Instead of getting a direct merchant account with a processor or a financial institution, third party credit card processing merchant accounts are alternative options that are available. There are many reasons why a business would prefer third party account instead of a direct account. These accounts are usually reserve for online ecommerce websites or businesses conducting business over the web in some way or forms, even if it’s processing phone payments via a virtual terminal on the internet.
Typically the transactions are completed at the processors’ website via a redirect or if a more advanced integration option is offered, merchants can integrate the processor’s API on the website for users to checkout on their website. Usually the processor will provide a shopping cart of some sort. A basic shopping cart would be to copy an HTML code on the product page. This is done by creating several product links for the order page and those links will lead to the processor’s website or server. Third Party processor also support shopping carts designed by other companies. The merchant would require an advanced programmer to integrate the shopping cart with the API that is provided by the processor.
The great thing about these types of merchant accounts is that advance fraud detection tools are available for businesses to utilize. The processor will validate the credit card transactions for the merchant and acts as the backend between the retail or ecommerce store and the customer. In other words, all of the backend management, reporting and processing is outsource.
There is usually a setup fee involved which can range from $0 to $500 depending on on if the account is domestic or an offshore international account. There is usually a reserve of 5% to 10% which is rolling for 6 months for most processor. For merchants that are higher volume, there is some flexibility with the reserve. Some processors will provide a cap on the reserve so it is not always rolling. The discount rate is typically higher and can rage from 3% to 15%. And obviously there are other miscellaneous fees such as Address Verification Service (AVS), monthly statement fees, batch and wire transfer or ACH deposit fee and more. Chargeback are a bit more relaxed and flexible than direct merchant accounts. After the transaction is settled, the processor takes out their fees for processing the transaction.
For retailer or ecommerce sites that are having a hard time finding a merchant account, these type of accounts are easier to get setup with and are quite simple to maintained and generally has an lower overall cost. There are many different types of businesses and industries that are supported.
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