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Payment Processors: Gateways and Beyond

Part 2 of a series about electronic payment providers and what merchants should look for

Today’s online retailers might have an edge on traditional brick-and-mortar stores because they don’t necessarily need as much experience or know-how to become successful. However, those with the most understanding about the behind-the-scenes of business are better equipped to make the right decision.

In Payment Processors: Unraveling the Mystery, we explored terms that are related to payment processing, and we looked at how payment processing works. We also took note of what to consider when shopping for the right payment service provider.

In this second installment of our three-part series, we examine traditional credit card processing, as well as some new ways to accept credit cards using your mobile phone.

Credit cards and gateways

Now let’s briefly look at credit card processors. TopTenReviews.com recently released its 2012 top-10 rankings for both credit card processors and mobile credit card processors. Within the rankings, there are three companies that made it to both lists: Chase Paymentech, Leaders Merchant Services and Merchant One. If your business needs encompass traditional and mobile payments, it might behoove you to research these particular companies.

Those with the most understanding about the behind-the-scenes of business are better equipped to make the right decision

Two of the more well-known payment gateway services are Authorize.net and First Data Corp.

Authorize.net: Authorize.net is a popular gateway service that began in 1996, which clearly makes it a veteran in the online gateway business. CyberSource Corp. acquired Authorize.net in 2007, and Visa acquired CyberSource in 2010.

Authorize.net offers payment processing through reseller partners—one of which happens to be Chase Paymentech, mentioned earlier as a top credit card processor. Resellers’ fees vary, so if you want to be an Authorize.net customer, a little more research is warranted.

  • Fees: A one-time setup fee can range from $100 to $200. Most of Authorize.net’s payment processors will also charge between $10 to $50 per month, and anywhere from 5 cents to 20 cents per transaction. There are several other features you can apply to your account, such as fraud detection or electronic check processing, and each one will vary in cost based on the processor you choose.

  • Pros: Authorize.net, CyberSource and Visa are all large enough companies to provide a sense of security for you and your customers. Authorize.net merchants can choose from a variety of features, which gives a sort of “build your own” service and allows for expansion as your business grows. Also, Authorize.net offers a live chat option for customer support.

  • Cons: Costs are high compared to the many other options now available for small online businesses.

First Data Corp.: First Data is another leading provider in financial services. Originating in 1964, the company has business operations in 35 countries and serves customers in 80 countries. Last year, First Data topped Fortune’s ranking of Financial Data Services companies on the Fortune 500, ranking No. 236 overall.

  • Fees: First Data doesn’t publish its service fees, but provides a way for merchants to inquire through its website.

  • Pros: First Data has a solid history of financial services and provides secure transactions. First Data also provides live chat, which gives a sense of easy access if you are ever in need.

  • Cons: Finding answers on the company’s website can be tricky.

While this is only a snapshot of the variety of credit card processors available to you, it should get you started in the right direction if you want to find a traditional credit card processor. Meanwhile, mobile payment processing is the wave of the future. Below is a sample of apps for your phone that let you do business anywhere you go.

Mobile payment processing works well for merchants who sell online, but also make their products available on location

Mobile payment processing

As a merchant in the 21st century, it’s wise to understand that mobile technology is gaining popularity in payment processing options. Those merchants who do a lot of finger-work on their mobile or portable units will recognize that the ability to swipe a customer’s card on their mobile phone could be an invaluable tool.

For example, Lance Bloyd, an online merchant at Bucking Bull Pro, used to bill his customers and wait for the check to arrive in the mail. He was also limited to cash and check payments when he hosted booths at bull-riding events. After Bloyd downloaded a payment app to his iPhone, he was immediately able to process credit card payments for phone, mail and event booth orders.

It’s this sort of option that works well for merchants who sell online, but also make their products available on location. You could even use a mobile app to process credit cards at a yard sale. Now, isn’t that fantastic?

Here are five popular mobile apps to consider:

Intuit GoPayments: If it has to do with money management, of course Intuit is in to it. QuickBooks users will find GoPayments handy because payments received are synced with their merchant QuickBooks records. There’s a $13 monthly fee, plus fees of 1.7 percent to 2.7 percent per credit card transaction. Other fees may apply to certain cards. GoPayments also has two other plans for a fully-integrated financial management system.

