Archive for December, 2006

Shortly after the new year, Microsoft plans to move forward with a plan to flag certain ecommerce and banking sites as “safe” in an upcoming update to its Internet Explorer 7 browser. It will do this by looking for a special kind of SSL certificate called an “extended validation certificate”. For an ecommerce site to qualify as safe their SSL issuer will need to do an extensive check on the ecommerce applicant as well as an audit by a company called WebTrust.

What these companies will be verifying are:

• Physical existence

  The certificate issuer must verify that the business’ legally registered address matches the address provided to the certificate issuer. If they do not match the issuer must visit the physical location provided by the business to verify that it exists. In these cases photographs of the business’ location must be provided.

• Legal existence and identity

  The certificate issuer must verify that the business is legally registered. DBA’s (Doing Business As) that differ from the business’ legal name will also need to be individually verified.

• Individual’s authorization

  The person applying for the certificate must be verified as being a legal representative of the applying business with the authority to apply for the certificate. This requires contacting the business as well as receiving a written verification.

• Domain name

  The domain name that the certificate is being applied for must be verified as being owned by the business. This means verifying the whois information as well as possible having the site owner make specified changes to the website to verify they do in fact control the domain.

• Telephone number

  The telephone number provided in the application for the certificate must be verified. This can mean calling the number or checking publicly available phone directories. Cell phone numbers will typically not be allowed.

Although at a glance this sounds like it will offer a strong assurance for potentially new online shoppers, there are issues with this process. Business registered for less then three years may require further validation including verification that they have a valid business bank account. Because many of these checks require government filings certain business entities (sole proprietorships, general partnerships, unincorporated associations) will not be able to get these certificates. Also, due to the amount of work that must be performed by the certificate issuer to validate the business, the cost for these certificates will be substantially higher with costs possibly reaching as high as $500 or more.

Because only a limited subset of all businesses will be eligible to receive these certificates. Additionally, only Internet Explorer 7 will support these certificates. This means the extra validation done will not offer any additional credibility in all other web browsers and thus provide virtually no additional benefit to merchants.

Additionally, Microsoft is implementing this on an unfinished specification. This means if the specification changes, and it likely will as most of the participants in creating these specifications do not like the current draft, then these certificates may not be valid in the future or may not be compatible with all browsers. Imagine paying for an expensive SSL certificate that results in some browsers saying your site is verified while others saying it is unsafe.

Technorati Tags: SSL, ecommerce, Verisign, Comodo

When shopping around for a merchant account provider, discussing rates and fees seem to be what the discussion focuses on. But are you asking the right questions that will help you determine that the merchant account is right for you? Below are some questions that should help to take the discussion to a deeper level and reveal some details that will help you determine if the provider is a contender or a pretender.

1. Am I locked into a contract?

   When establishing a merchant account every merchant must sign a contract specifying the responsibilities of both parties. You must agree to abide by Visa and MasterCard rules as well as those of the merchant account provider. However, this does not mean you have to be locked into a contract for any length of time (to learn more about contracts and term lengths see Understanding a Merchant Account Contract’s Length of Term). Visa nor MasterCard require merchants to use their services for any length of time. Contracts that require a merchant to keep their merchant account for any length of time is solely at the discretion of the merchant account provider. The fee associated with terminating a contract early is also at the discretion of the merchant account provider and thus can vary.

   Contract lengths are not always disclosed up front so you must be sure to ask your provider what yours is. Make sure you don’t ask, “Is there a contract?” because the answer is always, “Yes”. You want to be sure to find out how long your contract is for.

2. Is there a monthly minimum fee?

   The monthly minimum fee, while seen by merchant account providers as a way to guarantee themselves an account is worth establishing, is seen by merchants as a penalty for being small or having a slow month. (To learn more about the monthly minimum see The Monthly Minimum Explained). The monthly minimum fee is not required by Visa or MasterCard. Larger merchant generally don’t have to worry about this fee as they will process enough sales during a month to never see it. Smaller merchants or seasonal merchants can see their costs for accepting credit cards be as much as double of what they should be without this fee.

   A good follow up question to this would be, “Why do you charge a monthly minimum fee”? If they tell you it is a required fee from Visa and MasterCard, you now know they aren’t being very honest with you and you can end your discussions with them.

3. Is the equipment/software you are selling proprietary?

   Just like computer software not all credit card terminals and software is compatible with all merchant account providers. This is intentional as the merchant account provider selling the equipment is hoping by selling you proprietary equipment they will make it more difficult for you to leave them for another merchant account provider. (See Avoid Proprietary Credit Card Machines). It’s one thing to be locked into a contract with a merchant account provider, but to also be locked in because your credit card processing equipment won’t work with most other merchant account providers is overkill. A good follow up to ask is if there is any equipment they can offer you that is not proprietary and can be used with other processors.

4. How long does it take to get my funds?

   In the past, a merchant didn’t get paid on their credit card sales until they mailed their credit card slips in to their bank. It could take days or weeks for a merchant to get their funds. Nowadays it is all done electronically. As a result funds for processing Visa and MasterCard transactions should never take more then two business days to arrive in your account. Keep in mind these a business days and not calendar days. Holidays and weekends are not considered business days and anything that occurs after 2 PM are considered as happening the next business day (just like your local bank). If a merchant account provider tells you that it will take more then two business days for your funds to reach your account ask them why.

