Posts filed under 'Ecommerce'
I just learned about a system that I was unfamiliar with for online businesses. It is called check drafting. Now my first thought was that check drafting was just a fancy name for ACH (Automated Clearing House) bank drafting, but surprisingly it was different.
Check drafting works very similar to the ACH system. ACH is essentially an electronic method to debit a checking account. Check drafting does the same basic task, but there are a number of benefits offered by check drafting that makes it superior to ACH. The main benefit of check drafting over ACH is more protection to the business accepting checks through the check drafting system.
ACH chargeback system:
ACH is governed by the NACHA (National Automated Clearing House Association). NACHA has some very stringent regulations and consumer protection is similar to credit card processing companies. Customers can request a chargeback over the phone, and like credit cards, they have 180 days from the time of their purchase to make a chargeback. Anyone who has dealt with chargeback fraud, or just Chargebacks in general, knows how difficult it can be to win them, even when no wrong has taken place.
Check drafting chargebacks:
Electronically debited transactions through the check drafting system take only a few days to enter the businesses bank account. Unlike the ACH system, check drafting also offers much better protection for a business.
- A customer must go to their bank and fill out an affidavit to claim that the draft was a fraudulent transaction. The customer has 30 days from the time they receive their statement to do this.
- The customer’s bank then requests that the processor explain their position (why the customer was billed).
- When the processor authenticates that the customer authorized the draft, the bank will not allow the chargeback and the merchant will not be penalized.
- The advantage here is that check drafting allows you the option of refunding the money. The money stays in your account until the issue is resolved; unlike an ACH, where the money is automatically returned to the customer or frozen. You create goodwill with your customers because you are able to address these issues, as they occur, placing you in a proactive position instead of the reactionary situation that is created with an ACH.
Integrating check drafting into a website:
The check drafting system uses an API (application programming interface) similar to a good credit card payment gateway. The benefit of using API integration for any purpose is that your hard earned website visitors don’t ever leave your website. The check drafting system integrates seamlessly into an existing website, and allows customers to pay with a check in addition to any other offered payment methods. The system also offers a virtual terminal that allows the manual keyed entry of checks, making check drafting great for businesses that take orders over the phone.
The Price:
Check drafting is about the same as or slightly less expensive than accepting credit cards. The benefit over credit cards, is also the greater protection a business has over Chargebacks compared to credit cards. It also gives another method to allow customers pay for merchandise or services, helping a business to provide the most convenience for their customers without paying more themselves.
We are currently setting our own company up for check drafting on our website. We are also beginning to sell it to customers, as we have partnered with the Giact Check Drafting company. I am a firm believer in selling only products that I would personally endorse so we are going to test it out first hand. I will post again on more specifics of the check drafting setup and the process altogether. From the response we gotten so far in only a few days on the website, and the features that I have seen, it looks like check drafting could be an excellent system.
June 8th, 2006
In the age of Do-It-Yourself, it is often difficult to find places to learn how to Do-It-Yourself. This is especially true with areas of ecommerce. There is so much information out there, that finding exactly what you are looking for can be a daunting task.
The best place to find real ‘tested’ knowledge, is to find people who are already doing what you need to do. I personally try to answer questions on the blog, but the sheer quantity of questions I get, and the fact that only a few people would be interested in many of them, prevents me from answering them publicly.
One thing that I have learned in years of working on ecommerce systems and helping my customers with their ecommerce needs, is where to find good information. Whether it is programming specific information, or general business relate there are a few places that I refer to, when I need help or want to give advice.
Discussion forums are the best place to find professional, objective, and accurate information on just about any topic. Once again, with literally thousands of discussion forums out there, which one should you go to.
Digitalpoint: This is by far one of the best forums out there. It isn’t as old as some of the forums around, but it has a huge member base and a ton of very knowledgeable professionals. I have rarely seen a question go unanswered here.
