danieltenner.com: danieltenner.com — How to get a merchant account
Daniel
· 9 months ago
You can use paypal and still take credit cards directly on a form on your own website without having to send the user to PayPal. PayPal has an API for integrating payments directly in to your website. Most of our customers have no idea they are paying with PayPal since they just enter their card details directly on our site. We also offer a Pay-With-Paypal button for users that already have a PayPal account and prefer that method. You can see it here: https://www.fixtunes.com/purchase/purchase.php
tjstankus
· 9 months ago
Thanks Daniel, that's good to know.
Joe Van Dyk
· 9 months ago
Daniel, how is your experience with taking credit card information directly and sending it to Paypal?
We're doing recurring billing and am wondering what the best option is. I'm leaning towards Authorize.net and their CIM product.
Kit
· 9 months ago
I'll chime in: My company started with the Verisign PayFlow Pro gateway (very solid SDK), and it was bought up by Paypal. Since the transition, I have nothing but praise for the way paypal handles both our credit card and paypal gateways.
For the CC captures, you can find plenty of sample code to start from to integrate a variety of payment systems straight from paypal developers, and I've found their documentation to be excellent.
I have worked with them for a number of years and continue to be satisfied.
Daniel Tenner
· 9 months ago
In that case, I'll chime in too and suggest that if PayPal does work this well, it's worth seriously looking at it, since getting a merchant account can be a big hassle, as mentioned in my article.
Back when I built my first business, PayPal was not a good option since they didn't like that type of business, but that's only the case for certain specific kinds of businesses, so probably PayPal can be a better option than getting a merchant account.
Daniel
· 9 months ago
It's been a year since we implemented PayPal payments directly on our site, so some rules may have loosened, but here's what I know: 1) The API was easy to use and allows you to accept credit cards via a form on your own site. The form posts to a page on your site as well, so the user never leaves. The payment shows up in your PayPal account just like other payments. 2) PayPal required that we also offer a "Pay with PayPal" button on the page to allow existing PayPal users to pay the old way. 3) When we implemented it, the web form only worked for US residents. Non-US payments had to be handled the old way (this may have changed) 4) Currently 80% of our purchases go through the form and the other 20% of users opt to use their own PayPal accounts. 5) The difference between allowing users to purchase directly on your site vs. having to go to another website (like PayPal) was about 4% (as in, sales went up 4% when we added this form and they drop 4% if we take it away and force people to go to PayPal). We also tested with Google Checkout (which requires creating a Google Account) and found the same thing 6) We have had zero problems with PayPal. They are cheap (we pay $0.30+2.5% per transaction) and they handle chargebacks, refunds, complaints etc. 7) I don't believe that the website form works with subscriptions
That's all I can think of.
Alan Pinstein
· 9 months ago
I just filled out the PCI DSS questionnaire since I store cardholder data for subscription payments. My advice? Make sure your gateway supports subscription services and store the cardholder data there. It costs a little more but saves a lot of time. There are brand new rules regarding security and trust me you don't want to have to comply. If you don't store cardholder data it's no problem.
Daniel Tenner
· 9 months ago
Absolutely agree. I've done it both ways, and outsourcing the subscription handling is much less of a headache.
TF
· 9 months ago
Who did you outsource it to and do you recommend people do business with them?
Daniel Tenner
· 9 months ago
We use Protx for this at the moment. They've been good so far, but they haven't stood out in any way. Some support tickets take a bit longer than we'd like to process. On the other hand, their documentation is excellent and their API is pretty clean.
Would I recommend them? Yes, but not overhwlemingly so - I'm sure a number of similar providers are equally good.
Edit: Worth mentioning that we moved off Protx (now "Sage Payment Services") because they had the worst customer service I've ever experienced since starting my first business. Simply dreadful. We're now with SecureTrading.
TF
· 9 months ago
Thanks.
Ben Summers
· 9 months ago
If you're in the UK, you can get a good rate, no monthly minimum and no signup fee if you go to Streamline via the Federation of Small Businesses. You can save more than the FSB signup fee.
Banks tend to like you going via their associated merchants, so start with your own bank.
Also, we found that mentioning how we only took money after services had been provided or only a month in advance for service subscriptions, helped them feel comfortable. They don't like having huge amounts outstanding as they're jointly liable.
