

Taking payments online – merchant account & payment processor fees - dmytton
http://blog.boxedice.com/2009/05/20/taking-payments-online-merchant-account-payment-processor-fees/

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pxlpshr
I'm going to go against the grain of this post and say that a merchant account
isn't for everyone. I was surprised the author did not mention one of the big
drawbacks to merchant accounts: fraud and charge backs. PayPal and Google
Checkout, for example, handle most of that liability while a merchant account
will make put that responsibility on your shoulders.

Generally it's not something to be afraid of, but if you're bootstrapping a
business and/or your product tends to draw a lot of fraudulent shoppers (high
price, rare, etc.), then it's something to consider.

During college we use to sell customizable, fix mounted projection screens
online; they would range in price from ~$800 - $4,000+ depending on the screen
material. We had so many fraud attempts in our first few months that we almost
shut down the ecommerce section of the site. Getting our merchant account was
a big headache and not something we probably needed to deal with given the low
volume of transactions (less than 10 sales a month) in regard to the high
number of fraud attempts.

I think it makes a lot of sense to deal with your own merchant account if
you're doing high volume of sales, especially when it's usually relatively low
cost goods/service/subscriptions. Scaleable web startups that rely on
subscriptions apply here, our projection screen business wasn't exactly a
"startup".

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dmytton
Using something like PayPal or Google Checkout is false security as far as
chargebacks are concerned. They do have extra security features but, PayPal at
least, has a lot of fraud.

I'm unfamiliar with Google Checkout but I have handled chargebacks through
PayPal before. The buyer has exactly the same freedom to issue the chargeback
through PayPal as they would if they had purchased with a card through your
merchant account. PayPal hold you liable for any chargebacks, especially if
the customer does it through their bank instead of the PayPal disputes
console.

Having a merchant account allows you to do your own fraud checks against
payment details - address, IP, etc. Good payment processors will do this for
you. You can also do your own checking using something like MaxMind.

In terms of fraud, you're going to have to deal with it regardless of whether
you use Google or PayPal (or anyone else).

~~~
pxlpshr
I agree with you but I know first hand that Google Checkout and PayPal offer a
first tier of defense against it, you pay for it in the higher fees. For some
people and depending on the state of their business, it's probably worth the
time-savings, that's all I was really saying.

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rapind
Thanks for the article. Well written and informative. What I can't understand
is why this is _still_ such a painful process. ecom was the hype back in 1999.
If you're a payment gateway you should have SOAP and REST interfaces. You
should have example code and tutorials for every popular web platform out
there (struts2, rails, django, .net, phpcake, etc.). You should have detailed
use cases for 90% of the typical payment requirements.

I should probably shut up or put up, but I'll have to look into what's
involved in setting up a company like this first. The state of payment
processing just seems so far behind.

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lux
What about merchant account vs the premium services like Paypal Website
Payments Pro? Their fees are reasonable and the API looks like it accounts for
the flexibility issues you would ordinarily go to a full merchant account for.
I'm currently considering this myself and I'd be interested in anyone's
experience or comparison :)

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DTrejo
Another good article on the merchant account setup process:
<http://news.ycombinator.com/item?id=530055>

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datums
I've used cdgcommerce.com for payment processing. What stood out from them was
their rates and customer service. You get an authorize.net account which
exposes a rich api.

