

Merchant Banking Sucks - Dylanlacey
http://www.softwarebyrob.com/2011/02/11/i-have-never-been-so-happy-to-give-paypal-30month/

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mgkimsal
This may not be applicable for everyone in all situations, but I got a
merchant account in a few days with not too much effort, by simply going to my
local bank and talking to someone. They put me in touch with their regional
person in charge of merchant accounts. That person asked me a few questions,
then came out to my local branch a few days later. She asked me a few more
questions while we sat in a conference room, had me verify information, and
then we were done. I had the merchant account details within the week, ready
for API integration. My short term need for it went away, but I'm planning to
integrate it as an option on existing sites next month.

Online applications were ridiculous, and the "oh you can't sell subscriptions"
thing was crazy too. I had the exact same experiences Rob did. But those were
all people over a phone.

I went to my local bank - they knew me, knew my history, asked for a bit of
paperwork to verify existing sales, and we were off. Now... I'd asked what
they'd have done if I'd had no sales. She said they'd likely still approve me
based on my banking history, but my rate would be higher, but in all
likelihood it would go through anyway. Talking with a real person who was in
charge of making decisions like this, she explained they had the power to set
up all sorts of edge-case merchant account scenarios for people, all various
combinations of transaction and monthly fees. Most people just don't
investigate their options enough.

To be fair, they could/should have more of this process on line - I didn't
think I'd want to go through a manual human process. But... they made it
pretty quick and painless.

~~~
phishphood
+1 , I also stopped by a local bank, talked to the person in charge and had
the whole thing setup in few days. They actually gave me choice of different
gateways as well, I went with authorize.net per recommendation

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HNer
I work in both setting up merchant accounts and offer PCI compliance services.
Penetratation testing and something called the SAQ WIZARD which makes the SAQ
understandable.

The pain involved is high here are some quick tips:

1) most new startups might as well forget about applying. Unless you have
prior trading history which you can prove your chargebacks are < 1% then you
will most likely get a NO.

2) The business volume should be at least 5K + per month to make if worth your
while (and theirs) and figures below this will probably not be worth their
while = a NO.

3) Trying to get a good rate is only going to be possible if your a mum a pop
store selling shoes etc., anything online will generally be high risk and have
fees north of 3.5 %

4) if your transaction value is high > 500$ + then you will be high risk.

5) anything travel = high risk

6) video, gambling, adult, coupons, gift vouchers, warranties, etc are all a
general NO.

7) dating = very high charge backs, block every Proxy IP and non UK non USA.
Or all markets you are not targeting.

8) PCI compliance is easy if you use the gateways checkout page, However, if
you want to incorporate payments direct into your own site, thus using the API
(needed for recurring billing or for repeat clients where you don't want to
ask for card number again and again) then PCI compliance is a big task, making
sure your servers can pass about 3k5 tests and about 400 questions and
standards adopted as part of the SAQ (self assessment questionnaire) + you
will need to make sure your app is secure from sql injection etc. etc.

~~~
joelhaasnoot
It's all about the liability. Ran into the same thing when trying to rent out
desks (coworking). Since we're an intermediary we can't bare the full
responsibility: the actual things we rent out are outside our control. We were
denied because of that. Luckily most consumers here in The Netherlands don't
have credit cards, so not having CC checkout is not a big deal, and businesses
are accustomed to paying invoices within x number of days. The number of
invoices that get defaulted on is worth the risk.

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loganfrederick
Am I the only one who thought the article would be about:
<http://en.wikipedia.org/wiki/Merchant_banking>

Based on the title of the post, which is different than the original article?

~~~
josephcooney
Nope, that was exactly what I was expecting too.

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jseifer
I had a similar experience. Between all the back and forth it took me about 4
months when getting the merchant account for Genius Pool
(<http://geniuspool.com/>). For background, this site is not meant to make a
ton of money -- I just wanted a job board as an option for the podcasts I do.

I tried to get the merchant account set up while building the site. When I
tried my bank (BOA), they wanted a fully functional site before they'd think
about looking at an application. That wasn't going to work since the site
wasn't done yet.

I went with TrustCommerce for my gateway and the rep there referred me to
someone for the merchant account. He had me do an application and submit it.
After a week or two he said they needed "marketing materials" like a brochure
and flyers. I made some marketing materials and let him know the podcasts were
the primary marketing materials. Application denied due to marketing
materials.

Next he said he could try a different processor. I go through the whole
application process again. It takes many weeks during which I keep getting
emails back needing some other piece of documentation. During this time I had
contacted Braintree who said they could approve me with X,Y, and Z, and it
would take about 7-10 business days to get me all set up. They were very
explicit about what exactly I needed. The only downside was that it was going
to be a relatively high minimum every month.

I told the first guy to cancel the application and then it was approved if I
still wanted it. Plus all setup fees would be waived. I went with them because
fees were lower as were monthly fees.

However, I wish I had gone with Braintree. Their service was top notch and I
wasn't even a customer. If I knew I was going to be processing at least their
minimum I would have gone with them. With that said, my current setup works
and I've been very happy with TrustCommerce.

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antihero
Could you possibly elaborate on why you went with PayPal as opposed to Google
Checkout or Amazon Payments, what with having experience with all of them?