Re: comforting the bank about how and when you charge, you're absolutely right too.
David Minor
· 9 months ago
In addition to AVS/CV2, we've found MaxMind's ip address-based fraud scoring service to be quite useful in sniffing out fraud. Some gateways offer similar services, but typically at much higher prices.
Daniel Tenner
· 9 months ago
That's a pretty good tip if there's any likelihood you'll be defrauded, actually... Some time ago, I was hoping someone would come up with such a service. I'm glad they have.
@Daniel: You don't mention who you got your merchant account(s) with in the end...?
I have had merchant accounts with Bank of Scotland and Barclaycard Merchant Services. BoS had very low fees when I was with them a few years back but as of 2007 they were not accepting new accounts for subscription services. This may have changed now. I had similar problems with Streamline (no subscription payments) around the same time I eventually went with BoS.
In terms of processor, I highly recommend SecPay. They store the card details and allow you to do calls to their API (SOAP when I used it, but also other options) for recurring billing. This is particularly useful because you can vary the fees each time - the amount just needs to be specified via the API call. They have now merged into www.paypoint.net and offer a startup package which includes a merchant account.
Daniel Tenner
· 9 months ago
We ended up going with Barclays and HSBC, and Barclays came through with the best terms.
As a payment gateway, we use Protx, as I've mentioned in another comment.
Edit: Worth mentioning that we moved off Protx (now "Sage Payment Services") because they had the worst customer service I've ever experienced since starting my first business. Simply dreadful.
Mase
· 9 months ago
I would almost always recommend using someone like Authorize.net to handle processing and storing credit card information. Their CIM service allows you to keep soft-references to the CC information without keeping the data on your own servers.
Unless you're running millions of transactions a month (at which point those processing fees can add up) and can *afford* to be PCI compliant (I'm talking man-hours setting up the system and keeping it up to date), trust the people who Make It Their Business.
Daniel Tenner
· 9 months ago
Definitely agree. PCI-DSS compliance can be extremely tricky to implement on your own servers. I don't recommend handling credit card numbers directly if you can avoid it.
Bubbo
· 9 months ago
PayPal for direct credit card payment works great if you are using a cart that supports it or a web-based payment services provider (which is what I do, but I am not listing links here).
As an alternative, I also use Authorize.net with an actual merchant account to ensure I have payment redundancy and to keep my options open. Allowing users to pay with PayPal (millions of members) has turned out to be a great addition, as approximately 35% of consumer buyers are opting for PayPal.
I actually utilize two different payment providers to connect directly with the Authorize.net API and PayPal API, which means I am not storing or sending CC info and do not have to worry about being PCI Compliant or setting up SSL certs.
Michael
thesujective
· 9 months ago
Another vote for Authorize.net. Great customer service. Used them for both merchant and gateway services. Taking Discover card hard though. International payments a whole other issue.....required to have "domicile" within a EU country in order to utilize services like Global Collect. If your site is popular in say SEA those are all considered "exotic" currencies and prove very challenging. Anyone figure out a great micro-payment solution say sub $2 that didn't break the bank?
maccman
· 9 months ago
A vote for Braintree - they're very up front with all the costs, and they have a 'Vault' service (with the corresponding ActiveMerchant libs). www.braintreepaymentsolutions.com
I've also just added Amazon FPS support to my app - the caveats to their system are: * People are redirected away from your site * The subscription amount is fixed - so you can't change it without getting the user to re-authorize
Has anyone here tried Amazon's payment method: http://aws.amazon.com/fps/. Seems like it's mostly for their cloud supported applications but still a solution to evaluate. If you're a startup you should definitely outsource the credit card process to someone else. It gets very difficult to DIY and it's a resource blackhole once you get involved.
Zachary Smith
· 9 months ago
As an acquirer for merchant processing accounts, I found this interesting but not entirely accurate, specifically the financial underwriting recommendations:
1) Do give realistic volumes on what you're processing. Remember that large volumes may help you get a better rate, but they also represent a large (potential) risk for the underwriting bank. From my years of approving nearly 5,000 Internet Merchant Accounts, the best bet is to be realistic and transparent on what you think your sales are going to be over the next 6-12 months.
2) Merchant processors do check credit on every applicant. As such, we can easily see if you're applying to 5 banks at one time and that generally does not lend a good feeling to the underwriter (who may, incorrectly, assume that you've been turned down by the other 4). However, it is always a good idea to get quotes from multiple vendors and negotiate before you sign an application.
