Billing on behalf of business

[ksolaro]

Hi there -- hoping this community can help.

We are thinking about starting a business that provides e-commerce & fulfillment services to small businesses in a particular niche. The businesses we are targeting are extremely small and have little to no online savvy.

Most shopping carts online require small businesses to register for a merchant account and a payment gateway to transact. We are considering offering individual shopping carts to these merchants, but just using our merchant account and payment gateway to transact on behalf of the small business.

Then, on a regular schedule (weekly or biweekly), we would transfer the accumulated value of the transaction into the individual small business' bank account, minus our transaction fees.

My questions:
1. Has anybody attempted something similar before? I think Amazon has a similar model. Are there others out there?
2. What are the gotchas in this scenario? Pros? Cons?
3. Are there legal or tax implications to making transactions on behalf of small businesses like this?
4. Is there a software package or API out there that makes it easy to automate transferring money between accounts, en masse, on a semi-regular basis?

Thanks so much for any help you can provide!

[Rugles]

>>>1. Has anybody attempted something similar before?

Besides Amazon, Yahoo and Ebay do this kind of thing as well.

[LifeinAsia]

2. What are the gotchas in this scenario?

The major gotcha is charge backs. Since the customer thinks they are buying directly from your client, the customer may often be confused as to the charge with your company name and will dispute the charge. Even if the dispute is later cleared up, you're still stuck with the charge back fee. And if the dispute is NOT cleared up, then you have to get the money back from your client.

Another possible scenario: client has a lot of orders, but never fulfills any of them. The charge backs start coming in after a few months. You try to contact the client, but he is long gone (with the money).

[ksolaro]

Another possible scenario: client has a lot of orders, but never fulfills any of them. The charge backs start coming in after a few months. You try to contact the client, but he is long gone (with the money).

Ah, excellent point. Except we will be doing fulfillment as well, so we should be able to keep this in check.

Good point about the chargebacks, though. Can this be alleviated by stating in the confirmation email and during checkout time that the biller of record will show up as "FOO COMPANY" instead of the business in question? I guess any solution that depends on people reading fine print is a risky one...

Any other weird things I should be thinking about? This is fantastic help, thanks.

[LifeinAsia]

Can this be alleviated by stating in the confirmation email and during checkout time that the biller of record will show up as "FOO COMPANY" instead of the business in question?

Alleviated? Nope. Reduced? Probably somewhat. We have 2 main sites that we use, but only 1 company name for the Merchant Account. Even though the checkout site is the same as the company name and the e-mails come from that site and the company name is included on every e-mail message, we still get the occasional inquiry or charge back because of people not paying attention (or even reading) what's right in front of them or sent to them.

[ytswy]

We also mainly sell through a domain that is different to our company name.

Chargebacks due to that happen every now and again, but no more than that really. They aren't at a level of having a real impact on the bottom line.

We also get calls from people querying a charge on a fairly regular basis, and you really want your phone staff to be able to find the order quickly and be able to email/fax/post out a duplicate receipt on request. Remembering that this will probably be a month or two after the charge so they simply may not remember placing the order - being able to easily search past orders for their post/zip code is a real help here.

Making sure that anyone searching for your company name as it appears on their statement finds a page with your contact details clearly displayed is also probably well worth it - anything that makes it easier for people to query the charge with you rather than going through their card issuer.

But like I said, for us it isn't a major problem.