~~~
ashleyw
I believe PayPal Website Payments Pro is just a payment gateway and merchant
account in one. The customer never knows PayPal are involved, it's all handled
on your site and via their API.

Whereas Google and Amazon's services are exactly like PayPal's traditional
service, where your customers are redirected to their site to make payment. I
don't think either of them provide a payment-gateway like service.

------
ydavid24
This smells like bs. paypal is one of the worst companies ever to have to deal
with, both as a merchant and as a consumer, and their policies are horrible
pretty much across the board. I'm sorry that you had bad experiences with
authorize.net, but we've used them for years without issues. We started by
using paypal's pro merchant account years ago but they would refuse to accept
about 2-5% of our credit card transactions for unknown reasons. When we
finally hooked up with authorize.net the payments all went through.

paypal may be better in certain circumstances, but overall it's not a great
leap forward and really falls short of its potential. But what do you expect
from a startup that was sold to a large company like ebay? they were doomed to
be mediocre as soon as they decided to sell out.

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tzs
Yeah, merchant accounts are a pain to get, but there's at least partly a good
reason for that. Consumers can charge back a long time after the charge--a
ridiculously long time. If you can't pay a charge back (you are out of
business, for instance) the merchant bank has to pay it.

Given that, it is not surprising that they want a lot of information about
your business.

~~~
InclinedPlane
A merchant account is the power to make any credit/debit card charge given the
card details.

This is an incredible power. The power to effectively drain the bank account
of every customer who has ever done business with you.

For credit card transactions the basic mechanism for making a payment is
fundamentally equivalent to handing over a signed stack of blank checks to the
merchant and having them fill in all the details.

Yes, this highlights how massively broken the system is. However, it also
highlights why it's necessary to avoid every Joe on the street having a
merchant account.

~~~
patio11
_For credit card transactions the basic mechanism for making a payment is
fundamentally equivalent to handing over a signed stack of blank checks to the
merchant and having them fill in all the details._

For check transactions, receipt of one check -- signed or otherwise -- is
exactly the same. The information printed on the check is sufficient to print
a "demand draft" -- a financial instrument which functions exactly as a check
_except_ it is printed by a third party and hence looks different and bears no
signature.

Yes, this really does mean that anyone who has ever glanced at one of your
checks can knock up a demand draft on any computer with a printer attached,
for any amount they desire.

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nhangen
Authorize.net has been a thorn in my side on multiple occasions. Absolutely
horrible, god awful customer support, and their departments are so
disconnected that you can't get anything done without an additional fax,
email, and a prayer.

The fees weren't horrible, but I'm very happy to be rid of the company behind
them.

------
krschultz
If I don't want to use Paypal, what are my best options?

~~~
keltex
This is just my own 2 cents. I use Merchant Plus (not affiliated with them in
any way). The application process did take a while (they were thorough), but
once approved everything has been very smooth and... get this... if you ask a
support question a real person responds.

Prices are competitive with Paypal.

------
InclinedPlane
s/Merchant //;

Modern banking is festooned with an array of regulations and legal
restrictions, not all of which are helpful in the modern age.

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cookiecaper
One of the exciting things about underground currencies like Bitcoin is a
freedom to experiment with new banking techniques, impossible to implement
with "real money" like dollars because of the regulations and paperwork. While
technically bitcoin et al may fall under guidelines for foreign currencies,
the likelihood of enforcement is very low, unless btc gets serious mainstream
traction (i.e., in your dreams).

Our current banking platforms are horribly obsolete and disjointed. In the day
of ecommerce everyone wants an online store and needs a merchant account. A
good demo banking platform with btc can light the way.

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pitdesi
This is pretty interesting... We haven't seen that to be the case at all for
companies that use <http://feefighters.com>. Also, the merchant account fees
(even for the smallest of accounts) on FeeFighters are significantly lower
than what this guy has reported.

