Hello,

Do you think that 3rd party payment processors such as 2CheckOut., PaySystems, PayPal turn your potential customers off?

Do you think customers are more inclined to buy from your site if you have your own merchant account?

Or Do you think the 3rd party processors are infact better for achieving higher sales?

PS. In our case, all our (dating site) subscriptions are going to be recurring. People always say that 3rd party processors encourage cancellation by sending emails to customers before each 'renewal' and that emails have 'cancellation' link in them.

That may be true but doesn't it help to avoid chargebacks/refunds etc which can cost as much as $25 per incident?

I mean are the 3rd party processors really that bad for recurring sales? How is your experience in general for any product and in particular for recurring sales such as memberships and subscriptions?

Please share your experience.

Thanks.

Rick Kumar

Some are turned off. However, others are actually attracted by the fact that they feel they are giving the information to a trusted party and the some of the more knowledgeable like the ease of cancelling recurring payments with the third party processors.

Originally posted by Incognito
Some are turned off. However, others are actually attracted by the fact that they feel they are giving the information to a trusted party and the some of the more knowledgeable like the ease of cancelling recurring payments with the third party processors.

"This ease of cancelling the recurring payments is my biggest concern"

as ours is going to be a recurring subscriptions based business model just like other dating sites.

I confirmed with 2CO (other 3rd party processors do the same as well) and they said they do send a cancellation link every time few days before renewal. They told me it protects them and vendors from 'expensive' chargebacks later on.

There is some truth to that statement but I still don't like the fact that they infact 'encourage' the customer to cancel the subscription which otherwise may or may not get cancelled.

Well lets see what others have to say.

Thanks.

Originally posted by Incognito
Some are turned off. However, others are actually attracted by the fact that they feel they are giving the information to a trusted party and the some of the more knowledgeable like the ease of cancelling recurring payments with the third party processors.
Yes, I agree. This goes a long way to ease some customer's concerns about the worrys of online transactions.

I concur as well. The attracting factor is the fact that the 3rd party payment processor provides an unbiased middle man that one is much less likely to have trouble with if things go wrong. They're more inclined to work out issues and don't have all that much in it if things go wrong, so they won't delay and refuse to give the money back.

Originally posted by CrazyTech
I concur as well. The attracting factor is the fact that the 3rd party payment processor provides an unbiased middle man that one is much less likely to have trouble with if things go wrong. They're more inclined to work out issues and don't have all that much in it if things go wrong, so they won't delay and refuse to give the money back.
Yes, I like the idea of a middle-man. That's a good way to put it. It also lowers startup costs for new hosts. I think 3rd party payment processors are a great way to encourage sales and integrity.

Originally posted by cybexhost
Yes, I like the idea of a middle-man. That's a good way to put it. It also lowers startup costs for new hosts. I think 3rd party payment processors are a great way to encourage sales and integrity.

I agree with you on that one.

What are your views about the fact 3rd pary processors make it easier to cancel recurring payments for items such as subscriptions/memberships etc.?

Do you think it actually helps avoid expensive chargebacks/refunds later on (thats what 2CO tells me)?

Thanks.

I would agree that third party processors have their place in the market. For a merchant who will process only small, sporadic amounts of money or for an international merchant - I think they are a great fit, in fact.

However, based on the feedback that I have heard from many merchants and end users over the years - I think there are many more people who are "turned off" by 3rd party payment pages than those that find it to be "more comforting."

In the minds of a lot of consumers, when a merchant has their own fully branded merchant account as opposed to a PayPal link or 2CO link... it reflects that they are a more established & credible company in their minds.

All that being said - I don't think that there is anything wrong with offering -multiple- payment options. (i.e. "Pay here by Credit Card or Pay here via PayPal" etc.)

Now, in terms of recurring billing... it makes sense why these companies make it easy for people to cancel. Since they are running all transactions through one master account - too many chargebacks could put them out of business.

However, if you have your own merchant account - you can certainly do the same exact thing. The nice thing is that you can control every aspect of it instead of being relegated to doing things a "set way" with a third party processor.

This way you can have the cancellation option formatted and presented in exactly the way you want so as not to almost "push" customers to cancel but rather just to make it clear that if they ever desire to cancel, it is easy to do.

Originally posted by cdgcommerce
I would agree that third party processors have their place in the market. For a merchant who will process only small, sporadic amounts of money or for an international merchant - I think they are a great fit, in fact.

Do you mean to say that most people who go with 3rd party are not regular or high volume sellers?

Thanks.

I think what he meant to say is that for higher volumes, the right merchant account is often cheaper than a 3rd party account.

-David

I was just stating that 3rd party processors are ideal for international merchants (who can't get U.S. merchant accounts) and they are also a perfect fit for merchants that do sporadic or lower volume.

For a higher volume merchant, if they are U.S. based, there are a plethora of merchant account options available in the market from various processors that provide a MUCH lower cost structure.

