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  1. #1
    SitePoint Enthusiast scslawin's Avatar
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    Why 3rd party versus your own merchant account?

    As you may know, I've written for SitePoint before, and now I'm working on another article and I'd like to get your thoughts on this topic:

    Why third party credit card processors like PayPal, iBill, or ProPay instead of your own merchant account?

    I used to be in the camp that thought third party credit card services were the way to go. Now that I've found a great and inexpensive (I mean way, way low) merchant account, I'm starting to wonder why folks doing e-commerce would rather go third party.

    Third party processors allow you to get in with little or no investment, but their percentages are much higher (some in the 15% range, ouch!) and in most cases your company name doesn't even appear on your customer's credit card statement. Some, like PayPal, require your customers to "join" before paying (I lost two customers over this issue when I was taking PayPal as my sole CC processor).

    I found ProPay, which I like, but even ProPay has drawbacks, not the least of which is the relatively high fee (3.5% + .35 per transaction AND .35 to get your money). Another downside is the imposed limitations on how much you can process per month through ProPay. Plus, ProPay does not offer American Express or Discover, or online checks. Additionally there is a $250 fee if you want to clear cards in real time at the POS, and that's just for raw access to their backend nothing more.

    Don't get me wrong, of all the third party processors I like ProPay the best and I can see using them for extremely low volume stuff (like $100 or $200 a month) or experimental business ideas. But if you're doing significant business, I just can't justify the third party route.

    Perhaps some folks don't know that there are some really great merchant account providers out there who charge very little. Some people cite high fees to get and maintain a merchant account (application fees, statement charges, monthly minimums, software/terminal costs, etc), but if you do you your homework you'll find a merchant account like we did:

    2% discount rate plus .30 per transaction, no charge for AVS, no charge for chargebacks (wow!), no monthly statement fee, no monthly minimum, no terminal charge, no software cost, no cost for monthly statements, no charge for real-time gateway, accept Visa, Mastercard, Amex and Discover as well as online checks, and the only monthly recurring charge is $10.00 for their toll-free 24/7 tech support (which is actually waived in any month that you don't process).

    So we get all that for $10 a month. It was really a no-brainer for us. We easily save $10 in labor by clearing the cards in real time. Now we don't even see an online order unless its been approved electronically (even people paying with checks).

    So no matter which way you've decided to go, third party or your own account, let me know your thoughts. I'm very interested.

  2. #2
    Payment Acceptance Expert jconley2's Avatar
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    I've long been an advocate of purchasing a real merchant account for your company rather than going the 3rd Party Processor route.

    Personally, I only see four real reasons where using a 3rd Party Processor would be a good idea:

    1) Testing out a new business idea to see if consumers will respond well to it.

    2) The merchants credit is poor and/or they've filed for bankruptcy within the past two years. This type of senerio could affect their acceptance rate and if they would be accepted their rates and fees would be higher.

    3) Excessive chargebacks led to the merchant losing their merchant account and being added to Visa/MasterCard MATCH List which all Merchant Account Providers have access to.

    4) The merchant is setting up a temporary "shop" to collect fees for admission and donations. Like Tradeshows/Expos, sport tournaments, charity groups, concerts, etc.

    Ralph Wilson of http://www.wilsonweb.com has done a research project just on what you're talking about, entitled: "At What Point Is A Merchant Account Better Than PayPal or CCNow?": http://www.wilsonweb.com/wct4/pg-merchacct.htm

    I think you will find it quite detailed and help you considerably.

    You are absolutely right, they're very ligit Merchant Account Providers out there that truly are interested in your business and offer very low rates and fees. That's part of the reason why I started MerchantSeek.

    Those who want to reduce or eliminate some of the monthly charges like the gateway fee (which Real-Time Internet merchants are charged) should look into going with a Merchant Account Provider that maintains their own payment gateway (*cough* ECHO Inc. *cough*) instead of using a company like Authorize.Net.

    If you have any questions please let me know as I'm sure I can help you out with more information.

