The push of many work from home programs is the idea that an individual can sell products that he or she does not own, and the promise is that they can make a profit doing this. This idea seems to defy human logic, as one questions how a profit can be generated when there is nothing to sell. In most cases, the idea that one can sell things that are not personally owned is an allusion to affiliate marketing, the process of selling products that other people own and earning commissions from the product owner. In this process, the sale is generated by the affiliate, and the merchant takes it from there. When the sale is completed, the affiliate earns a commission. Many people make money doing this, as it is a very good business model if one is able to perfect the strategies involved. However, there is another way to make money selling nothing of your own, and it includes the process of drop shipping. Drop shipping, which existed long before the internet, breathed a new type of life once eBay and the internet turned e-commerce on its head. Drop shipping is simply the process of selling a product that is owned by someone else at an inflated price. For example, if an individual is able to find products at a wholesale price, he or she can place it on eBay or their own store and sell it at a premium. In the process, one can avoid having to own anything, and the shipping is taken care of by the company that manufactures the company. While this process is similar to affiliate marketing, it differs in the fact that the product actually passes through the hands of the individual. Furthermore, affiliate marketing is often applied in the digital product industry, while drop shipping can only be done with physical products. And, while the product does pass through the hands of the individual, it does not do so physically. Because the manufacturer handles the shipping, the middleman does not need to package the item, ship it, or store it anywhere. Instead, he or she simply completes the order and earns the profit that is taken on the sale of the item. This type of a business model is very simple, easy to understand, and repeatable. For these reasons, people flock to study this strategy to see if they can make money by implementing it. While not everyone finds it to be a profitable venture, many in fact are able to generate solid income streams from drop shipping.Article Source: http://www.articlesbase.com/ecommerce-articles/selling-nothing-of-your-own-234071.html
-------------------------About the Author:To learn more about the strategy of drop shipping, read more in the Dropship Crash Course. Then, check out one of the best drop ship sources around, Worldwide Brands.
Friday, July 17, 2009
Steps To Accept Credit Cards In Your Business
1. What Are You Selling?
The reason for this is because VISA/MASTERCARD does not accept every type of business there is. Because of high return and charge back risks, each sponsored bank has a criteria of what kinds of business they will and will not accept. That is why when you check with your local bank there is a very good chance that your application will be denied if you are anything but retail.
2. What Is The Criteria For Acceptance?
The less risk your business is to the bank, the greater your chance of acceptance. If you were operating a retail store selling stationary, your chances for approval is many times greater than if you were operating the same business from your home or over the Internet. To the bank the retail store is far more secure than your home based business.
3. What Do I Do Then To Accept Cards? I Am Not A Retail Store.
The answer is that you need to work with a company or a bank that can approve these kinds of businesses. They have met the criteria and the requirements from VISA/MASTERCARD to approve businesses other than your standard walk in Retail store such as Mail Order, Phone Order, and Internet related businesses.
4. What About The Costs? Are They Any Different For A Retail Vs. Home Based Business.
The answer to this goes back to the "Greater The Risk, The Higher The Cost." In almost every case the cost (discount rate) to process a transaction is going to be more to you than if it was done in person. Most home based businesses process sales over the phone, through the mail, and over the Internet. There is no signed sales receipt in all of these types of transactions. This invites the high possibility of chargebacks. Hence, more risk, higher cost than if it was retail.
5. What Kinds Of Typical Startup Costs Can I Expect?
You should expect to invest a startup amount of between $190.00 - $300.00 from most companies in our industry. These amounts can include application, setup, equipment rental lease deposits as well as additional costs for poor credit, higher risk, etc.
6. What About Equipment. What Will It Cost?
This is going to vary depending on the kind of equipment you choose. If you lease your equipment, your payments should range anywhere from $35.00 to $49.00 per month for a complete processing system including a terminal and an automatic printer, and in many cases software. If you are looking to process Online Internet Realtime transactions, and want to add on Shopping Carts, etc, amounts will increase according to the amount of customization you need.
7. Is It Really Necessary To Accept Credit Cards To Be Successful?
Yes, it is. Here are just a few reasons why:
The average cash sale amount is $9.00. The average credit card sale is $40.00. That is a 450% increase per transaction. Is it any wonder why you do not see VISA/MASTERCARD signs disappearing from store windows? This is no different in a home based, and more importantly an Online business.
Another factor is this. Without giving your customers the convenience of accepting payment via credit cards, your sales are going to be far less than your competitors that do accept credit cards. This is a basic fact of business.
The bottom line?... If you are going to be in business, it is vital to the success of your business to offer your customers the convenience of paying by credit cards.
