Merchant Accounts

Mitch and Sarah Farber
In our line of work, we are constantly approached by merchants of all types asking us: "When is the time right for me to obtain my own merchant account for my websites?" While we would love to just yell out "Right now!" the answer is not that simple.

Deciding to obtain your own merchant account and freely choosing your payment gateway will depend on the specific entities of your business and your particular business needs. The advantage or disadvantage of having your own merchant account will differ greatly with respect to a company, the price of the business products, recurring billing, high or low risk and other factors.

When looking at the pros and cons in general, it is evident that obtaining your own merchant account usually is the most flexible way to go, but it might not be the right choice for everyone as it takes more commitment to detail and steady transaction volumes. However, depending on the flexibility of the payment gateway you are using (the company and software actually processing the transactions), having your own merchant account will, in almost all cases, save you money in processing fees and allow you the ability to increase sales conversions while minimizing fraud.

With particular emphasis on a company's sales volume increase, the flexibility of having your own merchant account unequivocally increases and is absolutely warranted to the continued growth and profitability of an online and retail merchant's business. But most merchants should not try to process credit cards with their own merchant account without having a reputable payment gateway and a customer service solution behind them.

The idea that there is great difficulty in obtaining and maintaining a merchant account is slightly outdated. For merchants selling tangible products (adult or mainstream), a merchant account can typically be set up within one business day with no previous volume requirements, depending on the location of the merchant geographically.

The ease of obtaining a merchant account has increased over time with the influx of competing sales forces within the banking industry. Visa and Mastercard are tough on high-risk businesses, which include adult, gaming, travel, etc. However, a merchant that has fairly decent credit, does not live in a Third World country and is willing to follow proper operational procedures can usually get a merchant account without difficulties.

For merchants with adult membership sites, most banks prefer merchants who have already established their businesses, whether using a third-party processor (IPSP) or with another merchant account solution. Many high-risk merchants use solid IPSPs such as CCBill, Paycom and others as they grow their businesses to the point where a merchant account is a viable option. Banks that deal with high-risk merchant accounts for membership or downloadable content sites typically require the current monthly processing volume to be more than $50,000, whether it is offshore or domestic.

Unlike 10 years ago, today's Internet-savvy merchants have a variety of processing options available to them, including many alternative payment methods. Using a processing gateway that offers the proper tools will help you greatly succeed in having your own merchant account. Many merchants think that if they have their own merchant account, they will need to handle their own customer service, scripting, fraud scrubbing, etc. That is absolutely not true. Some payment gateways (such as Netbilling) will handle all of your customer service 24/7/365, do all of the backend fraud scrubbing and will give you full control over all settings, email customization and form customization. They also will handle the complete implementation and provide you with exceptional support.

We must warn you, however, that many companies do not provide the same tools and are not built to handle the extensive needs and requirements of high-risk merchants.

Choose a processing company/gateway that is well known in the industry, has a strong track record and is there when you need it — with live telephone support, not just delayed email responses. Also, be sure to inquire about whether the company you choose provides call center services and even telephone order taking, cancellation upsells and member-retention incentives, where applicable.

Back in the "Wild West" of the adult industry, many merchants attempted to maintain their own merchant accounts without the proper tools to do so and did not follow proper billing practices, thus losing their merchant accounts. However, the landscape has changed, and many of today's advanced payment gateways will service all of your transaction processing and call-center needs at very reasonable rates.

In summary, online and retail merchants have many options for payment processing and customer service. For e-tailers who wish to have complete control over the financial aspects of their businesses, having a merchant account is a viable option that can save money and provide tremendous flexibility.