If a higher volume merchant is completely satisfied with their 3rd party processor - that's great. Payment processing is an important part of any business and it is important for merchants to work with a company that they feel comfortable with.

That being said, most folks that process a high volume would save quite a bit by having their own merchant account.

Personaly, when I was looking for hosting.. it turned me off.

Thanks for all the responses and comments!

I believe that somehow customer would find a company with third party processor is more trusted than when they are using their branded credit card processor.

The argument is somehow like this: 3rd party processor will definitely only accept merchants with credibility (which is not entirely true, you only need a credit card with 2CO), then they believe that if your company use a 3rd party processor, you are a credible company.

Somewhat it's okay using your own credit card processor if you already have a widespread reputation. Some of the 'geeks' and techies will surely pick the one with their own processor though.

Originally posted by ozzie123
Somewhat it's okay using your own credit card processor if you already have a widespread reputation. Some of the 'geeks' and techies will surely pick the one with their own processor though.

I agree with you that if you talk about WHT members or other geeks and techies then yes they know enough about 3rd party processors and merchant accounts.

But what about general public or most buyers? I think they have no idea what a 'merchant account' is.

Thanks.

The argument is somehow like this: 3rd party processor will definitely only accept merchants with credibility

Well - I would respectfully differ on that point. :)

In fact, if you look at the market as a whole, is really the exact opposite with respect to "accepting merchants with credibility."

3rd party processors will take just about any one and they basically bypass just about all of the safeguards and regulatory requirements normally imposed with respect to the merchant review process that is supposed to take place.

In fact, PayPal got penalized to the tune of many millions of dollars earlier this year by the FTC because they were processing for a number of gambling sites and merchants selling illegal products.

Thus, third party processors - with the exception of a few - generally scrutinize far less than their bank/ISO counterparts do.

For a merchant to get an actual merchant account, the approval process is much more extensive. A background check, credit report and various validation/verification checks are done to try to ensure that a merchant is really legit.

This doesn't mean that it takes much longer to get approved for a true merchant account. But there are definitely some more detailed checks that are done in the background before a merchant can setup a merchant account.

A LOT of people that I've spoken to are more comfortable when a merchant has their own branded payment pages & service as opposed to sending them to "some third party" which wierds them out.

Offering multiple options isn't bad. I.e. cater to both the regular consumers who want to pay direct as well as the folks who want to use PayPal. Nothing wrong with that - giving consumers a choice.

Chris is right on in his third party merchant account views. While they have their uses, it's silly to think that they will instill confidence in your customers.

Personally, I will not do business with a site that uses third party processors exclusively. Most of my reasoning for this has already been addressed in prior messages except one personal point: Paypal pissed me off to the point that I will never deal with them or their "please verify this", "please verify that", "please jump through this hoop", etc., etc., etc. It finally got to the point where I swear, PP knew more about me than my own bank!

All this dialog that "third party processors instill confidence" is a bunch of crud. For me, if I don't have trust in a merchant or site, I won't do business with them -- period! A third party processor is not going to instill confidence, instead it will have the exact opposite effect because of all the reasons mentioned by Chris in regard to background checks and risk assessment.

Also, as a consumer, if you have to rely on the third party processor to cancel your membership or dispute a transaction, then you made the mistake when you signed up. BTW, how many of you third party processor customers (purchasers) have read all the fine print? You basically have NO charge-back rights as far as the card associations are concerned. You are 100% liable for the transaction and it's up to disgression of the third party processor to issue the credit in the event of a dispute.

Third party processors have their niche (true person-to-person, hobbies, part-time low volume side jobs) -- I just think that if you're running a "real" business, then you should use a "real" merchant account.

We use both Paypal and have our own merchant account. Surprisingly, we find that paypal is used almost 3 to 1 by our customers.

Originally posted by Host Visions
We use both Paypal and have our own merchant account. Surprisingly, we find that paypal is used almost 3 to 1 by our customers.

I find that very interesting. Can you share more information about the type of business you are doing?

Why did I ask it? Because in my opinion, your choice of a your own merchant account 'versus' 3rd party processor like 2CO/Paypal also depends on the type of biz you do.

If you are in services such as dating/matchmaking (or adult sites), then you may not like to have your own merchant account. 3rd party processor provides better privacy as your merchant name does not really appear on the customer statement.

Any comments?

Thanks.

If you are doing that, you can have a boring company name like "supermega conglomercorp" or something on the merchant account.

I would guess that spammers and others who have less than legitimate practices actually would prefer 3rd party CC processors over hosts that have a Merchant account. They have much more leverage when they do a charge-back after being kicked off the server. With a Merchant account you have an increased ability to deal with these types of situations.

While I don't see using a 3rd party processor as an absolute turn-off, I do see the use of a Merchant account as an additional positive. We all know the more good marks on an initial evaluation that we can get from a potential client, the more likely it is we will earn their business...