Archive for the 'Merchant Accounts' Category

Amazon.com recently announced that they are entering the merchant services arena by offering their own in house payment system. Called Amazon Flexible Payments Service, or Amazon FPS for short, it is designed to be a direct competitor of Paypal and Google Checkout. An advantage it potentially offers over Google Checkout is through Amazon.com’s huge database of customers it already has billing information on file for a large portion of their potential user base. This can mean a quick and easy checkout. Unfortunately, like Google Checkout, your customer will need to go to the Amazon.com website to make payment.

Some of the features they offer include:

• Accept payments three different ways:
  • Credit Card
  • ACH
  • Amazon Payments balance transfer
• Accept one time, multiple, and recurring payments

The fee structure is very similar to Paypal and is listed below:

• For Transactions >= $10:
  • 1.5% + 1¢ for Amazon Payments balance transfers
  • 2.0% + 5¢ for bank account debits
  • 2.9% + 30¢ for credit card
• For Transactions < $10:
  • 1.5% + 1¢ for Amazon Payments balance transfers
  • 2.0% + 5¢ for bank account debits
  • 5.0% + 5¢ for credit card
• For Amazon Payments balance transfers < $0.05:
  • 20% of the transaction amount, with a minimum fee of $0.0025
• Qualified developers can apply for the following monthly volume discounts for credit card transactions:
  • 2.5% + 30¢ per transaction for monthly payment volume from $3,000- $10,000
  • 2.2% + 30¢ per transaction for monthly payment volume from $10,000 - $100,000
  • 1.9% + 30¢ per transaction for monthly payment volume over $100,000

On the surface this new service does not appear to differentiate itself from Google Checkout or Paypal in any meaningful way. It will be interesting to see its uptake by merchants and consumers.

You can read more about Amazon Flexible Payments Service on their website here.

When establishing your merchant account the acquiring bank that is reviewing your application is assessing the risk associated with establishing your account. They factor in many variables including ones associated with the product(s) you are selling. Different products have different risks associated with them. Let’s compare two products:

• Pencils

Selling pencils is a low risk product because not only will few people will attempt to commit fraud in an attempt to get their hands on pencils, but the customer’s expectations as to what the pencils are supposed to do a small in scope and easily met. As a result the potential for chargebacks is extremely small.

• Electronics

On the opposite end of the spectrum would be electronic gadgets like cell phones and stereos. These are frequent targets of fraudsters who essentially are trying to steal these items from you in one form or another. They also have tendencies to not meet customer expectations as they may not function as well as expected. As a result the potential for chargebacks is much greater.

Because an acquirer (A.K.A. your processing bank) is exposed to potential for losses whenever a chargeback is filed the higher the chargeback potential for a product the more difficult it will be to establish a merchant account for selling that product. This means when your merchant account is approved it is based on the merit of the products you offered at the time of your application.

So what if you want to add more products to your store? Well, there are a couple different scenarios for this:

1. The newer products are very similar to your current products

In this case you shouldn’t have to notify your acquirer. Since they based their decision to approve your merchant account on the type of the product and not specific products then you are in effect not making a sigificant change to your product offering. They have already factored these product types into their decision and adding these pr0oducts won’t affect that decision.

2. The products you are adding not related to the your current products

In this case you should contact your acquirer to let them know you will be adding these different products to your website. How they handle it will vary but if the number of products are significant and/or the product line is significantly differently you can expect your acquirer to expect a new merchant account to be opened for the new products. This will also certainly mean having a new website as well. The reason for this is due to different products having different risks.

It also has to do with how your business is presented. Usually a business name is modeled after the products it offers. If you are now offering different products for your business then when you established the business there is a good chance your current business name will not match the theme of your new products. This will cause confusion when your customers get their blling statements and result in an increase of chargebacks.

What it all boils down to is if you plan on adding products unrelated to the products your business currently offers then you will need to contact your acquirer and verify with them that it is okay to use your merchant account to accept payment for those products. If you think you can add them without your acquirer knowing think again. All it takes is one chargeback to get their attention. At that point instead of taking a customer friendly approach to the situation they may take a defensive approach and hold your funds while they get the matter squared away. If you don’t mind having a large sum of your money held for six months then this won’t be an issue. But if you want your money and don’t want your acquirer holding it back from you, always be proactive and let them know of a product change.