Also, something that is very useful to know is how the industry works on the backend. Rick Strahl, developer of a solid .NET shopping cart, did a great article on a tech guy's view of how the merchant industry functions. It'll help put the different players in perspective, if nothing else: http://www.west-wind.com/presentations/aspnetec...
Jacques Chester
· 9 months ago
The comments on this article are pure, pure gold. Platinum. Diamonds. Flawless pearls. etc etc
I guess what I'm saying is, I'm going through this trauma right now and I've just gotten another 3 services to look at. Which is a helluva bonus.
Daniel Tenner
· 9 months ago
I agree, absolutely. These are great comments. In a few days, I'll add an update to the article to include the best bits, so that people don't miss them.
The HN comments are good too, btw (click the orange Y at the bottom of the article).
Andrew
· 9 months ago
No wisdom to add, but this is a great post & the same goes for the comments.
peter
· 8 months ago
Merchant account companies are shady, especially companies like CommercePaymentSystems... it's very difficult to reach the account manager, and good luck trying to end things smoothly with them. United Bank Card is also shady because they'll bill you w/o ever sending you a bill and you won't know exactly what they're billing you for. And when you cancel, it'll take them over 2 weeks to cancel your account (and you have to keep calling to make sure everything is done properly or else it takes longer).
If I were a new merchant, I'd go with PayPal. It's so much easier and the terms are clear.
Don't go with UnitedBankCard & CommercePaymentSystems (and other merchant account companies).
R
· 8 months ago
Serously? Kick them out. Each person show was overweight, the one 'main' person could find enough money for internet? Seriously? Thats between 10-60 a month. Get a job. Go to McDonalds, Burger King, or anywhere really. If you have a computer to connect to the internet type up a resume and start job searching. Selling tie dye shirts, really? Having an adult son who lives with you and they can't rent an apartment? I am tired of this pitty me i can't afford stuff because of the economy stuff. I had to go without the internet because i was paying my rent for months until i got a better job. Now the poor have the internet and don't have to pay rent? She should be banking money not having to, and be able to get a deposit and rent payments for months. At some point we have to tell these people grow up, get a job, and stop being a bum. My step-brother has to carry a weapon when going into foreclosed houses because crack addicts have started to dwell in them as well. He was assaulted by three men in a pitch black basement trying to fix a water heater in one of these homes and was beaten pretty badly. Don't start casting a pleasant light on the 'poor' when some light just illuminates the 'victim mentality' of those who are too lazy to better themselves or too mentally impaired to know better. These are the same 47% who probably think socialism is better than capitalism because they'd get to do what they want paid by the rest of us. I didn't live it but i miss the post WW2 America mentality.
Good starter info. Your #3 point can be a problem. I'm glad that you said 'don't lie'. If they give you a good deal because your estimated volume is high, but then don't end up making any money on you because the gross margins are too thin and your not making up for it in volume, they your rates WILL GET READJUSTED. They are not looking to invest in your company.
Business owners must take payment processing/acceptance more seriously. If you don't ask the right questions, then any answer you get will do and won't matter. Once you find out the right questions to ask, start avoiding Sales Reps/Companies who give you no answer, evasive answers, or 'smart' sounding answers that further confuse you. If the beginning of the business relationship does not fit, then it won't get better by adding time and especially being locked up in multi-year contracts. Also, don't get bullied by high pressure sales tactics because a good deal today will be a good deal next week. Also, do they have any happy customers? Dozens and dozens of Customer Reviews/ Tesitmonials?
Always look for SERVICE QUALITY. If you save $20/mth compared to Provider B, but then have a problem and no one is helping you to fix it. The headaches will destroy any savings you negotiated.
Daniel Tenner
· 5 months ago
Hi Dat To,
Of course, the rates might get readjusted.. but that's a very manageable risk, and even if it does happen, at least the business will have had good rates for a year or two. Basically, it's a gamble worth making, because there's potential benefits and pretty much no potential downside ("if it fails, you just get the rates you would have had without inflating your estimated volume").
