Merchants to Merchant Account Providers

Stop what you are doing and go to Google, type in “adult merchant account” and see what you get. You will be served up oodles of sites telling you they offer adult merchant accounts and are experts in it! Seriously, how many of those names do you even recognize?

It seems that as the regulators and associations are clamping down on high-risk business, more and more companies are arriving in the space claiming to be the next best thing for adult merchant accounts.

Does having a merchant account make someone an expert in merchant processing? No more than owning a car makes them an expert in traffic flow theory.

As is true with startups in general, many will not last past the hype that they create upon entry (but hey, thanks for the drinks). These self proclaimed experts will point to their state-of-the art technology, a fresh perspective on high-risk payment processing, and relationships with new banks to high risk.

If you find yourself in the cross-hairs of one of these companies, besides the obvious questions of how long have you been in high-risk processing and what programs do you currently support, here are a few key questions that you may want to ask them.

Who is your on staff risk manager and what is their experience?

Ask them specifically if this person is their resource or a partner’s resource. Follow up with a scenario such as “if my chargebacks are increasing, who specifically can I go to for identifying the root cause?” I would suggest talking to that person to get a level of comfort with their expertise.

What controls are in place to ensure that my data is protected, specifically from other merchants?

As bizarre as this question might seem at first pass, let’s not forget that this industry, not too long ago, saw allegations flying regarding the use of merchants’ data by other merchants for marketing to their consumer lists. Getting consumers to signup and continue being an active member is the key to your revenue stream. Are you really certain that your data will not be accessible to another program?

Who actually owns the system’s source code? Are they still actively developing it? If you need a customization, how long will that take?

More than likely, they do not have anything to do with the actual platform and have merely white labeled an existing one for their needs and are now an administrator for any accounts that they bring on to the system. If this is the case, you should find out what their contractual obligations are with that provider to mitigate any risks to you if they do not fulfill their obligations.

What is the fee structure?

I think anyone who has a corporate checking account is already familiar with the concept of complicated fee structures so that you don’t really know what you are being charged. The list of items that are being proposed in your billing package will likely look very harmless — nothing more than 15 cents, but guess what, your one transaction that wasn’t even a successful sale will hit multiple billing items.

To get a full understanding of what you are going to be paying, put together a scenario of volumes, have your provider respond back with a detailed list of what the cost is for each one of those items on their pricing sheet and if one of them is blank, find out what would trigger that item being charged.

Do this until all items are understood and then place it against your current volume to see if this is truly a great deal. Further, this will allow you to compare multiple providers side by side in the proverbial apples to apples comparison.

What nuances are there that I should be aware of when moving my volume to your platform? What is the migration plan?

If they can’t communicate a satisfactory plan for your business migration from IPSP to merchant account or from platform to platform, then how are they going to be your expert regarding account fluctuations and regulatory developments?

There are many questions that you should be asking these providers and I have only presented you with a few that you may not have considered. As a final thought regarding expertise: Does having a merchant account make someone an expert in merchant processing? No more than owning a car makes them an expert in traffic flow theory.