The reason for this is because VISA/MASTERCARD does not accept every type of business there is. Because of high return and charge back risks, each sponsored bank has a criteria of what kinds of business they will and will not accept. That is why when you check with your local bank there is a very good chance that your application will be denied if you are anything but retail.
2. What Is The Criteria For Acceptance?
The less risk your business is to the bank, the greater your chance of acceptance. If you were operating a retail store selling stationary, your chances for approval is many times greater than if you were operating the same business from your home or over the Internet. To the bank the retail store is far more secure than your home based business.
3. What Do I Do Then To Accept Cards? I Am Not A Retail Store.
The answer is that you need to work with a company or a bank that can approve these kinds of businesses. They have met the criteria and the requirements from VISA/MASTERCARD to approve businesses other than your standard walk in Retail store such as Mail Order, Phone Order, and Internet related businesses.
4. What About The Costs? Are They Any Different For A Retail Vs. Home Based Business.
The answer to this goes back to the "Greater The Risk, The Higher The Cost." In almost every case the cost (discount rate) to process a transaction is going to be more to you than if it was done in person. Most home based businesses process sales over the phone, through the mail, and over the Internet. There is no signed sales receipt in all of these types of transactions. This invites the high possibility of chargebacks. Hence, more risk, higher cost than if it was retail.
5. What Kinds Of Typical Startup Costs Can I Expect?
You should expect to invest a startup amount of between $190.00 - $300.00 from most companies in our industry. These amounts can include application, setup, equipment rental lease deposits as well as additional costs for poor credit, higher risk, etc.
6. What About Equipment. What Will It Cost?
This is going to vary depending on the kind of equipment you choose. If you lease your equipment, your payments should range anywhere from $35.00 to $49.00 per month for a complete processing system including a terminal and an automatic printer, and in many cases software. If you are looking to process Online Internet Realtime transactions, and want to add on Shopping Carts, etc, amounts will increase according to the amount of customization you need.
7. Is It Really Necessary To Accept Credit Cards To Be Successful?
Yes, it is. Here are just a few reasons why:
The average cash sale amount is $9.00. The average credit card sale is $40.00. That is a 450% increase per transaction. Is it any wonder why you do not see VISA/MASTERCARD signs disappearing from store windows? This is no different in a home based, and more importantly an Online business.
Another factor is this. Without giving your customers the convenience of accepting payment via credit cards, your sales are going to be far less than your competitors that do accept credit cards. This is a basic fact of business.
The bottom line?... If you are going to be in business, it is vital to the success of your business to offer your customers the convenience of paying by credit cards.
Real-Time Credit Card Transactions
When customers press the 'Purchase' button on an order form, the information is transferred to the server. But, what happens after the server receives the information? The diversity of technical solutions is enormous. The solutions differ by price, security features, level of automation, and many other factors. This article discusses which solutions are better.
The major difference between solutions is real-time processing versus deferred processing. With real-time processing, credit cards are immediately approved and the customer sees the results immediately. With deferred processing, the order is forwarded to the merchant who then processes the order. Both methods have advantages and disadvantages.
Real-Time Processing
The most important advantage of real-time processing is that the customer sees the results immediately. If you sell software or information that you can deliver electronically, this feature is priceless because it lets you fill the order within minutes. This is a strong selling point,and you can conceivably sell more of your product if you can fill your orders immediately. If you have to ship your product through the regular mail, this feature probably won't make any difference.
Real-time processing also makes your customers more confident because they know that their card has been approved. So, if there is a mistake, like a wrong expiration date, they can correct it immediately. Half of the Internet buyers are impulse buyers, and they may not re-order if they are told about the mistake the day after they place their order. However, the probability of this kind of mistake is small. The credit card number is checked by the software, so the customer cannot enter an incorrect number. However, the expiration date and the address can be entered incorrectly in 1-2% of the orders.
The possibility of seeing immediate results may also attract hackers. The hackers may have some incomplete credit card information. For example, they may pick up a discarded credit card slip, which contains almost all of the information they need. They can then use your order form to guess the rest of the information. If you do not give them an answer right away, this will not work. So, real-time processing may have a higher percentage of fraudulent transactions.
If you use real-time processing, you can leave the system unattended. All you need to do is to receive e-mails that will inform you about the orders made and the products sold.
There are two ways to do real-time processing. The most common way is to use processing providers (the largest is CyberCash) who specialize in Internet transactions. These companies usually provide you with a set of scripts to build your storefront so you can easily integrate their processing with your storefront software. However, their services are expensive. You usually have to pay a setup fee between $200 to $800 plus 10 to 30 cents per transaction and/or $20-$50 per month. All of these costs are in addition to your bank charges. This solution is easy to transfer if you change your ISP.
