Understanding Ecommerce and Merchant Services

I recently spent half-a-day on the telephone with a website customer who was concerned that, when she purchased her website, she was told that the site would be “fully e-commerce enabled” and that this was included in the cost; however, she was surprised to learn that she would need to pay additional fees for credit card processing.  Let’s clarify, because this misunderstanding is not uncommon.

Often, the term “e-commerce” is incorrectly understood to mean the process by which a merchant collects payments over the internet.  In actuality, e-commerce (or electronic commerce) typically refers to only the logistics and mechanics involved in the creation of transactions over the internet or through a customer’s website.  When we develop a website for a client, if they desire to conduct commerce through that site, then we will create all of the functionality necessary to allow for these transactions to occur.  This can include the create of items within a catalog, catalog pages within the site, and shopping carts that will allow customers to identify the items they wish to purchase and prepare an item or group of items for a check-out process.

However, these e-commerce functions do not include the actual collection of payment or the processing of credit card transactions.  This is a different service we refer to, in general, as “merchant services.”  Typically, this actual processing of credit card transactions and the collection and appropriate distribution of funds is done by financial institutions such as banks, for example, though there are other companies that provide merchant services as well.  The important thing to remember is that merchant services will always carry additional costs for the ability to accept credit cards, which is typical whether the credit card is being accepted in person or online, as well as specific predetermined fees associated with each and every transaction.

The combination of E-commerce and Merchant Services, when properly designed and implemented into a website, provides a great deal of advantages and allows for business to often be conducted more efficiently and in an equally secure manner.  And e-commerce is not limited to solely “selling items online.”  Here are just two examples of our “nontraditional” e-commerce website customers:

1.  A refuse collection company services over 11,000 individual households and receives 11,000 pieces of mail every quarter, each containing a $19 check.  The mail must be received, opened, processed, and then taken to the bank for deposit.  By accepting payment through their website, we have reduced the mail and associated processing costs, and we also were able to automate the website e-commerce system to communicate with the accounting software and automatically record the payments and update the accounts.

2.  A non-profit organization established a donations section of their website to accept online donations.

These are just two examples of the countless ways that an e-commerce enabled website can provide great service to your business.  Contact us today to learn how we can quickly design your e-commerce enabled website!

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Published in: on October 17, 2008 at 4:20 PM  Comments (8)  
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8 CommentsLeave a comment

  1. This is indeed an interesting post, it seems that you are an expert in your field.
    I liked the article its informative especially from people seeking info’s like this.

    I’ll bookmark this one, and i am looking forward for more of your content.

    Best Regards,
    Craig Leshinger
    National Merchants Corp

  2. Great explanation, Clem!

  3. Hi Clem,

    I visited your blog the other day but didn’t see where to comment ~ but now that I found it, I want to thank you for being so clear on a topic that’s usually, well, NOT.

    One thing I’d like to know about ecommerce, though, is how does a business owner deal realistically with all those “hidden charges”? You know, the ones that the merchant account charges you under “fees” — that add up to some unbelievable percentage that was not originally explained.

    These days such costs can really eat into what little profit I had going and I’d love to get them under control!

    Your thoughts on that?

    Thanks!

    Nancy

  4. Two things.

    First, there should be no mystery whatsoever. Your merchant service agreement should spell out exactly what (a) the monthly fee is to be able to accept credit cards and (b) the exact “per transaction” fees that apply to each transaction that are processed. All merchant service providers should provide you with this information before you decide to use their service, and that will allow you to shop around and choose the most affordable and competitive service provider.

    Second, if you are talking specifically about merchant services on your website, a reputable and comprehensive web solution provider should be able to put you in touch with preferred providers for merchant services that are compatible with their web solution.

    Make sense?

  5. I can see how that can get confusing. If this person had trouble understanding this other people probably will too. It’s making the system as easy as possible to understand without hiding anything. A lot of companies want to hide this so they can earn more money. This won’t create trust and probably create customer dissatisfaction, forcing them to go somewhere else.

  6. Thanks for the Information

  7. Isn’t there a tier type of system? At the top you have your regular local bank that can provide merchant services. Although heavy traffic may be a problem for them. But nack to the tiers, there is a subprime sort of market in this area I think. you definitely want to stay away from these people, if you have decent credit, say 625 beacon score or above, you should be able to save yourself some money and aggravation. I think that the most important action for you to take is to shop and compare dozens and dozens. Make yourself an semi expert in this area.
    or have someone you trust do it. Then decide.

  8. Thanks all for the comments and the perspective.


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