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FINANCIAL MIDDLEMAN FOR SMALL BUSINESS------------------------------------------------------------copyright (c) Pavel Lenshin------------------------------------------------------------Small online businesses are mostly represented by home-basedentrepreneurs. In this regard any payment scheme or systemshould meet at least two criterions:First. It should be relatively cheap. Individuals areusually not enjoying huge investment potential in contrastwith legal entities.Second. It should lead to complete automation of financialtransactions as a result of lack of time or inability forthe majority of entrepreneurs to hire support stuff to servethese transactions.In short, it all comes down to the shortage of money andtime. For these simple reasons, sophisticated e-commercesystems based on merchant accounts are expensive, hard toestablish and support for an average entrepreneur. That iswhy third party payment processors that will handle allonline orders on your behalf became widely popular amongsmall businesses. They require very little effort toestablish and even less effort to support. In most casesthey will provide you with completely automated as well asquick and reliable for your customer way of payment.This will allow you to accept payments 24/7 focusing yourbusiness to work on other tasks and activity.In practice once set up, the whole customer paying andproduct delivering process becomes fully automated andconsists of the following steps:1. Customer fills out the order form and clicks on thesubmit button to pass the order to the payment gateway;2. Automatic payment gateway routes credit card (e-checketc.) data and purchase amount to the payment processor ofthe merchant (seller) acquiring bank;3. Acquiring bank sends authorization request to the paymentprocessor of the customer's issuing bank;4. Issuing bank validates customer's account, credit limitand authorize the transaction, freezing the specified amounton the customer's account;5. Issuing bank routes authorization code (or "transactiondeclined" message) to the acquiring bank's paymentprocessor;6. Acquiring bank routes payment approval (declined) messageto the payment gateway;7. Payment gateway notifies the merchant (seller) aboutapproved (denied) transaction;8. Provides customer with the product s/he ordered, thedetails of shipping etc. or notifies about payment problems;9. Banks' clearing settle the mutual transfer of funds,crediting the respective merchant (seller) account with thespecified amount of purchase.All these steps due to complete automation process, if wedon't speak about phone or mail orders etc., will takesomewhat between several seconds to several minutes, stillusually faster than when you are billed at the store's paydesk and much faster considering the speed of going foronline shopping instead of the "offline".This publication intended to analyze existent picture ofthird party processing companies and represent you thecomparative facts that would help you to determine yourpreferences based on business needs and capacities.The table below will provide you with basic features of themost "visible" today's online payment processing players.Please note, that the online financial market evolvesextremely fast, so the table data is accurate as on theFebruary 2003 what I cannot guarantee in a month, all themore in a year, so my advice here is to choose 3-5 mostacceptable and affordable financial intermediaries (even ifsome important for you feature is missing) and recheck theirservices and fees once more at their web-sites before makingany final decision.------------------------------------------------------------Company Name in alphabetical order:1) Setup fees 2) Monthly fees 3) Commission structure*2CheckOut:1) $49 2) no 3) $0.45 + 5.5%;CCNow:1) no ($11.95 for Int.) 2) $9.95 3) $0-$100 - 0%, $100+- 9%(11% for Int.);ClickBank:1) $49.95 2) no 3) $1 + 7.5%;IBill:1) no 2) no 3) $0-$9,999 - 15%, $10,000-$24,999 - 14% etc.;MultiCards:1) $15 or $150 2) no 3) 11.9% or 9.9%;PayPal:1) no 2) no 3) $.30 + 2.9%;PaySystems:1) $49.00 2) no 3) $1.00 + 3.95% or $0.45 + 5.5%;ProBilling:1) no 2) no 3) $0-4,999 - 13.5%, $5,000-12,499 - 12% etc.;ProPay :1) $35.00 (yearly) 2) no 3) $.30 + 2.9%;Regsoft:1) no 2) no 3)$0-$30 - $3.00, $30+ - 10%;Verotel:1) no 2) no 3) $3.75-$75.00 - 13.5%;V-Share:1) no 2) no 3) $0-$15 - 20%, $15-$100 - $3+4%, $100-$200 -$2+5% etc.