Ever since Mrs. Jane Snowball became the first online home shopper in 1984, the idea of selling one’s goods across the world, unencumbered by geographic barriers or the number of brick-and-mortar buildings one could afford, has enchanted entrepreneurs and established businessmen alike.
Since that day, this dream has become a reality for many. With electronic commerce – or e-commerce as it is more commonly known – it has boomed into an enormous industry. Today, multi-billion dollar companies and tiny start-ups alike are setting up storefronts on the internet. However, unlike in-person transactions, e-commerce sales carry some unique financial challenges, including increased risk for the merchant service provider. This may give some processors pause for thought.
Why Is My Business Considered High-Risk?
The good news for businesses engaged in e-commerce is that this venue is not nearly as high-risk as it was once. For example, it is not on the FDIC’s list of high-risk businesses, as many other verticals are. However, businesses of all types that sell online are considered at higher risk for chargebacks for many reasons. These reasons include the fact that the customer has not physically seen the merchandise, and the merchant does not directly hand the goods to the customer at the time of the sale, leaving room for the customer to contest the charge at a later date.
Does This Mean I Cannot Get an E-Commerce Merchant Account?
The answer to this question is a resounding “no.” E-commerce is an established and popular way to do business. Also, more people are looking to the internet as their preferred method of shopping every day. However, it does mean that businesses relying heavily or exclusively on e-commerce should find a merchant service provider that understands their industry and can assess their true level of risk, providing appropriate options for the seller’s situation and business type.
Finally, when searching for a credit card processor, you should not only consider the state of your own business, but the state of your potential service provider’s. A good provider will never charge you hidden fees. They will work with you to get you started, keep you supported, and help you grow. If you’re looking for such a company, we invite you to check out E-Commerce 4 IM. We can get you approved for an E-commerce Merchant Account and help your business grow. Call us today at (207) 200-7186 for more information.
What Does the Process Look Like?
Credit card processing companies consider several factors when evaluating e-commerce retailers. These factors include the length of time your company has been in business, your past credit history (including your business’ credit score), the amount of negative feedback your company has received, your sales and marketing practices, and your business’ overall financial health.
What Can I Do To Improve My Chances Of Obtaining An E-Commerce Sales Merchant Account At A Good Rate?
Financially healthy companies are always more likely to receive merchant accounts. A few ways you can contribute to the overall health of your business include:
Adhere to all state and federal regulations
Know your state and local policies and perform all required background checks. Even if these checks are not required for your venue, such as gun shows and private sales, you may want to consider voluntarily conducting them. By not doing so you can be repeatedly declined for an e-commerce sales merchant account.
Keep a low credit-to-debt ratio
Processors look to your personal credit first, so your personal credit is just as important as your business credit. Maxing out your available credit hurts your credit score with business credit or personal credit. This is one of the key factors credit card processing companies consider when assessing the real risk your business presents. Ideally, you should only use 10-20% of your available credit and keep as much of the balance as possible on a single card.
Pay your bills on time
Timely bill payment also goes a long way toward developing a positive credit score. This can convince processors and banks that you are a responsible business.
Minimize your chargebacks
High-risk businesses are known for excessive chargebacks, so minimizing the number of contested credit card payments and bounced cards is essential. Make sure your customer service is easily accessible and responsive by phone and email. Your goal is to make it easier for a customer to call you for a refund. You don’t want them to call their bank and ask for a chargeback.
Be honest and up-front in your marketing
When you appear to promise things you cannot deliver, customers often become angry or disillusioned with the product. No matter how many other beneficial results they may have obtained, they may demand a refund or charge back their card. They may do this if they did not achieve the same result you promised.
Stay off (or get off) the TMF list
The TMF (Terminated Merchant File) list is a database created to identify merchants who have been had their credit card processing accounts flagged for illicit activity, including money laundering, excessive chargebacks, fraud, identity theft, or illegal transactions. It is also accessed by all 4 major card brands, so being on this list is the equivalent of being on a shared blacklist that is circulated among most major credit card companies. If you are not already on this list, keep your business dealings honest and avoid high chargeback rates to stay off. If you do end up on the list, contact your merchant services provider to find out why. Often, they can help you to fix your reputation if you are on the list erroneously.
Finally, when searching for a credit card processor, you should not only consider the state of your own business, but the state of your potential service provider’s. A good provider will never charge you hidden fees. They will work with you to get you started, keep you supported, and help you grow. If you’re looking for such a company, we invite you to check out E-Commerce 4 IM. We can help your business acquire an E-Commerce Merchant Account today.