As described in our article An Introduction To Merchant Accounts, there are two forms of ecommerce payment acceptance – the merchant account and the third party processor.
In order to operate with your own merchant account, you need your own merchant account license. Using a third party processor means you’re utilizing someone elses in a legal and legitimate way.
Having the ability to charge people’s credit cards is a huge responsibility – after all you’ve heard all the scare stories of stolen and misused credit cards.
Whilst I believe that these stories are generally over-rated, and due to current legislation and technological security features, using your credit card online is as safe, if not safer, than using it offline, I have still experienced credit card fraud once myself in the past.
Someone stole my credit card details and managed to rack up $600 worth of adult site subscriptions before I received my bill and noticed the problem.
This was four years ago and despite using my credit card online almost every week, I have never experienced another problem.
These days, online merchant account gateways can check where abouts in the world a transaction is taking place from and compare it to the registered address of the card to reduce fraud.
Card security numbers are used extensively (they’re the last three digits on the signature strip of a Visa or Mastercard) which means even if someone has your credit card number and expiry date, it’s still difficult to make fraudulent purchases.
Furthermore, most online merchant accounts won’t divulge the customer’s credit card details to the website they’re buying from.
And then there’s always the chargeback – the process of your bank refusing to make a payment to a company because either your card was used fraudulently or your purchase wasn’t satisfactory – even after the charge has been made. It was in this way that I managed to get all my money back when my card was used fraudulently – all’s well that ends well.
But all this goes to illustrate my point that if you’re looking for a merchant account license – it’s a big responsibility – hence all the paperwork involved.
So don’t be fearful of a five or ten page application form. The merchant account providers are weighing up your business – trying to weed out those businesses they feel would be unsuitable for this kind of responsibility.
The good news is that in my opinion, with all the recent developments in fraud prevention, plus the competition in the market (and it is fierce – some providers are paying over $5 per visitor in the pay per click search engines!) means that it’s easier than ever to get a merchant account license.
The licenses are non-transferrable – you can’t gain one then sell it on as the process involves checks on your own business. Much like you couldn’t do a driving test then sell your license on to someone else.
And don’t forget, if you get refused, or simply don’t fancy all the paperwork – you can always use a third party processor – with whom you don’t require a merchant account license of your own.