    To your success,

    Jim Conley II
    Your Payment Acceptance Expert
    Last edited by jconley2; Oct 22, 2001 at 14:47.
    Get FREE copy of "Top 3 Merchant Account Pitfalls REVEALED" -
    http://www.discount-merchant-account.com
    Touch-Tone Credit Card Processing - $39 setup & $5/month

  3. #3
    SitePoint Enthusiast scslawin's Avatar
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    Jim:

    Thanks. Your points are quite good. I'll read the Wilson piece and see what he has to say on the topic.

    ECHO is *exactly* the company we chose for our merchant account. I was really shocked at exactly how low their fees are compared to everyone else out there.

  4. #4
    Payment Acceptance Expert jconley2's Avatar
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    Sure thing, let me know what you think of that research that Ralph did.

    ECHO is a great company, I know one of the guys there quite well.

    If you have any questions please let me know!

    To your success,

    Jim Conley II
    Your Payment Acceptance Expert
    Get FREE copy of "Top 3 Merchant Account Pitfalls REVEALED" -
    http://www.discount-merchant-account.com
    Touch-Tone Credit Card Processing - $39 setup & $5/month

  5. #5
    SitePoint Zealot Lamar's Avatar
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    Hello-

    We have a merchant account and are not very happy with it. When we developed websites, we did a trade and ended up getting a merchant account from the deal.

    Our merchant account has a $99/yr member fee(this was hidden in fine print), a $25/mo gateway fee(which only seems to work with their terribly written Perl shopping cart), a $10/mo statement fee, and a 2.85% + $0.35 transaction fee. So, this past year it cost us $519 in member, statement and gateway fees just to have a merchant account. Now, if you sell a service or good, tack on the transaction fee. We got robbed! On top of that, our contact didn't even know what recurring payments were.

    Recurring payments are important to us, since most hosting payments are monthly. I really don't want to spend lots of time sorting out batch scripts and such. We need something similar to Paypal's subscription service.

    Echo is sounding too good to be true. Where can I find more info? Does the gateway support recurring payments?

    Thanks
    Lamar

  6. #6
    Payment Acceptance Expert jconley2's Avatar
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    Nah, ECHO isn't too good to be true. Yeah, they support recurring payments. They operate their own gateway, they don't go through Authorize.Net or any of the others. They maintain their own. No monthly gateway fee because of this. First 5 chargebacks are free every month, after that only $5 per instance. Rates for their Real-Time solution can be found here: http://www.echo-inc.com/echonline_rates.html

    Go to http://www.echo-inc.com for more information. In fact, give their sales folks a call. They are California based and deal with US based businesses only.

    To your success,

    Jim Conley II
    Your Payment Acceptance Expert
    Last edited by jconley2; Oct 25, 2001 at 15:39.
    Get FREE copy of "Top 3 Merchant Account Pitfalls REVEALED" -
    http://www.discount-merchant-account.com
    Touch-Tone Credit Card Processing - $39 setup & $5/month

  7. #7
    SitePoint Enthusiast scslawin's Avatar
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    Compared to the others they do SOUND too good to be true, but man are we happy so far. Great support too, 24/7. I've called them half a dozen times and they're always cheerful and helpful.

    AND: free AVS!

    Plus, for development purposes, they'll set you up a free "test" account that you can run live transactions through to test the gateway and such. None of the transactions run on the test account actually post.

    You can't beat $10 a month, all-inclusive.
    You're paying too much to be listed at Goto.com!
    Keep your ranking and save money with Position Guardian

  8. #8
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    Recurring Charges

    Great article. I think I'm going with ECHO. I am also not a fan of using PayPal outside EBay. If I want my business to look "big" and hope to obtain the confidence of my customers, I'm not going to ask them to use a P-to-P payment method.

    One question regarding payment options:
    How can I set-up a subscription service on a checkout screen? For example, I want my customers to sign-up for a hosting package (just an example) and want them charged for the set-up fee $50 and the monthly charge of $20 every month.

    Do I need to process this every month or can the system run them the first of the month for my business and provide a report?

    I would appreciate your help.