5. My average sale is $xx.xx. How much would I pay with you?

   This question gives you an opportunity to see how their rates and fees will apply specifically to your business. It’s one thing to see their sales pitch and the numbers as they present them, but these examples are generic and may not reflect what your business will be paying. Have the merchant account provider calculate what an average transaction will be for you. Follow up by having them figure out what a typical month will cost for you. If you can, even go so far as to try to have them calculate what a month would cost for you with some downgraded transactions. If you have an existing merchant account and are considering switching to a new provider this would be a good way to compare the two. An even better test would be to compare their results with those from our Advanced Fee Calculator and Advanced Account Comparison Calculator.

6. What will my fees be if I don’t do AVS?

   When advertising merchant account rates the vast majority of merchant account providers advertise their qualified rate and other basic fees like monthly statement fee. This is to keep the advertising simple and is what most merchants will be concerned with as it should constitute the majority of their processing costs. But other fees apply and for non-retail businesses a common reason to pay additional fees is related to doing AVS. Non-swiped credit card transactions require AVS to be performed every time. Not performing AVS will result in the transaction downgrading to a higher rate. By asking this question you will find out what your non-qualified rate will be as this is the rate charged for failure to do AVS as well as other processing errors and some special credit cards.

7. Is this an introductory rate? Can my rates change?

   A common tactic amongst some merchant account providers is to quote a merchant one rate and after a set period of time raise their rates significantly. Naturally this kind of bait and switch is unethical and harmful to the merchant. Rates should only ever change whenever Visa and MasterCard make a change in Interchange. This happens on average once a year, although it can happen three times in a year or it can go years without happening. In these cases all merchants will experience a rate change so your business is not being singled out. But if a merchant account provider gives you any other reasons for your rates to go up then it is in your best interest to find a new merchant account provider.

8. What makes you different then the other guy?

   Although there is some advice that can be given related to this question, the best reason to ask it is so your gut can weigh in on the decision. It is a wide open question that forces the merchant account provider to really describe themselves as an entity and reveal a bit about themselves not only as a company but as a person. This is a great time to get a “feel” for them. Numbers and technical specifications are important when making many decisions, choosing a merchant account provider included. But how many times have you wish you listened to your gut feelings?

Technorati Tags: merchant account, merchant account provider, avs, merchant comparison calculator, Visa, MasterCard, Interchange, credit card

MasterCard has announced a new program where small businesses can order personalized MasterCard branded gift cards. These are similar to the gift cards currently available for purchase through local banks and some stores. The cards can be redeemed anywhere MasterCard check cards are accepted. The gift card can be customized with a company logo, a recipient’s name, and an embossed message. Cards are available in denominations of $10 up to $500.

You can order these gift cards online at http://www.mastercardgiftcard.com/.

Technorati Tags: MasterCard, gift cards, check cards, small business

Google is stepping up the pressure on Paypal yet again. Apparently they feel the free processing has been a great way to get merchants on board with their system. So much in fact they are extending it through 2007.

With the holiday season quickly approaching, we wanted to do something to say “thank you” to our merchants. To help out during this very busy shopping season, we are processing all of our merchants’ Google Checkout sales for free during the holidays. From November 8 through December 31, 2006, Google Checkout merchants will receive free processing for all of their Checkout sales, regardless of whether or not they use AdWords. If you don’t currently use Checkout, don’t worry—new Checkout merchants are eligible for this offer as well, so sign up now. To all of our merchants: thank you for contributing to the success of Google Checkout and Happy Holidays!

In addition, they have open Google Checkout to allow purchases to be made from other countries outside of the United States.

Technorati Tags: google checkout, paypal, processing fees, adwords

One thing that isn’t often mentioned up front is the term of the contract you have to sign to accept credit cards. When signing a contract to establish a new merchant account you are usually, but not always, committing to staying with the merchant account provider for a minimum length of time.

There are three different kinds of contract terms a merchant may be subject to. They are:

1. Open Ended

   There is no term specified in the contract. The merchant can terminate the contract at any point in time without penalty. This is the ideal term for merchants.

2. Specified Length

   The merchant is locked into the contract for a minimum period of time. This is typically two or three years but can be as liitle as one year or as much as four years. If the merchant terminates the contract prematurely they may be subject to fees and/or penalties for doing so. If the merchant terminates the contract after the term has expired no penalty will assessed.

3. Auto Renew

   This is similar to the specified length contract except the contract automatically renews itself when it ends. If the merchant does not indicate to the merchant account provider that they wish to terminate the contract when its term expires they will automatically be locked in for another term subject to the same penalties of early termination. This is the worst kind of contract a merchant can subject to.

When shopping around for a new merchant account provider, be sure to find out what type of contract they offer. If there is a contract term involved, make sure you are aware of the termination fee (also known as a cancellation fee) and whether the contract is auto-renewing. The last thing you want to do is get locked into a contract for a long period of time and find leaving difficult because the termination fee offsets any savings you may have gotten from a new merchant account provider.

Technorati Tags: merchant account, merchant account provider, cancellation fee, termination fee, contract, accept credit cards, merchant