Gettin' Down to Business

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Advance Notes: Stock photographers are realizing that processing credit card transactions is an inherent part of doing business on the Web. Since credit cards are the best way to conduct business on the Web, the question becomes, "How do I leap from operating by mail, phone and fax, to credit card processing?"
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If you want to emerge from the last century's way of doing business (checks, cash, and billing), you will want to consider accepting credit card payments on-line. It's called having a "merchant account." You'll experience less paperwork, no problems with bounced checks, and instant revenue deposited directly in your bank account.

What's the first step to signing up for a merchant account? Check with your ISP (Internet Service Provider) or your Web hosting service. Either of these may already provide merchant account services for its members. However, most do not. You are then left to search out a service on your own. Here are some tips to getting a merchant account.

THE LOCAL BANK

Your local bank probably offers credit card services, but since you operate as an on-line Internet company, you might find resistance from your bank. They are used to dealing with local retail merchants (the shoe store, hardware store, etc.) and not an Internet "mail-order" business. Also, your bank might require a security deposit of $5,000 to $10,000. Another problem: some banks will deal with only two of the four major credit card companies. So you might find yourself having to work with two banks in order to have all four (MasterCard, Visa, Amex, and Discover) available to your customers. Another problem in dealing with banks is they might charge you a higher fee for processing your cards (4% to 5% instead of 2.5% to 3.5%).

A BROKER

Another option is to get your Visa, Master, Discover, and Amex accounts through a "broker." A broker is a company that will handle the bookwork of dealing with the credit card companies. Brokers are Internet-based, and specialize in getting credit card accounts for on-line businesses such as yours. The broker will charge you an extra fee on top of your discount rate for this service. It's not difficult to get approved by the broker. No security deposit is required. Because it is an Internet-based company, you can apply directly on-line. If you are a foreign company and want to get U.S. accounts, they can usually help you, too.

A set-up fee for a broker should be around $125 to $400. The only other fee you'll have to deal with would be for the software you'll need to process the credit cards. You can usually purchase the software outright, or rent it for around $20 to $30 per month. Brokers can also supply you with "shopping cart" software. You'll be able to start taking orders on-line right away.

FULFILLMENT HOUSE

Another approach you can take is to sign on with a fulfillment house and use their merchant credit card account system. The company will handle, process, and ship your orders through an 800-number with live operators (24/7); they will keep track of your database, provide some customer service, process credit cards and ship out orders. These companies have their own merchant credit card accounts and will let you use their accounts to process your orders -- for a fee. The fee is usually a 6% discount rate instead of the normal 2 to 4 percent that you would pay if you had your own account.

There may be a fulfillment house within visiting distance in your nearby city. Consult the Yellow Pages or a search engine, under "mailing lists," or "Web hosting" etc.

If you are processing only a few thousand dollars of orders per month, this may be the preferred way for you to use credit cards. Otherwise, it is more cost effective to get your own merchant account.

THIRD PARTY

A final option is to outsource your credit card transactions to a third party service that, in effect, handles your on-line money management for you. Companies like "iBill*" let you use their merchant account. They are able to process your credit card payments for you in addition to other services. They will also handle your banking, affiliates (if you have any), and customer service issues. They can also handle payments by on-line checks, and orders that come in through the telephone.

If you already have an Internet merchant account and handle your own customer service, iBill will provide transaction processing, fraud control, business reporting tools, subscription capability, and shopping carts.

The good part is that you can be set up to take credit card orders in a week because you are using their merchant account. The down side is they charge you a processing fee of 11 to 15 percent of the selling price of your product. The percentage depends on the volume of business you are doing.

Third party companies like iBill set up your order forms, process your credit card orders, and manage the hassle of mailing you checks if any come in through that method of payment. A disadvantage of using a service like this is that you don't get paid for up to 60 days after your customer puts in their order.

Once you find that your website is successful, you may want to move on to handle all of your own financial transactions in-house. But initially, a third party company like iBill can be worth the fees, etc. to get you started.

Setting up a merchant account to process credit cards on-line can increase your sales three to four-fold or more. But getting the right service provider is not always easy. Some of the drawbacks you'll want to watch out for: Poor records of approved accounts, slow client-approval rates, customer service complaints, no follow through on service providers, poor performance in general, and slow processing of paper work.

To check out who we recommend, go to:> http://www.marketingtips.com/creditcards/t.x/44127 , http://www.photosource.com/iBill.html<

Rohn Engh is director of PhotoSource International and publisher of PhotoStockNotes

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