in your checking account and
you will be required to verify this deposit. This process takes
2-3 days.
To implement Google Checkout in to Volusion
visit the following page in your administration panel.
To learn how to setup google
checkout you can visit the Volusion training manual that covers
this section:
http://store.volusion.com/kb_results.asp?ID=133
We are now finished setting up all of your payment methods
and you are offering your customers four convenient ways to pay
you, by mail, credit card, PayPal and Google Checkout. There is
one last step you need to complete in this chapter.
Now
that everything is setup for your site it is time to go live!
This will change you from that long demo url to the actual
domain name of your site. You need pay for your setup fee and
first month’s service with Volusion. At this point you can begin
selling on your site but you won’t make a sale without driving
traffic to your site. We are completing this now so we can setup
your marketing in the next chapter. Once you have paid you will
receive a welcome email on how to make a few changes to your
account so it points to yourDomainName.com instead of that long
demo url. You will change the MX records on GoDaddy to point to
the correct place and that is about it.
Once you have
gone live with your store you should be able to go directly to
yourDomainName.com and it should bring up your site. The
administration panel will be accessed by going to
youDomainName.com/admin after you have paid. Once this is
working properly make sure you can navigate all of your
categories and products. Make sure you have enabled SEO friendly
URL’s to increase your search engine optimization.
NOTE:
You may wish to read the following chapter before going live.
You will need to go live before completing the steps in the
following chapter, but make sure you are familiar with all of
the processes in Chapter 14 first. The reason for this is that
you do not want to pay for your store and then take too long
setting up your marketing campaigns.
We are now ready to
start bringing in some business and in the next section we will
teach you exactly how you can drive traffic to your site and
convert that traffic in to sales!
Step 15 - Marketing Your Business
The True Web Money Dropshipping eCourse Outline
Start Here - Introduction
The Power of the E-Commerce
What is Drop Shipping?
Why You Should Drop Ship
Getting Started
Setting up a Temporary
Contact
Picking a Niche Market
Getting Started with a Plan
Business Structure and Legal
Picking a Domain Name
Product Sourcing and Finding
Suppliers
Building Your Website
Branding Your Business
Finding a Merchant Service
Provider
Marketing Your Business
Putting it all Together
Sales Strategy
Defining Business Systems
Conclusion
Step by Step Checklist
Website Resources