A common question we see asked online is, “What exactly is a Third Party Processor”? Well, a third party processor allows other businesses to share their merchant account. This means the merchants who shares their account doesn’t have to apply with a merchant account provider. They apply directly with the third party processor.

The ramification of this are as follows:

1) You have to follow the rules of the third party processor. Because it is their account and they are responsible for it their rules are tighter then a normal merchant account’s rules. They can shut down your account at any time for any reason. Same goes for holding your funds.

2) Their name appears on your customer’s statements. Because it is their account their name is what will appear.

3) Their rates tend to be higher then a normal merchant account because they have to mark it up to make a profit. But other fees, like monthly fees, may be waived which is a good thing.

4) They tend to accept people that merchant account providers don’t. This includes people with bad credit or high risk products. Merchants who have had their merchant account closed can usually still use a third party processor.

To see how third party processors compare to true merchant accounts check out our article Merchant Account Comparison which compares Paypal, Worldpay, and 2Checkout to a true merchant account and gateway.

Technorati Tags: merchant account, third party processor, high risk, merchant account providers, Worldpay, 2Checkout, Paypal

From Digital Currency Business E-Gold Indicted for Money Laundering and Illegal Money Transmitting

A federal grand jury in Washington, D.C. has indicted two companies operating a digital currency business and their owners on charges of money laundering, conspiracy, and operating an unlicensed money transmitting business, Assistant Attorney General Alice S. Fisher of the Criminal Division and U.S. Attorney for the District of Columbia Jeffrey A. Taylor announced today.

The four-count indictment, handed down on April 24, 2023 , and unsealed today, charges E‑Gold Ltd; Gold & Silver Reserve, Inc.; and their owners Dr. Douglas L. Jackson, of Satellite Beach, Fla.; Reid A. Jackson, of Melbourne, Fla.; and Barry K. Downey, of Woodbine, Md., each with one count of conspiracy to launder monetary instruments, one count of conspiracy to operate an unlicensed money transmitting business, one count of operating an unlicensed money transmitting business under federal law and one count of money transmission without a license under D.C. law.

Subsequent to the indictment, the Department of Justice also obtained a restraining order on the defendants to prevent the dissipation of assets by the defendants, and 24 seizure warrants on over 58 accounts believed to be property involved in money laundering and operation of an unlicensed money transmitting business. The restraining order does not limit the E‑Gold operation’s ability to use its existing funds to satisfy requests to exchange E-Gold into national currency for customers of non-seized accounts, or its ability to sell precious metals to accomplish the same, once approval has been received.

According to the indictment, E‑Gold’s digital currency, “E‑Gold,” functioned as an alternative payment system and was purportedly backed by stored physical gold. Persons seeking to use the E‑Gold payment system were only required to provide a valid email address to open an E‑Gold account – no other contact information was verified. Once an individual opened an E‑Gold account, he/she could fund the account using any number of exchangers, which converted national currency into E‑Gold. Once open and funded, account holders could access their accounts through the Internet and conduct anonymous transactions with other parties anywhere in the world.

The indictment alleges that E‑Gold has been a highly favored method of payment by operators of investment scams, credit card and identity fraud, and sellers of online child pornography. The indictment alleges that the defendants conducted funds transfers on behalf of their customers, knowing that the funds involved were the proceeds of unlawful activity; namely child exploitation, credit card fraud, and wire (investment) fraud; and thereby violated federal money laundering statutes. The indictment further alleges that the defendants operated the E‑Gold operation without a license in the District of Columbia or any other state, or registering with the federal government, and thereby violated federal and state money transmitting laws. The indictment alleges that this conduct occurred at various times from 1999 through December 2005.

How this indictment will affect the company is unknown. But any merchant currently using E-Gold should consider switching to another processing provider while they sort this out. There is always the possibility they may go bankrupt and/or freeze or hold the funds of their merchants. If this occurs the odds of the merchant getting their money back is very slim.

Yahoo and Paypal have announced that merchants that accept Paypal as a form of payment will have a special shopping cart icon displayed with their listing in Yahoo Sponsored Search results. It will look like this:

This is similar in concept to Google’s display of a special icon in the Adwords listing of merchants who accept Google Checkout as a form of payment. Interestingly enough, the Paypal logo is a shopping cart that looks strikingly similar to the original Google checkout logo before they changed it to is current version.

Technorati Tags: yahoo, Paypal, Google Checkout