The most difficult aspect of selling something from your web site is figuring out how to accept payment. Asking people to send checks is an option, and it will result in a few sales. Various services offer assorted payment methods. All of them will result in a few sales. But the single most important service you must offer is the ability to accept credit card payments. In the 18 months that I have been selling templates from my web site, easily 90% of my sales have come through credit card transaction, although I offer two alternative payment methods.
To accept credit cards transactions, you must have a Merchant Account. This is a special arrangement with your bank that allows you to accept credit cards. When you apply for a merchant account at your bank, you will be required to demonstrate that your business has had an extended period of financial stability. Expect to present your business plan, your financial statements and various other documents. Those who pass the stringent requirements may be asked to put up a substantial sum or money (several thousand dollars) as a safeguard against chargebacks or credit card fraud, and may be asked to pay for the software or terminals that they will be using.
To process a merchant account, the merchant must have a terminal, software or both. He/she processes the transaction manually, using credit card information that has been given in person, by phone, mail or over the Internet. Please note that email is not secure and very few people are willing to supply confidential information by standard email message.
An Internet Merchant Account is a merchant account in which the transaction is processed online, in real time, in a period of less than a minute. While the customer waits, the technology automatically checks the name and other contact information given for the credit card, ascertains that the card has not been reported as lost or stolen, and determines that the card has not expired or exceeded its limits. If there is no problem, the sale is processed and both merchant and customer receive notification so product delivery can occur. If there is a problem with the card, both customer and merchant receive notification that the card has been declined.
With an Internet Merchant Account, the merchant does not need a terminal or software, since all transactions are processed by online technology. The merchant must have access to a secure line to protect the privacy and confidential information.
Internet Merchant Accounts are even more difficult to set up through a bank. The likelihood of chargebacks and credit card fraud increases, since no signature is given. Chargebacks occur when a customer contacts their credit card company and requests that a payment be refunded. They may claim that the product did not arrive, that it was unsatisfactory, or that they did not make the purchase in the first place. In the case of digital goods, a disappointingly high number of consumers are using this as a type of “Internet shoplifting.” Since digital goods cannot be returned, the customer can download the merchandise then request a refund from the merchant or a chargeback from the credit card company. In a situation where the goods have been ordered via mail order (or over the Internet), the law protects the customer for a period of 30 days. Requests for a refund during this time will usually be honored. Merchants who attract too many chargebacks are in danger of having their merchant account discontinued, although the merchant himself/herself may be perfectly legitimate.
Credit card fraud is a serious problem over the ‘Net, given that no signature is taken. When a card is stolen, the thieves typically make as many purchases as possible before the owner reports the card. Electronics, computers, and jewelry are the products most commonly targeted, but no merchant can consider himself safe. Another fraudulent activity occurs when credit card thieves “test” a stolen card by running it through an Internet merchant’s credit card technology. When they find a card that “works”, they know that the card is “safe” and it can then be redistributed. Any merchant whose site is being used for testing stolen credit cards is in danger of having his/her merchant account discontinued once the financial institution realizes what is happening.
The bottom line, therefore, is that banks are not willing to take on those risks unless they are sure of your stability and unless you can put up a lump sum to be used as safeguards against fraud and chargebacks. There are risks inherent in accepting credit card transactions over the ‘Net, and you, the merchant are the one who will assume most of those risks.
Despite the problems and the risks, ecom is here and many merchants, large and small, are profiting from this new method of sales. Merchants who understand the risks, exercise common sense, and provide good customer service can succeed. Next week’s column will discuss Reseller Services — an affordable alternative for entrepreneurs who can’t arrange a merchant account through their own bank.
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