    BTW- new to the site. Great information! Thanks in advance.

  9. #9
    Payment Acceptance Expert jconley2's Avatar
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    Hi Dave,

    Welcome to the SitePoint Forums! So glad you could join us. Anytime you have a question regarding payment acceptance please drop me a note here in and forums. Others and myself are sure to be able answer any questions you may have regarding this topic here in the E-commerce section.

    Your question is referring to what is called in the payment acceptance industry as "recurring payments". ECHO and other Real-Time processing solutions support this feature which allows a customers account to be automatically charged each and every month according to the amount you will pre-determine when you setup your Real-Time payment acceptance solution. And if there are any changes all you'll have to do is login to your account and make the necessary changes on your "account setup" page (or similar page). With ECHO you'll receive monthly on-line statements from them letting you know what exsisting accounts were charged, new ones charged, how much they were charged, etc.

    When and if you setup an account with ECHO they will show you all the details on how to setup for recurring payments and get e-commerce added to your site. They are great people, as I mentioned previously I know one of the guys there quite well.

    Let me know if you have anymore questions or concerns about payment acceptance. Once again, welcome to the SitePoint Forums... come back soon!

    To your success,

    Jim Conley II
    Your Payment Acceptance Expert
    Get FREE copy of "Top 3 Merchant Account Pitfalls REVEALED" -
    http://www.discount-merchant-account.com
    Touch-Tone Credit Card Processing - $39 setup & $5/month

  10. #10
    SitePoint Guru hurtdidit's Avatar
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    hmmm, haven't been able to get a response in nearly 24 hours from ProPay, Revecom, OR echo!! Wonder what's going on??!

    "A small group of thoughtful people could change the world.
    Indeed, it's the only thing that ever has." --Margaret Mead

  11. #11
    Payment Acceptance Expert jconley2's Avatar
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    I had e-mailed ECHO the other day and it took 2 to 3 days for them to get back... much too slow if you ask me. They could answer their e-mail a lot faster... going to put a "bug" in their ear about ramping up sales staff so they can respond quicker to e-mails.

    To your success,

    Jim Conley II
    Your Payment Acceptance Expert
    Get FREE copy of "Top 3 Merchant Account Pitfalls REVEALED" -
    http://www.discount-merchant-account.com
    Touch-Tone Credit Card Processing - $39 setup & $5/month

  12. #12
    SitePoint Guru hurtdidit's Avatar
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    I'm getting frustrated with all of the budget CC solutions; 2checkout has been having all kinds of server problems, and now I can't even get a response from any of the others I have contacted!!!

    Guess I'll be sticking solely with PayPal a while longer. Wish PayPal would offer a more streamlined approach, I wouldn't have to go looking elsewhere!!

    "A small group of thoughtful people could change the world.
    Indeed, it's the only thing that ever has." --Margaret Mead

  13. #13
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    ReveCom ???

    Looking into ReveCom after reviewing ECHO information. I want to go with Echo, but can't figure out who to use for the merchant information.

    Do you always need a merchant account and a seperate shopping cart?

    I like Revecom since they give you this witht the cost of the service.

    Went onto MerchantSeek.com and couldn't find them listed. Hope this doesn't mean that they are an overnight operation.

    Any help with this one?

    Thanks.

    BTW- National Card Systems site is horrible. Not enough information on their turnkey solution: website hosting and ecommerce information. Just what do we get?

  14. #14
    SitePoint Guru hurtdidit's Avatar
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    Do you always need a merchant account and a seperate shopping cart? I like Revecom since they give you this witht the cost of the service.
    Personally, I've always preffered using a separate shopping cart; this way, you aren't married to the CC processor, and if you decide to move on, you don't have to completely rebuild your site!

    I, too, have been trying to get ahold of a number of CC solutions...all of which have not replied to my inquiries, and it's been over 36 hours now!!! What's up with that?!!?

    "A small group of thoughtful people could change the world.
    Indeed, it's the only thing that ever has." --Margaret Mead

  15. #15
    Payment Acceptance Expert jconley2's Avatar
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    Hi Dave,

    Frank is right about the all-in-one deals. Plus with a 3rd party provider if their servers mess up it delays you from being able to process orders. In other words, you're dealing with a middleman.

