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  1. #1

    Disadvantages of Third-Party Processors

    What are some disadvantages of third-party processors versus Merchant Accounts? We all know the advantages of having a third-party processor versus a Merchant Account, but rather, what exactly are the disadvantages?

    Can you guys help me out? 500 brains are better than 1. I am writing helpful content for our site, so any input is appreciated.

  2. #2
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    1) Costs more per transaction
    2) Impression isn't as professional (leaving site)
    3) Charges appear under third party
    4) Less control/more headaches when things go wrong
    5) Limited billing options
    Last edited by adland; 05-26-2003 at 10:15 PM.

  3. #3
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    What are some disadvantages of third-party processors
    1) Costs more per transaction
    2) Less options
    3) Weekly/Monthly payment can be late to arrive
    4) Could disapear next Sunday at 12.45PM with your $10,000

  4. #4
    If you use a merchant account and can set up your cart so that people do not leave your site you do not distract them in 'leaving'. When selling things on the net you want people in your store as long as possible, You don't want to send them accross the street to make a payment, then come back to pick up the merchandise. Go find a couple shops that take you 'offsite' for payment and see if you have any urge to go to a competitor that has everything built into their site. If you have to use an offsite payment area make sure you can make the sites look as close to the same as possible.

    Cheers,
    Ben
    BEN HALSTED, Developer :: WebGroup Media LLC.
    Cerberus Helpdesk 2.4.0 -- Take Control of your Company Inbox!
    Combat Spam. Improve Response Times. Share Knowledge.
    http://www.cerberusweb.com/

  5. #5
    Anyone else have any thoughts on disadvantages of third-party processors (like 2checkout, paysysytems, paypal, etc) in general, versus a real Merchant Account?

    Adland mentioned a major difference between a third-party processor and a merchant account. Your customer's credit card statements show the third-party processor rather than the actual business name... which can quite easily confuse your customers.

  6. #6
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    The biggest disadvantage in using a third-party processor is how difficult it can be in moving to a real merchant account later on.
    Modest Mouse Talk

  7. #7
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    Well personal reasons for me that 3rd party is bad is mentioned above as well as 2checkout has a lot of problems with the merchant area and you have to wait to get money you don't get it right away, it's also quite limited, while you can change the design to look like your page there are things you have to list like "all services provided by 2checkout". You also can't change the form, what cards are accepted, and you don't know the users card number for verification purposes. I would just go with a merchant account as I'm planning that this month.
    Nationhosts, LLC
    http://www.nationhosts.com
    "Nationwide hosting solutions"

  8. #8
    Personally, I prefer outsourcing anything that's not central to my business. Of the 3rd party processors, I like PayPal the most. Their rates are reasonable and IPN is secure and easy to implement. I'm able to sweep the receipts into my checking account whenever I want.

    I have a merchant account through Fleet, but I don't think it's worth the hassle to write the scripts to let me do what PayPal does.
    Sean Brunnock
    http://server.com

  9. #9
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    In high volume or high ticket sites, cost will almost always be cheaper using a merchant account vs. P2P solution (I use P2P because the term "third party" is confusing in the cc industry, most banks use "third party" processors that are unrelated to Paypal, etc.).

    But to me, the biggest disadvantage is company image. While most sites that use P2P payment solutions are perfectly legit and on the up-and-up, they give the impression as being fly-by-night. Personally, I have never used Paypal (et. al.) for any purchase other than an auction and in these instances, I knew and accepted the risk.
    --Steve (blog)

    Shift4 Corporation -- Secure payment processing

  10. #10
    shift4sms, what exactly is P2P abbreviated from?

    Also, are there other names that are used out there for Third-Party Processors / P2P?

    If so, let us know.

  11. #11
    P2P - Person to Person
    Sean Brunnock
    http://server.com

  12. #12
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    Sorry, as Sean said, Person to Person.

    Other P2P solutions: While I don't care for them, Paypal is the biggest.
    --Steve (blog)

    Shift4 Corporation -- Secure payment processing

  13. #13
    I've never heard them called P2P -- has anyone out there other than Sean and shift4sms heard of this term? Thanks.

  14. #14
    P2P was a fad term back when Napster was considered to be a viable business.

    http://conferences.oreillynet.com/p2p/
    Sean Brunnock
    http://server.com

  15. #15
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    Originally posted by Benjamin
    Anyone else have any thoughts on disadvantages of third-party processors (like 2checkout, paysysytems, paypal, etc) in general, versus a real Merchant Account?
    One more point of failure.

    "Esteemed Merchant

    We are working diligently to resolve a technical problem at the Bank processing level which has been resulting in transactions being declined.

    Here is the message the customers are receiving while attempting to finalize a purchase.