Sitepoint: While I don’t spend a lot of time at sitepoint, it is still one of the best. Like digitalpoint, sitepoint has a huge amount of professionals willing to give advice. Sitepoint also has some very good articles and information. Sitepoint does have some annoying pop-ups and advertisements, but the quality of content negates any negatives that I have seen.
Webproworld: I moderate at webproworld, and while it isn’t quite as active as digitalpoint or sitepoint, it has a number of professionals that you wont find anywhere else.
If you have a question related to the internet, marketing, business, ecommerce, or something related and you cant find an answer at one of these forums, you probably wont be able to find the answer. There are plenty of other great forums out there, and I’m not saying that these are the best out there. I’m saying that I find them to be the most usable, with the best information and contributors.
June 2nd, 2006
I am currently in the process of developing a simple php based shopping cart system. What differs my shopping cart from most other carts out there, is that my cart can be easily integrated into an existing website. It is made for smaller website’s that don’t need a full features ecommerce system. But, it will still offer the capabilities for a website to accept paypal and credit cards through a variety of payment gateways.
I am looking for a few programmers to help develop and test the shopping cart. I need to have several payment modules created that will integrate the shopping cart with different payment gateway’s.
Email me if you are a programmer that has experience developing ecommerce systems and are interested in contributing. You will get a permanent link to your website on the shopping cart website.
The shopping cart already has its own website and will be distributed under GPL.
June 1st, 2006
There are probably thousands of merchant account affiliate programs on the internet. Because of the lack of a solid internet foundation that most merchant service providers have, most of these programs are completely worthless.
Affiliate Program Key Areas:
There are a few key areas that an affiliate should look for when finding a program to join. To get paid a commission whether pay per lead or pay per account, your referral is going to have to fill out an application on the provider’s website. The website and the way that the application form is setup are the biggest factors in turning your leads into commissions. A visitor needs to instantly be able to trust the provider’s website. The website should be clean, professional, and well established. An important fact about merchant services is that online applications are not the actual application for a merchant account. The longer the application, the less likely it will be for a visitor to fill out the application because they will have to fill out another application at some point. Make sure that the affiliate program’s website is above average in appearance and professionalism, and it has the shortest application form possible. If you have the time and/or knowledge, investigating things like rates, customer satisfaction, and business history will help you to find the best program, but these time intensive tasks are not mandatory to find a decent program.
Where to find a merchant account affiliate program:
There are several ways to find reputable merchant account affiliate programs. Affiliate networks have a few programs available, but most merchant service providers use in-house programs. By finding a good merchant account provider, you can then look to see if they have an affiliate program available. This way, you can ignore any potentially poor merchant account affiliate program right from the start. The most common affiliate networks, are commission junction, shareasale, and linkshare. As far a merchant services go, commission junction which is normally the leader in quality affiliate programs, only has one provider. Shareasale and link share have a few, but the majority of programs are in-house operated.
Affiliate Networks vs. In-House Programs:
Affiliate networks are great because they are a third party that helps to maintain the integrity of an affiliate program and all parties involved in it. Affiliate networks ensure timely and proper payouts, and help protect all parties from fraud. In-house programs are run by the companies receiving the application. Make sure that if you do decide to go with a company’s in-house program, that the company has a very good reputation. There is very little recourse for affiliates that are scammed by in-house affiliate programs.
Getting Paid:
One very important part of the affiliate program is how to get paid. Make sure the affiliate program you are interested in offers acceptable payout methods and amounts. I have seen a few programs payout only when commission reaches $500. While every affiliate would love to be getting $500+ checks each month, the simple fact is that most affiliates aren’t going to reach $500 in a reasonable amount of time. Unless you know from experience that the minimum payout is an easy target, look for a more reasonable $100 or less minimum.