    ECHO has it's own shopping cart, though you don't have to use that one. If only you can get up with them, I would recommend calling instead of e-mailing. You're pretty much guaranteed to get someone then.

    You won't find Revecome listed on MerchantSeek, yet. I've got a 3rd Party Processor section almost finished, just need to have a reviews section added in so people can read and write reviews on the third party companies. I should have that section up before long, I just wanted to keep the merchant account providers separate from the third party crowd.

    I agree the Turnkey solution from National Card System is pathetic. I'm adding more detailed information to MerchantSeek in many sections and one of my "to do's" is removing that mess on National Card Systems. Should have that out of there by the end of this week.

    Revecom has mixed reviews... some think they are great, others think they aren't so hot. You can find more reviews on them by just typing in "Revecom" in the search box at the top and allowing it to search the forums... you'll find many threads on them for sure.

    To your success,

    Jim Conley II
    Your Payment Acceptance Expert
    Get FREE copy of "Top 3 Merchant Account Pitfalls REVEALED" -
    http://www.discount-merchant-account.com
    Touch-Tone Credit Card Processing - $39 setup & $5/month

  16. #16
    SitePoint Enthusiast scslawin's Avatar
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    Originally posted by daveinpa
    Looking into ReveCom after reviewing ECHO information. I want to go with Echo, but can't figure out who to use for the merchant information.
    I'm not sure what you mean. ECHO provides it all, every facet of the merchant card process. Merchant account, shopping cart, gateway, everything. You can use as much or as little of it as you like. All for $10 a month, $0 if you process nothing that month.

    You don't need a separate provider for merchant account, gateway, cart, etc.

    And by the way: when dealing with ECHO I've found the very best way to get an answer or help is to call them on their toll-free line. I've never waited more than a minute or two for a response. Forget the e-mails.
    You're paying too much to be listed at Goto.com!
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  17. #17
    SitePoint Guru hurtdidit's Avatar
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    And by the way: when dealing with ECHO I've found the very best way to get an answer or help is to call them on their toll-free line. I've never waited more than a minute or two for a response. Forget the e-mails.
    I appreciate that, but I have a difficult time convincing myself that a company that will not respond to my emails will really work hard for me after I signed up. Usually response to sales inquiries are the most prompt communication in most companies; what does this say about them? I haven't gotten a reply from them for nearly 48 hours now!!! And it was a simple technical inquiry.

    I'm frustrated that there are no decent lower-budget CC processors out there it seems. PayPal's not perfect, but thus far have stood out head and shoulders above the rest, at least for me...

    "A small group of thoughtful people could change the world.
    Indeed, it's the only thing that ever has." --Margaret Mead

  18. #18
    SitePoint Enthusiast scslawin's Avatar
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    Too bad, but I can appreciate your opinion. I'd just advise you not to throw out the baby with the bathwater on this one. ECHO has been absolutely tremendous for us. Any issue we've ever encountered has been handled with a single toll-free phone call.

    They handle it all for us, Visa, MC, Amex and Discover, and we just signed up to have them do our checks, too.

    I just can't say enough about how terrific they are.
    You're paying too much to be listed at Goto.com!
    Keep your ranking and save money with Position Guardian

  19. #19
    SitePoint Guru hurtdidit's Avatar
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    How long have you been with them?

    "A small group of thoughtful people could change the world.
    Indeed, it's the only thing that ever has." --Margaret Mead

  20. #20
    Net Senior Citizen tommatthews's Avatar
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    I wish we had someone like Echo in Australia. All the ones here charge an arm and a leg!


    affordable website design

    :: sydney australia ::

  21. #21
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    Echo

    Thanks for everyone's feedback. I checked out the Echo links and the cart looked horrible. I have been designing sites for 5 years on the side and have never added cart functionality. Does anyone have a site that is using Echo's merchant account, cart, etc.??? Echo talks about the "real deal"...
    http://www.echo-inc.com/echonline_tech.html

    I looked into Merchant America. Another cheesy solution. Maybe I'm missing something. I thought it had to work like this:

    1) use all-in one solution (like revecom)
    2) get a shopping cart (maybe Shopsite- free if less than 12 items to sell) and hook up with a payment gateway.
    3) use a form (perhaps get one from builder.com) and program it for Echo. Anyone go this route?

