Web Hosting Talk : Web Hosting Main Forums : Running a Web Hosting Business : Advice sought: want to offer outsourced payment service like 2CO and PaySystems.

[ques526]

I would like to offer online outsourced payment service. I may be able to get some investors, but I want to get some advices from people here and see if it is a good business and what is needed to run such a business.

I know there are a few big players, but not too many (PayPal, Worldpay, 2CO, Paysystems). I think there still be some room to get a market share.

Thanks for your insights.

[Alfa]

What is your plan?

[UH-Matt]

Its extremely difficult to do this legally. You need a solid business plan and proper backing from a bank. Also you have to gain a lot of trust from any potential clients.

Look what happened to hostcharge *cough idiots*

[ques526]

I want to start small, or even be a reseller of those big players, but I want to keep my own band name, to build customer base. Yes. It may be difficult and has some risk involved. But that may be an advantage for that business since not everybody can do it. Look at the over-crowded hosting world, even a 14-year old teenage could run a few hosting companies.

Among many things, I want to know what is basically needed to get it started, i.e.

1. A merchant account;
2. A gateway;
3. A shopping cart;
4. A website;
5. Some web programming;
6. what else...

Can somebody provide more specific suggestions/ideas, or even just point me to some resources or consultants who are experienced in this area.

Thanks.

[Maczor]

PaySystems offers a reseller system. Why not contact them about it?

[ddent]

The biggest thing your going to have to worry about is chargebacks... your going to need a lot of cash lying around, and your going to have to do this on a big scale if you want to make a profit. Brace yourself for huge amounts of fraud.

[Kx-2]

You definitely need backers with some financial firepower. The risks associated with third party processors is fairly high. Like what Matt said, look what happen to hostcharge. However, if you do pull it off kudos to you!

[hdezela]

I'm looking to do the same thing for non-US customers (esp. South America, the processors we have here charge outrageous prices, like 2,000 a year plus 8.95% per transaction to name the cheapest one).

PM or email me if you want some information on this.

[ques526]

PM sent. Thanks in advance for the info.

[cdgcommerce]

Hi ques526,

Honestly, you are going to need a lot more than just the technology that you mentioned above.

The *most* important technology isn't any of those that you mentioned but rather the risk management & fraud scrubbing technology.

There are a lot of regular U.S. merchants alone who have gone out of business or gotten hit with huge losses - and that was just from selling their own products to foreign customers when they didn't manage their risk sufficiently... and they aren't weren't even doing third party processing.

In fact, the intended marketplace for your third party service would be the foreign arena - and that is the single most risky sector of payment processing!

I'm not trying to burst your bubble or tell you that it can't be done... just that you are going to have to really, thoroughly and carefully explore the risk management side of it.

More than ANY other part - that part is KEY. Winning customers and generating processing volume is the EASY part. Preventing yourself from being put out of business from the legions of fraudsters in many foreign areas who look at you as the next great opportunity to make quick cash - THAT is the hard part.

I totally understand that at first glance it seems like such a great opportunity ("wow --- a cost of 2.xx% and a fee to customer of 5.00% means I can make 3% of their sales" and so forth) but the tricky - and risky part - is in taking liability for sales transactions that you really don't control.

There are also numerous legal, regulatory and financial hurdles that you will also need to overcome. My advice: work with a bank in your country to setup accounts for merchants in your home country... its safer, better and a more proven way to make money IMHO.

[Tina J]

To be brutally honest...if you have to ask what you need to start this venture, HERE at WHT...you aren't qualified or even remotely ready to handle it.

[Rax]

That's kinda what I was thinking too. There's nothing wrong with asking if you don't know, but to just say 'I'm going to start a payment service, what do I do?' sounds a bit behind.
I would say research for a couple years and feel around for big financial backing.

[Reality Hosting]

PaySystems offers a reseller system. Why not contact them about it?

Paysystems reseller program is only for companies that can bring them 100 000 dollars of new business a month. They are working on an affiliate program though.

[ques526]

Thanks for all your ideas, warnings, and criticisms. I am doing some research and posting questions here is part of my research. As you know, people are not born to be an expert. I am exploring some business opportunities. I want to do something not very easy, but doable, profitable and sustainable.

cdgcommerce's comments are particularly detail and useful. I really appreciate it. I am investigating the possibility to do that type of business in a country where the ecommerce is still in its infancy and far from reaching its potential, but growing rapidly.

At this point, it may be more approriate for me to be someone's reseller/agent first and learn things from them and since there won't be any chargeback risk for resellers. I am thinking of Cardservice International, Plug'n Pay, and Paysystems.

Any more comments?

[cdgcommerce]

I think your approach of becoming a reseller/agent first makes a lot of sense. It will help you to get acclimated and familiar to some areas like risk management without having to put yourself in financial jeopardy along the way.

Best of luck with your project - I think you are smart to take it slow, learn, ask a lot of questions, research and develop your plan over time... and you're right - no one is an expert in the beginning.