Re: Service quality, absolutely, I agree. I personally prefer sticking to "proper" banks where, if something's going wrong, you can talk to a real human being (typically your account manager), who actually has the power to fix things. As for payment gateways, there again I think customer service is paramount, although it can be really difficult to tell which companies have good customer service in that area...
merchantmaverick
· 5 months ago
Daniel,
Great article. I think the "negotiation" bit is the most important of all. Most business owners are either too afraid, or don't understand that they can negotiate terms on pretty much anything. My only advice would be that those of you that setup more than one merchant account, or that choose to sit on their merchant account without processing, actually do face monthly fees. Most merchant service provider's charge a monthly minimum that will most certainly be drafted from your account and can range anywhere from $15 to $60 depending on the MSP.
I think it's very important for more articles like this one to help level the playing field for merchant's. We all know that there are some shady characters in this business. I personally created http://www.merchantmaverick.com/ as a review and information site for exactly this topic because frankly, I got a little tired of all the secrecy, misinformation, and BS in the industry.
Best of luck to you Daniel and take care, The Merchant Maverick. :)
Daniel Tenner
· 5 months ago
Sounds great! Good work. This is definitely something that could use more transparency.
All Comments
We're doing recurring billing and am wondering what the best option is. I'm leaning towards Authorize.net and their CIM product.
For the CC captures, you can find plenty of sample code to start from to integrate a variety of payment systems straight from paypal developers, and I've found their documentation to be excellent.
I have worked with them for a number of years and continue to be satisfied.
Back when I built my first business, PayPal was not a good option since they didn't like that type of business, but that's only the case for certain specific kinds of businesses, so probably PayPal can be a better option than getting a merchant account.
1) The API was easy to use and allows you to accept credit cards via a form on your own site. The form posts to a page on your site as well, so the user never leaves. The payment shows up in your PayPal account just like other payments.
2) PayPal required that we also offer a "Pay with PayPal" button on the page to allow existing PayPal users to pay the old way.
3) When we implemented it, the web form only worked for US residents. Non-US payments had to be handled the old way (this may have changed)
4) Currently 80% of our purchases go through the form and the other 20% of users opt to use their own PayPal accounts.
5) The difference between allowing users to purchase directly on your site vs. having to go to another website (like PayPal) was about 4% (as in, sales went up 4% when we added this form and they drop 4% if we take it away and force people to go to PayPal). We also tested with Google Checkout (which requires creating a Google Account) and found the same thing
6) We have had zero problems with PayPal. They are cheap (we pay $0.30+2.5% per transaction) and they handle chargebacks, refunds, complaints etc.
7) I don't believe that the website form works with subscriptions
That's all I can think of.
Would I recommend them? Yes, but not overhwlemingly so - I'm sure a number of similar providers are equally good.
Edit: Worth mentioning that we moved off Protx (now "Sage Payment Services") because they had the worst customer service I've ever experienced since starting my first business. Simply dreadful. We're now with SecureTrading.
Banks tend to like you going via their associated merchants, so start with your own bank.
Also, we found that mentioning how we only took money after services had been provided or only a month in advance for service subscriptions, helped them feel comfortable. They don't like having huge amounts outstanding as they're jointly liable.
I hadn't heard of the FSB approach. That's an interesting tip that I'll have to look into for next time. Found a link about it: http://www.fsb.org.uk/default.aspx?id=14&loc=FS...
Re: comforting the bank about how and when you charge, you're absolutely right too.
More info at: http://www.maxmind.com/app/ccv_overview
It looks pretty affordable, too: http://www.maxmind.com/app/ccv_buynow
And appears to even have a free version: http://www.maxmind.com/app/ccfd_features
I have had merchant accounts with Bank of Scotland and Barclaycard Merchant Services. BoS had very low fees when I was with them a few years back but as of 2007 they were not accepting new accounts for subscription services. This may have changed now. I had similar problems with Streamline (no subscription payments) around the same time I eventually went with BoS.
In terms of processor, I highly recommend SecPay. They store the card details and allow you to do calls to their API (SOAP when I used it, but also other options) for recurring billing. This is particularly useful because you can vary the fees each time - the amount just needs to be specified via the API call. They have now merged into www.paypoint.net and offer a startup package which includes a merchant account.
As a payment gateway, we use Protx, as I've mentioned in another comment.
Edit: Worth mentioning that we moved off Protx (now "Sage Payment Services") because they had the worst customer service I've ever experienced since starting my first business. Simply dreadful.