    Question: Is there a difference between a merchant account and a shopping cart or are they part of the merchant account?

    SCSLawin - I checked out the Position Guardian site and noticed CC authorization. Is this a form, ECHO cart or a separate shopping cart?
    http://www.positionguardian.com/order.cfm

    I hope to understand the process better and appreciate everyones help before I get sucked into a web hosting package with some bone-head ecommerce solution.

    This site is GREAT. Wish I knew about it sooner!

  22. #22
    SitePoint Guru hurtdidit's Avatar
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    daveinpa, a merchant account is basically a bank account that works with the payment gateway to accept CC payments online, collected from either a simple form or shopping cart solution. The three components work together integrally (is that a word even!?).

    Can't have one component without the other two, etc. Some, like revecom, PayPal, et. al. combine the merchant account and payment gateway into one tidy package.

    Authorize.net is perhaps one of the largest standalone payment gateways; you still need to get a merchant account from a bank to work with it. ECHO has their own custom payment gateway, I believe.

    Check out DansieCart (www.dansie.net) if you are in need of a robust, yet simple, shopping cart for not a lot of money. I have been using the Mall version for almost a year, and it's awesome.

    "A small group of thoughtful people could change the world.
    Indeed, it's the only thing that ever has." --Margaret Mead

  23. #23
    SitePoint Enthusiast scslawin's Avatar
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    I think mistake is trying to find a one-size-fits-all approach that will make you happy. You probably need to find a really good merchant account provider that has low fees and doesn't charge for gateway access (ala ECHO) and then locate a full-featured shopping cart that supports the gateway.

    ECHO is great in that they publish their standard openly and developers can produce whatever products they want to support the ECHO gateway. You can see their open standards project at www.openecho.com.

    Daveinpa:
    The Position Guardian checkout is something different, don't go by that. The site where we've implemented the ECHO gateway stuff is: www.gearpress.com.

  24. #24
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    Thanks

    OK. I think I got it. If someone only made this process easy!

    Here's what I think I'll do. Any holes?

    1) Sign-up for hosting at www.SSHost.com - Have not spoken with them, but they look hot.
    2) They'll give me my SSL or access to their SSL server. Would I still need a SSL certificate?
    3) I'll use either the Dansie cart (included in hosting) or a script and dump it into my cgi-bin.
    4) Sign-up for ECHOnline. Use their merchant account with a bank called First Regional Bank.
    5) Hook-up (program) the cart or scrip to ECHO specifications.
    6) Open for business.

    Can someone verify that it's that easy on paper? I would appreciate your help... and saving me some money in the end by not jumping on the first CC system all-in-one I could find.


  25. #25
    SitePoint Enthusiast scslawin's Avatar
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    Daveinpa:

    Looks right. On item #2, if the host gives you access to their SSL server using their certificate then you don't need your own. However, I will say that having your own certificate is more professional and gives your shoppers a better impression of your company.

    SSL certs are not expensive, if you can afford $125 you can get one for a year from www.thawte.com. If you have a discount hosting partner code, you can get that same cert for $100. If you can afford the $100, do it.

    Check out the Danise cart at their site: http://www.dansie.net/index.html and see if like it or if your customers will like it. They do not seem to have direct support for ECHO, which could make your job a little tougher.

    ECHO publishes a list of something like two dozen carts that directly support their gateway. You can find that list here:

    http://www.echo-inc.com/shopping_carts.html

    You could either find a host using one of these carts or deploy the cart on a host that will do it for you.

    Make your life as simple as possible. In my case, I wrote my own cart in an afternoon because it's really quite simple and I customized to exactly my own specifications.


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