Swipe: Swipe by AppNinjas is the credit card terminal Bloyd uses. Available through the iTunes store, Swipe provides a card reader that accepts all major credit cards and supports a host of payment gateways. However, you will still need to provide a merchant account or use the one offered by AppNinjas, which charges $24.95 a month, and transaction fees of 1.74 percent to 3.79 percent, plus 24 cents per transaction.

PayAnywhere: PayAnywhere is a mobile payment service by North American Bancard. It provides merchants with a card reader and there are no monthly fees. PayAnywhere also provides the merchant account, and the only fee you pay is 19 cents, plus 2.69 percent to 3.49 percent per transaction.

PayPal Here: The newest kid on the block, PayPal Here, includes a thumb-sized card swiper that attaches to your mobile device. But it also goes one step further by allowing users to simply take a photograph of a credit card or check as a way to process payments. All swipes and PayPal transactions have a flat 2.7 percent fee and PayPal Here offers free invoicing.

Square: Finally, another popular option to consider is Square. When you sign up, you will receive a free card reader. Square charges no monthly fees, but transaction fees are 2.75 percent per transaction. However, if you key in the credit card information rather than swipe the card, charges are 3.5 percent plus 15 cents per transaction.

In the third part of this series, Payment Processors: Comparing Third Parties, we explore third-party payment options and compare their services.

Editor’s note: This article was updated to include information about GoPayments.

About the author

Sarah Brown
Sarah Brown is a freelance writer who writes about e-commerce and small businesses. She recently graduated from Chico State with a journalism degree and is also a budding online entrepreneur, having launched two Web businesses and her own line of handmade products. Opinions expressed here may not be shared by The Online Seller and/or its principals.

  • Anonymous

    Now, let’s get
    one thing straight. PayPal is not a “financial institution” in any sense that a
    licensed bank or Visa or Mastercard or Amex or Discover is. PreyPal is, in
    their own words, a “merchant of sorts”, licensed as required in some states merely
    as a “money transmitter”, like Western Union.

    All the clunky, faux
    banking services that PreyPal offers are provided via a “merchant account” with
    the infamous Wells Fargo Bank, that is, a merchant account just like any merchant
    may have with their banker. PreyPal is no more than a clumsy middle man riding
    precariously on the back of the banks’ existing payment processing systems; nor
    is PreyPal dynamically linked into any of these payment systems, as are the
    bank-issued payment cards.

    As PreyPal is
    not a licensed bank, there is no prudential oversight of PreyPal; merchant
    users who leave funds “on deposit” with PreyPal are simply unsecured creditors,
    just waiting to be bilked, or to be subjected to payer-biased transaction
    mediations, and funds holds that are clearly in breach of the conditions that
    generally apply to PreyPal’s money transmitter licences.

    Both the eBafia
    and PreyPal are clunky, unscrupulous, commercial entities that deserve to be
    the subject of in-depth audits by court appointed special masters, particularly
    in respect to the faux “bank” PreyPal’s habitual breaching of the conditions of
    its money transmitter licences, and the eBafia’s blatant and conscious aiding
    and abetting, before and after the fact, of the rampant shill bidding wire fraud
    being perpetrated by unscrupulous professional merchants on naïve buyers.

    With PayPal at POS and “PayPal Here” merchants can expect the full package of PreyPal services: hard-wired “buyer protection”, funds holds, rolling reserves, and all the scamming buyers the criminal facilitator eBay has encouraged to crawl out of the woodwork—won’t that be fun for merchants, just like on eBay.

  • Bob

    I have merchant facilities with the ANZ bank in Australia, problem with phone orders, I have no security if a customer decides they want their money back as the bank says you “manual Keyed” number and have no signature,, no argument they get their money back including freight I bought on the customers behalf. This happens rarely but I’m not happy when it does. The couriers signed docket does not count. Merchant facility looks like the cheapest alternative for micro businesses, which is why  I still use it

  • Testshoot

    What about Intuit’s GoPayment.?  Obviously Intuit is a major player (Quicken).  They have the same smartphone swipe option Square made a hit with and was the second one I chose.

  • Efoxxx

    Don’t forget about Intuit’s GoPayment mobile processing!



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