Programs that I have found with reputable companies:
Pay Per Lead:
The Merchant Store Inc. - This is my company’s affiliate program. We offer $20 per lead, and 3% for equipment sales that our affiliates generate. We have both a shareasale program and an in-house program. By using 2 programs we can offer custom affiliate partnerships with select affiliates or affiliates with special needs. We have been in business for over 10 years.
Electronic Transfer Inc. - Offers $10 per lead and performance incentives for well performing affiliates. Electronic Transfer Inc. has been in operation since 1989.
Pay Per Account:
Merchant Accounts Express - Pays $80 / approved merchant account. Over 8 years of operation.
Paynet Systems - $50 - $100 per approved account.
Ecommerce Exchange - $50 / approved account. In operation since 1989.
3rd Party Processing Programs:
Paypal - You will receive an initial monthly bonus, equivalent to 0.5% of the new merchant’s net sales, as soon as that merchant reaches $200.00 in sales. Every 30 days for the next 12 months, you will receive a bonus of 0.5% of the new merchant’s monthly net sales. The maximum total bonus you can receive is $1,000.00.
2Checkout.com - All referrals earn $9, every third referral earns an additional $5.
Related Posts:
Guide to Merchant Account Affiliate Programs - Part 1
May 30th, 2006
This is a two part post on merchant account affiliate programs. The first part will cover the basic types and payout amounts of merchant account affiliate programs, and the second will cover where to sign up for merchant account affiliate programs, and will list a number of available programs.
An affiliate program is an online referral program that is designed for website owners to refer visitors to another website in exchange for a commission on any transaction those visitors make.
Merchant account affiliate programs have become increasingly popular with web design, hosting, consulting, and businesses where customers may seek a recommendation on getting setup accepting credit cards. Merchant account affiliate programs have two basic payout structures: pay per lead, and pay per account.
Pay Per Lead
Pay per lead affiliate programs are where a flat fee or percentage is paid to the affiliate for each referral. A referral is normally considered a visitor applying for a merchant account. The affiliate is paid whether or not the applicant actually sets up a merchant account.
Positives:
- Paid for each application.
- Paid whether or not an account is ever setup.
- Faster turn around time for being paid.
Negatives:
- Lower commission per action.
Pay per Account
A pay per account affiliate program is almost unique to merchant service affiliate programs. An affiliate is paid for each approved merchant account that they refer. Unlike a pay per lead program, the affiliate has to wait for the referral to be approved and processing before they are ever granted a commission.
Positives:
- Higher payout per referral.
Negatives:
- A substantial percent of applicants wont ever get fully setup.
- Delay in getting commission until merchant account is setup.
- No control of the process once referral is made.
As you can see the two programs are similar, but offer completely different benefits. It is my experience that for merchant account affiliate programs, pay per lead affiliate programs are better for both the affiliate and the business they are referring to.
The simple difference between the two program types:
The key difference between a pay per lead and pay per account program is that affiliates with the pay per account programs have to wait and trust that the lead they referred will be turned into an account.
With a pay per account program, the merchant account process can be confusing and frustrating for affiliates who are waiting for their commission. Apart from that, the best merchant account provider is not going to convert more than 70% of their leads into sales. That means that in the best case scenario, 3/10 referrals will never be paid. Realistically, most providers will never break a 50% conversion from a lead to an account.
Payout Amounts:
Pay per lead programs usually pay between $5 and $25 per lead. Pay per account programs normally pay between $50 and $200 per account. When you get into the higher paying programs, there is very often additional requirements for the commission to be paid. Sometimes the requirements are as detailed as having a required monthly minimum processing volumes, or the referred business has to process for 3 or more months. The bottom line is that the time, complicated process, and limited payout window that pay per account programs offer, are not worth it.
Part 2
May 25th, 2006
I wish that I would have seen this article sooner. Jason Chance of jccommerce.com wrote an article, 10 Easy Steps to a Horrible Ecommerce Site, that covers many of the mistakes that new online businesses make. Here are a few excerpts from the article. I highly recommend new and existing online business owners to take a look at it.