------------------------------------------------------------Company Name in alphabetical order: 1) Credit Cardsacceptance 2) Online Check acceptance 3) Phone(Fax) ordersacceptance 4) Recurring Billing feature2CheckOut: 1) yes 2) yes 3) no 4) yesCCNow: 1) yes 2) no 3) no 4) noClickBank: 1) yes 2) yes 3) no 4) noIBill: 1) yes 2) yes 3) yes 4) yesMultiCards: 1) yes 2) yes 3) no 4) yesPayPal: 1) yes 2) yes 3) no 4) yesPaySystems: 1) yes 2) yes 3) no 4) yesProBilling: 1) yes 2) yes 3) no 4) yesProPay: 1) yes 2) yes 3) no 4) noRegsoft: 1) yes 2) yes 3) yes 4) noVerotel: 1) yes 2) yes 3) yes 4) yesV-Share: 1) yes 2) yes 3) yes 4) yes------------------------------------------------------------* Commissions are charged in two most popular ways:* depending on the sales volume, for instance, 10% for$0-$1000 in gross sales and 5% for $1000+ or;* flat fees plus percent of the transaction amount: $2 + 5%,so if you sell your item for $50 the commission is $2+$2.5(5% out of $50)=$4.5Note, that commissions shown for credit card billing may bethe same or may differ from company to company for onlinechecks and, especially, for phone order processing.As you see, the table compares the most common features ofservices, while some secondary options like affiliateprogram, online auctions support or inability of suchcompanies like PayPal to process all worldwide customersincluding yours truly, were left behind.IBill and Verotel, for instance, have retail price maximumlimits. The dominating majority of payment processors chargeadditional fees for chargebacks and refunds, while Regsoft,Verotel or V-share offers a completely risk-free start up,charging commission from actual sales only.The middleman you will commit to should offer easy ways toadministrate your account, view statistics, add/deleteproducts on sale, setup price, tune and customize with yourweb-site image the order page etc.Depending on the nature of your main product: tangible orintangible, some companies may or may not meet your needs.Check Verza.com payment processing company for tangible andshippable goods. They are the Mother company of Verotel -division specially designed for intangible products or"bits" sellers.Carefully read terms & conditions agreement, otherregulations as well as charge back policy before signing upfor any service.Find out the offered ordering security options.While some companies provide sophisticated fraudulentcontrol system and supply you with both server secured orderform and non-secured order form for your customerconvenience, other payment processors had problems even withthe coding of their order web-pages, what allowed anyone toliterally steal your intangible products by downloading themwithout payment. That happened because the URL of theso-called "Thank you" page (where sellers arrange their infomaterials to download) was clearly visible in the sourcecode of the order form. This is unacceptable.You may also want to test their support system and uptimethe same way you do before selecting a web-hosting provider.Because your order page(s) is(are) hosted at the 3rd partypayment provider server(s), if they are down for any reason,it may be very sad for your customer to choose a product,click on the order link and get error or "The page cannot bedisplayed" massage.As you see there are a lot of points to check and analyze.On the other hand, remember a rule of not complicatingthings. The key for easy decision-making process is not toavoid research as some people do going for the first offerthey see, rather than knowing your needs and capabilitiesincluding financial beforehand.Determine them at the very beginning and search companiesaccordingly, making the whole research smooth and easy.Besides, on the contrary to, say, domain name choosing,payment processor service is temporal to help you build youronline business in a quick, cheap or zero cost way. At somestage due to economy of scale it will be cheaper and moreeffective for your business to establish personal merchantaccount with respective e-commerce gateway system. Article Tags: Financial Middleman, Payment Processors, Order Form, Merchant Seller