How does it all work?

Merchant accs, reselling, etc?

[monipro]

I see lots of offers of the type: "Get your own merchant account in minutes and start selling online"

Are sellers of goods actually using (renting) the merchant accounts of the CC processors? Or the processor creates a new MA for every client and if so, how?

In both cases, how does it work?
Also, I see these merchant account providers are linked with a gateway like authorize.net - are they actually only reselling what authorize offer, but in addition renting their own merchant account to online sellers of goods?

[Corey Bryant]

Getting a merchant account is usually pretty easy if you are in the United States and are not selling high risk items (downloadable goods, electronics, adult items, etc).

To accept credit cards online - you need two things basically: a merchant account processor and an electronic payment gateway (LinkPoint, Verisign's Payflow, Authorizenet.com). The gateway is basically the virtual connectivity between your website and the transaction processor (First Data, Visa, etc).

Authorizenet.com does not sell their services - they rely on resellers actually. This is usually the case with most of the gateways as well as merchant accounts. It is usually easier but then the responsibility is too much divided. It used to be easy for an agent to say "no problem" when trying to get you to sign on the dotted line. But think about it - we are talking about money. You would like to think no problem, but you are asking to basically borrow a certain amount of money from a merchant account processor.

let's say that you are going to be processing about $10,000 a month. You are asking to borrow $60,000 from the processor - this is included from the 6 months that is the average for Visa / MasterCard chargebacks - some are less, some are more. If something happened and your product did not make it and your customers requested a chargeback, the issuing bank would give the money back to the consumer. The issuing bank would then get the money from the acquiring bank. The acquiring bank would get the money from the merchant account processor (MAP). And then the MAP would have to get the money from you. If something happened and you were no longer around, the MAP would be responsible.

-Corey

[monipro]

Ok, Corey, are there any options for the MAP not to offer the buyer to request his money back in case of dissatisfaction with the product?
For example I sell books through <snip> and did not see anywhere a statement about chargebacks, maybe I just didn't look carefully, but I doubt there is such. What if MAPs just state on their checkout page that if customer is not happy, he still can not request his money back? Is there any legal obligation for product sellers to give money back within certain period if requested, or it is just an option for attracting more more buyers?

[edited by: lorax at 3:33 pm (utc) on July 18, 2005]
[edit reason] removed specifics [/edit]

[meg8]

Two things:
First:
There obligations under the law to offer refunds for goods. In the UK there are the distance selling regulations and the sale of goods act. I'm sure the US will have something also.

Second:
The banks allow people to use the chargebacks on their credit cards up to six months later and there is nothing the merchant can do about it. A worst case scenario is. You send out the goods. You receive a chargebcak. You are charged a fee for processing the chargeback. You never see your goods again. There is no way round this with the bank. Have a read of this forum and you will see the chargeback system described as 'legal theft'.

For some people this is a total nightmare which eats into their profits, I, on the other hand, have never received a chargeback. So don't let it put you off.

[monipro]

Thank you Meg, this was very important to have in mind.

[Corey Bryant]

As far the chargebacks - the time varies per issuing bank. The normal for Visa / MasterCard is 6 months. But depending on your card - I have seen some as little as 2 months. AmEx almost has no time limit - I have seen it as long as 18 months.

What happens with the chargeback - the issuing bank gives the money to the customer. So at that point - the process starts. If you can prove to the issuing bank satisfactory that whatever the consumer said is false, then you might win.

Most of the time - it is product not received or I did not do it. Being on the internet, the I did not do it is very difficult to win unless you have verified by Visa / MasterCard SecureCode in place. This will help you

-Corey