Whatever shopping cart you use, the “stock” or default look is fine. After all, if it wasn’t the best layout of all time, why would they distribute it as “stock” in the first place?
All that junk about customers “Caring about their privacy” and being “Worried about identity theft” is unfounded. Just ask my friend “John” from Indonesia. Hey, by the way, he has $30,000,000.00 he wants to send you. He just needs your credit card number along with your name and billing address.
http://www.sitepoint.com/article/steps-horrible-ecommerce-site
May 24th, 2006
For a new business, checking into the company merchant account is often near the bottom of the to-do list. It is very important to ensure that the merchant account is running smoothly and in a manner that is cost effective right from the start, to help to prevent problems that can arise in the future.
- Watch your statements carefully in the beginning.
- Don’t exceed your processing limits early on (or without notice).
- Check your bank account daily.
Watch your statements carefully in the beginning.
The first few months of a new merchant account are watched closely by the processing banks. Traditionally most fraud that occurs with merchant accounts, occurs in the first few months of processing. It is equally important for businesses to watch their own statements closely in the first few months of processing. The start of opening a merchant account is the best time to find errors and problems, because they can normally be corrected more easily than after the business has been processing for a long time.
What business owners should be watching for is that their business is setup with the correct merchant account type, that they aren’t downgrading excessively, and that there aren’t any major fees that they were unaware of.
Don’t exceed your processing limits early on (or without notice).
When you applied for your merchant account, there was a section on the application that asked you what your anticipated monthly volume was expected to be. This volume acts as a base line for comparing your monthly processing to. Processors use this amount to flag fraud and other risk factors. Another number that you entered was your average ticket size.
While growth to you is a great thing, quick unexpected growth is hated by most credit card processors as it opens avenues for fraud. Because of this, many businesses have been held back or even had their merchant accounts canceled due to growth.
Exceeding your monthly volume: It is my opinion that businesses should always check their merchant accounts using an online account access system, which is available with almost every merchant account. If your merchant account approaches your specified monthly volume, you should call your merchant account provider immediately. There is some leniency for the occasional high volume month, but if you consistently reach or exceeding your volume, you need to request a volume increase. If your processor cant increase it, you should start looking for a new processor. Believe me when I say that the negative reaction from some processors handling growth is far worse than shopping for another merchant account. Your current provider may also have another processing bank that will grant you a higher volume. Either way, this is something that should not be ignored.
The reason that this is also applicable to new businesses, is that they often have no idea what their volume is going to be. Hopefully if a guess was made, it was higher than needed, and if a lower guess was made, a volume increase or new merchant account should be a priority.
Exceeding your average ticket size: Almost every business has to run a few transactions over their average ticket size. After all it is an average, and not a limit. 10 - 15% is acceptable with most processors, and some like Nova often allow a 100% over transaction. But, running a $5,000 transaction when your average ticket size is set at $20 is not a good thing. The processor will force you to refund the money and collect payment with another form. They probably wont refund your processing fees as well. Now your mad at your processor, you just lost some money, your customer is inconvenienced and nobody is happy. If you expect that you are going to need to run a much larger transaction than your average ticket, call your processor. They may allow you to run a one time transaction because it just happens sometimes. If you expect that you are going to be seeing a lot of these larger transactions you either need a average ticket increase, or you need to find a processor that will let you have the high ticket size. Be prepared to prove that you do sell something costing that much (it would be hard to believe that a dollar store sold had a transaction for $5000, etc).
Check your bank account daily.
Just like anything, a merchant account sometimes has errors. At some point a human has to add your bank information to an electronic system. Although rare, this account number sometimes gets mixed up, and money goes to the wrong account. If this mix-up ever occurs, it is also soon after a merchant account is opened.
Since money is normally deposited into a business’ bank account about 48 hours after they process a transaction, there isn’t a good excuse for notifying your processor that you haven’t been receiving your money for two months. Check you bank account closely for the first few weeks and make sure that your money is going to the correct place.
