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Piggy Bank in the Middle
If you make financial transactions on the Internet you will doubtless encounter a wide
variety of payment processors.
A payment processor is an intermediary between your cash (either your bank or credit
card) and the company you wish to pay.
To help understand this a little better let us have a brief look at what happens if you are
selling something from a website.
If you make financial transactions on the Internet you will doubtless encounter a wide
variety of payment processors.
A payment processor is an intermediary between your cash (either your bank or credit
card) and the company you wish to pay.
To help understand this a little better let us have a brief look at what happens if you are
selling something from a website.
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The Merchant Account - If you
want people to pay money to
you using credit card or to
make their payments directly to
your bank account, you will
have to approach the credit
card merchant or your bank
and get their permission. They
will then assess you and your
business proposition based on
certain criteria.
Most small, Internet-based
business do not meet the
criteria set down by these
banks and credit card
merchants - usually because of
want people to pay money to
you using credit card or to
make their payments directly to
your bank account, you will
have to approach the credit
card merchant or your bank
and get their permission. They
will then assess you and your
business proposition based on
certain criteria.
Most small, Internet-based
business do not meet the
criteria set down by these
banks and credit card
merchants - usually because of
- insufficent trading history, poor credit rating or the relatively low volume of cashflow. In
this case you will require a third party to accept the payments on your behalf.
The Third Party Merchant - There are a number of credit card merchants that will allow
you to accept credit card payments using their transaction facilities. However, as they
are acting as an intermediary, they will charge a hefty fee for this service - plus, they
also have a strict criteria that you have to meet and your business may well fail to meet
even these standards.
Paypal is probably the largest and most well known third party merchant. Originally
created to manage the huge number of payments from Ebay autions, they allow an
individual to create an account that can be linked to their own bank account and credit
cards. Paypal charges you to receive money, but then you can transfer that money
directly into your bank.
Digital currency or e-currency - A hugely popular
method of making payments over the Internet is
through digital or e-currency accounts.
You purchase a quantity of gold, silver or other precious metal using an e-currency
exchanger and store this metal in the virtual vaults of the service provider. You can then
use this e-metal account to pay for goods or services whereever a company accepts this
method payment.
An air of anonymity surrounding these companies and they are often the focus for US
federal investigation due to money laundering accusations, due to the ease of moving
large amounts of cash around the world. This fact has not detracted from their
popularity or their usefulness on the Internet.
this case you will require a third party to accept the payments on your behalf.
The Third Party Merchant - There are a number of credit card merchants that will allow
you to accept credit card payments using their transaction facilities. However, as they
are acting as an intermediary, they will charge a hefty fee for this service - plus, they
also have a strict criteria that you have to meet and your business may well fail to meet
even these standards.
Paypal is probably the largest and most well known third party merchant. Originally
created to manage the huge number of payments from Ebay autions, they allow an
individual to create an account that can be linked to their own bank account and credit
cards. Paypal charges you to receive money, but then you can transfer that money
directly into your bank.
Digital currency or e-currency - A hugely popular
method of making payments over the Internet is
through digital or e-currency accounts.
You purchase a quantity of gold, silver or other precious metal using an e-currency
exchanger and store this metal in the virtual vaults of the service provider. You can then
use this e-metal account to pay for goods or services whereever a company accepts this
method payment.
An air of anonymity surrounding these companies and they are often the focus for US
federal investigation due to money laundering accusations, due to the ease of moving
large amounts of cash around the world. This fact has not detracted from their
popularity or their usefulness on the Internet.
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Security
With some of these payment processors you have the option to set your
desired level of account security.
The highest level of security will only allow access to your account from the
same IP address. This is not very helpful if you are travelling, it can also be
very annoying if your server uses a dynamic IP or your browser requires
frequent updates (eg Firefox).
My advice - Accept the annoyances and set your account to high security!
These websites are constantly targets for hackers (as are all financial
institutions), but providing you are careful you should not experience problems.
WARNING
If you have a dispute with someone concerning a payment and the other party
contacts the payment processor support, you might find your account is frozen
until the other party declares the dispute over. This also means that someone
without any justification can have your account frozen and it may take months to
resolve the issue.
Org's Top Tip
Don't leave a lot of money in your processor account!
With some of these payment processors you have the option to set your
desired level of account security.
The highest level of security will only allow access to your account from the
same IP address. This is not very helpful if you are travelling, it can also be
very annoying if your server uses a dynamic IP or your browser requires
frequent updates (eg Firefox).
My advice - Accept the annoyances and set your account to high security!
These websites are constantly targets for hackers (as are all financial
institutions), but providing you are careful you should not experience problems.
WARNING
If you have a dispute with someone concerning a payment and the other party
contacts the payment processor support, you might find your account is frozen
until the other party declares the dispute over. This also means that someone
without any justification can have your account frozen and it may take months to
resolve the issue.
Org's Top Tip
Don't leave a lot of money in your processor account!
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