Payment processing is a complicated industry, and most businesses don’t know much about how it works when they start out. When there’s so much to learn, it’s hard to blame them. Most don’t gain what limited understand they have until they’ve set up shop and partnered with an ISO to use a particular gateway for their business.
The problem with it is, in their limited understanding, callow businesses might partner with a provider that neither meets their needs nor gives them a fair price for services. Anyone who runs an eCommerce business needs to be aware of the options when it comes to payment gateways, and some may be a better fit for your business than others.
Traditional Payment Gateways
In the traditional model, a payment gateway partners with a merchant acquirer, like an Independent Sales Organization (ISO), that then collects clients for the gateway. The gateway doesn’t interact much with the merchant clients; they just provide the software for conducting transactions. The ISO does most of the interacting, but has no control over the platform being used, and they can’t really help if something goes wrong or the client wants to make changes.
This disconnected format is made worse by the signup process and the fees. Because the risk of each merchant is underwritten individually, getting approved is an involved, lengthy process. Cost structures are also typically not very transparent, leaving merchants confused about how much they will owe, and about which fees are “junk” fees.
This is the most common option chosen, usually due to lack of awareness of alternatives. There are alternatives, though, and times are changing.
White Label Payment Gateways
Some intrepid Independent Sales Organizations sign up with payment gateways that provide their services under a white label, meaning that the ISO gets to market the platform as their own solution, with increased control over the quality of service provided to the clients. This means that merchants have more direct access to help when they need it and that ISOs are better able to directly address the needs of their clients.
White label platforms also usually benefit from a multi-tier hierarchy, allowing merchants to set up multiple merchant IDs (or multi MIDs), and separate accounts for separate locations of the business, without having to increase the number of parent accounts and login profiles.
Payment Facilitators
Payment facilitators similarly shorten the supply chain, but in a different way. Facilitators also use a multi-tiered system, starting with their own “master merchant” account. Merchants that sign up under them are given “sub-merchant” accounts but are each given a separate account and merchant ID.
Because they’re sub-accounts, they don’t require each merchant to have their risk underwritten, which means the application process is easier, and the approval comes faster. And because they’re part of a hierarchy, a merchant can set up multiple accounts if they need to. What’s more, facilitators usually use a flat rate fee for their cost structure, making the pricing unbelievably transparent.
So if you’re a business that uses a traditional gateway, don’t settle for a basic understanding of the industry. Do some digging, shop around, and find a solution that best fits the needs of your company. Odds are, the only thing holding you back from better service and better prices is the knowledge of where to look.
About the Author: Danielle Adams is a freelance writer who specializes in eCommerce topics and writes for a variety of publications such as NMI. In her free time, Danielle enjoys learning more about payment gateways, technology, and hanging out with friends.