Overview:
These three small tips can help prevent about 90% of all the potential problems you can possible have your merchant account. Catching them early on will help to ensure that your credit card processing is transparent, allowing you to focus on the rest of your business.
May 23rd, 2006
We recent upgraded our SSL certificate to a Verisign certificate from Geocerts. I have purchased SSL certificates from several different companies over the years, and I must say that the Verisign process is something different.
One of the main reasons people use Verisign for a SSL certificate is that they are very well trusted and you get to display a Verisign logo on your website. This is also one of the main reasons that we installed the certificate, trust. As far as SSL certificates go, 128 Bit encryption is the same whether you issue the certificate on your own server, or Verisign issues it to you.
The Verisign Process:
In this case we opted for the most basic Class 3 certificate that Verisign offers. The initial process of applying for the certificate was easy enough. Generate a CSR (Certificate Signing Request) on your own web server, fill out a few information forms on the Verisign website, pay a small fortune, and hit the process button. Once the charge is completed, Verisign goes to work on validating your business and then generating your certificate.
Coming from always using instant SSL certificates, I thought the certificate would arrive in my email in about 10 minutes. I did know that Verisign had a business verification process, but I had no idea how involved it really was. Verisign checks several things to verify that your business exists, and you are who you say you are. First, your domain registration is checked to ensure it matches your business information. Next, they check phone directories to ensure that your listed phone number is registered to the company, and is a listed number. Lastly, they check to ensure that your business actually exists, and is legally registered. Only when you have meet all of their verification, will they issue a certificate.
I personally though that we had all of our ducks in a row, but I had to fax Verisign about 5 different documents before we were fully validated. After the faxes and about two days of being verified we were issued the certificate.
Overall the process was fairly smooth, and the ease of getting setup is directly dependent on having your domain name registered to your exact business name, having your business’ contact number as a listed number in phone directories, and having your business legally registered.
I will post in a few months, whether I think the certificate is worth the extra cost. We track our sales very carefully, and should have an accurate model to the any increased or decreased sales within a few months.
May 22nd, 2006
A new tool is now available in the tools area. The advanced merchant account fee calculator takes downgrade and other charges into account and should provide a fairly accurate estimate of the cost of processing credit cards.
Link to The Advanced Merchant Account Fee Calculator
May 16th, 2006
I was clued into a great tool made by google in the google lab, by Rand of Seomoz. It’s called Google Trends and it is a system that will let a user view a graph of the search volume for a given search term over time.
Naturally, I wanted to see how the top terms relating to credit card processing look. I would consider the top terms to be: Merchant Account, Accept Credit Cards, Credit Card Machines, and Credit Card Processing. For this article I searched for the first three.
What I found was an extremely troubling and unexpected graph.
Not only was this line sloping in the exact opposite direction that I was expecting, but the slope is much steeper than I ever could have expected. I added the red line to show a linear path of the slope of the line.
Since the beginning of the chart (2004), until now (2006), there has been a linear 50% reduction in search traffic for terms relating to credit card processing. The beginning of 2004 is coincidentally when we started actively competing for these related terms, and we also began advertising with Google and Overture pay per click programs. Since the time we started, the average cost per click across all terms in our industry has at least doubled. Pay per click adversing costs, are also a decent indicator, of the amount of competition for natural traffic.
What this means for websites relating to credit card processing is that the potential customers are searching on the internet 50% less now than 2 years ago, and the competition has increased by 100% or a factor of 2. Putting this all together, the merchant services field on the internet is now 400% more competitive than it was 2 years.
I’m not sure how accurate this graph is from google, and it is in a testing area of their services. The data itself is against everything I have read and calculated about the trends of traffic on the internet. But, it is a very interesting look into two ways that competition increases in business. I am interested to see if other industries experience the same trend.
May 11th, 2006
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