Why set up credit card processing for your business?
In an age of online business and mobile payments, it is not only important but necessary for any business to have a merchant account and the ability to accept credit and debit card payments. While some physical locations like convenience stores and certain kinds of specialty food service businesses like carts and pop-up vendors can temporarily operate on a cash-only basis, the truth is any company planning on a long-term presence has to have as many options as possible for customers to pay.
The good news is nearly every company from the most ephemeral startup to a nine-figure-a-quarter corporation has multiple options for accepting credit cards ranging from online store providers to electronic payment processors to commercial banks. If you are in a situation where you need the ability to accept credit card payments and you aren’t sure which option is best, here are some things to consider:
Simple Payments
If your business is one that only needs to accept the occasional payment with a credit or debit card, it probably doesn’t make sense to set up a full-fledged merchant account. You may find you are better off with a service like Amazon Payments. After entering your bank account information and some basic identifying information for your company, you will be able to take payments from anyone who has an Amazon account using the same back-end as Amazon itself uses.
This is probably not the best option if you are running a high-volume business, as Amazon Payments can be difficult to integrate with a website and will be an obstacle if your company’s customer base increases in size over a short interval. As a stop gap between your first sale and your first few dozen shipments, it is a quick and easy way to at least get the doors open, however.
Virtual Merchant Account
Once you find you are doing customers, you will want to look into some of the options that will open what is known as a “virtual” merchant account for you. This is most commonly done through a service like Stripe. Some of the major e-commerce providers use Stripe as their backend and will open an account for you if you open a store, but you can also set up your own account and integrate it with your own custom storefront or shopping cart if you like.
The reason this is called a “virtual” account is because Stripe processes payments for your customers on your behalf and takes a standard percentage of each transaction as its fee. Otherwise, services like Stripe are generally free to use and to experiment with. There is a bit of an incline when it comes to learning how to set up the code to process payments and to operate a web-based interface, but once those pieces are in place, the service is quite reliable and Stripe does provide comprehensive tools to monitor performance and manage your customers.
Financial Institution
The traditional approach is to go to your business bank and have them set up a first-hand merchant account that will process payments and deposit funds directly into your bank account. One detail you will have to be prepared for is the fact that any chargeback or dispute will have an immediate effect on your account. With other payment systems, there is often a delay between disputes and the potential deduction of funds from your account. When you are the payment system, the money comes directly out of your account, so you will need to maintain a significant float to be certain you can absorb any unexpected problems.
Setting up a merchant account often involves a credit check and sometimes requires a deposit or minimum balance agreement. Your account and tokens can then be used to either program physical terminals or to integrate your account with providers of online merchant services like all-in-one web hosts.
It is vitally important you spend at least a little time with both your bank advisor and a technical advisor to best decide how to deploy your technology resources and how to integrate your new merchant account, virtual account or simple payment service. This is the true core of everything you do in business, so it is imperative you understand all the details and ramifications. A merchant account is definitely something you don’t want to allow to get out of control. At the same time, it can be a huge benefit to your business if managed properly.
— Article by Evelina Brown