    Card Declined
    It was not possible to process your credit card.
    Supplier:
    Card Result: Unable to establish a secure connection

    Unfortunately, the problems are still not resolved at this time. We are in constant contact with the processing networks, but have not received any firm estimate as to when the systems will be available.

    We will continue to keep you updated concerning this situation.

    We apologize for the inconvenience caused.

    PaySystems Corporation"

  16. #16
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    Originally posted by Benjamin
    I've never heard them called P2P -- has anyone out there other than Sean and shift4sms heard of this term? Thanks.
    The context of P2P they are using is in relation to B2B (Business to Business).
    Modest Mouse Talk

  17. #17
    Originally posted by vipe
    The context of P2P they are using is in relation to B2B (Business to Business).
    Would anyone care to elaborate?

  18. #18
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    Talking

    Originally posted by vipe
    The context of P2P they are using is in relation to B2B (Business to Business).
    Also in the context and more relative to B2C (Business to Consumer).
    Last edited by shift4sms; 05-27-2003 at 08:03 PM.

  19. #19
    Originally posted by shift4sms
    Also in the context and more relative to B2C (Business to Consumer).
    Well, if you are saying the third-party processor is a business and the seller is a business ... it would be B2B.

    Although, the B2B can also be attributed to both Gateway and Merchant Account providers selling their processing service to the seller (who sells products/services in turn to customers).

    So how can B2B be attributed only to "third-party processors?"

  20. #20
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    Originally posted by Benjamin
    Well, if you are saying the third-party processor is a business and the seller is a business ... it would be B2B.

    Although, the B2B can also be attributed to both Gateway and Merchant Account providers selling their processing service to the seller (who sells products/services in turn to customers).

    So how can B2B be attributed only to "third-party processors?"
    The context is in how the goods or services are going and not in the actual technology to pay for them.

    P2P (person-to-person) is generally thought of as an individual selling directly to another individual or personal transaction. Most garage sales fall into this category. Web auctions (eBay, et. al.) were mostly person-to-person in the early days but now it appears more business to consumer.

    B2C (business-to-consumer) is generally thought of as a business selling goods or services to a customer. Most anyplace you spend money would fall into this category.

    B2B (business-to-business) is generally thought of as business exchanging goods and services between each other and usually a common payment medium is negotiated ahead of time (PO's, inventory exchanges, etc.) but this is not required. There can be a gray area between B2B and B2C but I usually separate the two (whether right or wrong) by whether or not you pay for the transaction with personal funds.

    The term "third party" can be used in the context of P2P providers but it gets confusing because the largest credit card processors are referred to as "third party" providers even though their primary business is providing a payment mechanism for B2C transactions. Confusing huh?
    --Steve (blog)

    Shift4 Corporation -- Secure payment processing

  21. #21
    Originally posted by shift4sms
    The context is in how the goods or services are going and not in the actual technology to pay for them.
    [...]
    The term "third party" can be used in the context of P2P providers but it gets confusing because the largest credit card processors are referred to as "third party" providers even though their primary business is providing a payment mechanism for B2C transactions. Confusing huh?
    Okay -- so that's what you meant by B2C.

    And regarding the "third party" ... I guess it just matters how you are referring to that "third party."

    Gateways (example: Auth and Echo) are third parties to the Merchant Accounts and the seller business. Also, Gateways/MAs are the third party to the seller and the customer. Then, take it another way ... 2checkout/paysystems/paypal is the third party.

    So ... is there another way of identifying paypal, 2checkout, or paysytems without having to use B2B or B2C as a way of IDing them? And IDing them so nobody gets confused (in the industry or out)?

  22. #22
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    Originally posted by Benjamin
    So ... is there another way of identifying paypal, 2checkout, or paysytems without having to use B2B or B2C as a way of IDing them? And IDing them so nobody gets confused (in the industry or out)?
    Why reinvent the wheel? Paysystems/2Checkout are third party processors. They exist between you and your business accounts, to get the funds there. As opposed to having your own payment gateway or eftpos terminal straight in to the bank.

    G

  23. #23
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    Why reinvent the wheel? Paysystems/2Checkout are third party processors.
    Agreed. Your audience isn't merchant bankers.

    Besides, I see the relationship of most webhosts and their customers as B2C. And some also host other small businesses which would be B2B.

    When PayPal started it may have been solely P2P, but I don't think you can classify it that way now. The fact you can conduct recurring transactions contradicts the notion that its only P2P.

  24. #24
    Paysystems is declining so many charges, it is not funny anymore, out of 5 order we get in a day at least 3 of them get declined...

  25. #25
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    Yep, and we put the same charge through our merchant facility and there's no problems. We're just about through with Paysystems I think. Paypal would be a better option now.

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