Web Hosting Talk : Web Hosting Main Forums : Ecommerce Hosting & Discussion : Do you think 3rd party payment processors turn customers off?

[rickkumar]

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

[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.

[rickkumar]

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.

[Aussie Bob]

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.

[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.

[CybexHost]

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.

[rickkumar]

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.

[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.

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.

[rickkumar]

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.

[thedavid]

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

[cdgcommerce]

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.

[Picard102]

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

[rickkumar]

Thanks for all the responses and comments!

[ozzie123]

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.

[rickkumar]

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.