Unless you're running millions of transactions a month (at which point those processing fees can add up) and can *afford* to be PCI compliant (I'm talking man-hours setting up the system and keeping it up to date), trust the people who Make It Their Business.
As an alternative, I also use Authorize.net with an actual merchant account to ensure I have payment redundancy and to keep my options open. Allowing users to pay with PayPal (millions of members) has turned out to be a great addition, as approximately 35% of consumer buyers are opting for PayPal.
I actually utilize two different payment providers to connect directly with the Authorize.net API and PayPal API, which means I am not storing or sending CC info and do not have to worry about being PCI Compliant or setting up SSL certs.
Michael
www.braintreepaymentsolutions.com
I've also just added Amazon FPS support to my app - the caveats to their system are:
* People are redirected away from your site
* The subscription amount is fixed - so you can't change it without getting the user to re-authorize
So, for the moment, I'm going with Braintree.
I'd also like to plug a open source SaaS Rails app called Sassy - http://github.com/maccman/saasy/tree
1) Do give realistic volumes on what you're processing. Remember that large volumes may help you get a better rate, but they also represent a large (potential) risk for the underwriting bank. From my years of approving nearly 5,000 Internet Merchant Accounts, the best bet is to be realistic and transparent on what you think your sales are going to be over the next 6-12 months.
2) Merchant processors do check credit on every applicant. As such, we can easily see if you're applying to 5 banks at one time and that generally does not lend a good feeling to the underwriter (who may, incorrectly, assume that you've been turned down by the other 4). However, it is always a good idea to get quotes from multiple vendors and negotiate before you sign an application.
Also, something that is very useful to know is how the industry works on the backend. Rick Strahl, developer of a solid .NET shopping cart, did a great article on a tech guy's view of how the merchant industry functions. It'll help put the different players in perspective, if nothing else: http://www.west-wind.com/presentations/aspnetec...
I guess what I'm saying is, I'm going through this trauma right now and I've just gotten another 3 services to look at. Which is a helluva bonus.
The HN comments are good too, btw (click the orange Y at the bottom of the article).
If I were a new merchant, I'd go with PayPal. It's so much easier and the terms are clear.
Don't go with UnitedBankCard & CommercePaymentSystems (and other merchant account companies).
Business owners must take payment processing/acceptance more seriously. If you don't ask the right questions, then any answer you get will do and won't matter. Once you find out the right questions to ask, start avoiding Sales Reps/Companies who give you no answer, evasive answers, or 'smart' sounding answers that further confuse you. If the beginning of the business relationship does not fit, then it won't get better by adding time and especially being locked up in multi-year contracts.
Also, don't get bullied by high pressure sales tactics because a good deal today will be a good deal next week.
Also, do they have any happy customers? Dozens and dozens of Customer Reviews/ Tesitmonials?
Always look for SERVICE QUALITY. If you save $20/mth compared to Provider B, but then have a problem and no one is helping you to fix it. The headaches will destroy any savings you negotiated.
Of course, the rates might get readjusted.. but that's a very manageable risk, and even if it does happen, at least the business will have had good rates for a year or two. Basically, it's a gamble worth making, because there's potential benefits and pretty much no potential downside ("if it fails, you just get the rates you would have had without inflating your estimated volume").
Re: Service quality, absolutely, I agree. I personally prefer sticking to "proper" banks where, if something's going wrong, you can talk to a real human being (typically your account manager), who actually has the power to fix things. As for payment gateways, there again I think customer service is paramount, although it can be really difficult to tell which companies have good customer service in that area...
Great article. I think the "negotiation" bit is the most important of all. Most business owners are either too afraid, or don't understand that they can negotiate terms on pretty much anything. My only advice would be that those of you that setup more than one merchant account, or that choose to sit on their merchant account without processing, actually do face monthly fees. Most merchant service provider's charge a monthly minimum that will most certainly be drafted from your account and can range anywhere from $15 to $60 depending on the MSP.
I think it's very important for more articles like this one to help level the playing field for merchant's. We all know that there are some shady characters in this business. I personally created http://www.merchantmaverick.com/ as a review and information site for exactly this topic because frankly, I got a little tired of all the secrecy, misinformation, and BS in the industry.
Best of luck to you Daniel and take care,
The Merchant Maverick. :)