The other solution is to install your own credit card processing software on your server. Most processing software vendors have solutions that let you integrate their processing with your storefront software. If you prefer this solution, you will have to install a modem on your server and connect it to a dedicated phone line. You can expect to pay $50 for a modem (you do not need a fast one) and about $300 to your ISP to install this system. The credit card processing software will cost another $350-400. However, since you paid to have the system installed on your server and bought the processing software, your only recurring cost will be the phone line.
Some Internet Service Providers already have a credit processing software installed on their servers, so you will be able to easily plug in your store. But, you will have to pay about $200 for the setup and a per-transaction or per-month fee for using their system. With this solution, you won't be able to transfer your system if you change your ISP.
If you use real-time processing, make sure that the software does not keep the transaction log on the server, because the log containing all the credit card numbers, may become a target for hackers. If your Internet Service Provider hosts several merchants, it may store thousands of credit card numbers. If hackers break into their system, the merchants will be responsible for card numbers' loss.
Deferred Processing
If you defer credit card processing, you cannot fill the orders immediately. So, this processing method is more suitable for businesses that cannot deliver their goods over the Internet.
The advantage of using deferred processing is that you can inspect your orders manually, and correct them before you ship the order. For example, a customer called you and told you that he is from a non-profit organization, and arranged a 20% discount on his purchase. He can still use the order form, and then you can correct his order. You can do any discounts or surcharges for any orders, or otherwise edit the orders, before you process them. Real-time processing doesn't provide this convenience.
When order cards are processed, the credit card issuer's network may be down. This is especially true, if your customers are in China, Brazil, or other distant countries. In these cases, the credit card processor returns the 'CALL CENTER' answer, which means that you must call the center to authorize the transaction. If you do real-time processing, these transactions will be reported to the customer as declined. Not only do you loose a sale, but the customer may be confused by the answer.
Deferred processing is much cheaper than real-time processing because you do not have to pay anybody for any special processing. All you need is a credit card processing software, which you can buy for $350-400. You can use this software for both Internet and phone orders, which is a big advantage. You do not incur any additional costs for processing. The orders are delivered to you by your storefront software and then processed. However, deferred processing requires daily attention because you need to download your orders and process them every day. This may be just a single mouse click, but it needs your attention every day.
If you use deferred processing, the orders stored on the server must be securely encrypted. If the orders are just e-mailed to you, then anyone with administrative privileges on the server can read the orders and steal card numbers. So, before you use the system, ask your ISP or storefront software vendor how the orders are encrypted to secure the orders against hackers.
It is not easy to decide which method is the best for you because you have to choose a storefront software consider integration issues. at the same time, and We will talk about storefront software in one of our next issues.
The major difference between solutions is real-time processing versus deferred processing. With real-time processing, credit cards are immediately approved and the customer sees the results immediately. With deferred processing, the order is forwarded to the merchant who then processes the order. Both methods have advantages and disadvantages.
Real-Time Processing
The most important advantage of real-time processing is that the customer sees the results immediately. If you sell software or information that you can deliver electronically, this feature is priceless because it lets you fill the order within minutes. This is a strong selling point,and you can conceivably sell more of your product if you can fill your orders immediately. If you have to ship your product through the regular mail, this feature probably won't make any difference.
Real-time processing also makes your customers more confident because they know that their card has been approved. So, if there is a mistake, like a wrong expiration date, they can correct it immediately. Half of the Internet buyers are impulse buyers, and they may not re-order if they are told about the mistake the day after they place their order. However, the probability of this kind of mistake is small. The credit card number is checked by the software, so the customer cannot enter an incorrect number. However, the expiration date and the address can be entered incorrectly in 1-2% of the orders.
The possibility of seeing immediate results may also attract hackers. The hackers may have some incomplete credit card information. For example, they may pick up a discarded credit card slip, which contains almost all of the information they need. They can then use your order form to guess the rest of the information. If you do not give them an answer right away, this will not work. So, real-time processing may have a higher percentage of fraudulent transactions.
If you use real-time processing, you can leave the system unattended. All you need to do is to receive e-mails that will inform you about the orders made and the products sold.
There are two ways to do real-time processing. The most common way is to use processing providers (the largest is CyberCash) who specialize in Internet transactions. These companies usually provide you with a set of scripts to build your storefront so you can easily integrate their processing with your storefront software. However, their services are expensive. You usually have to pay a setup fee between $200 to $800 plus 10 to 30 cents per transaction and/or $20-$50 per month. All of these costs are in addition to your bank charges. This solution is easy to transfer if you change your ISP.
The other solution is to install your own credit card processing software on your server. Most processing software vendors have solutions that let you integrate their processing with your storefront software. If you prefer this solution, you will have to install a modem on your server and connect it to a dedicated phone line. You can expect to pay $50 for a modem (you do not need a fast one) and about $300 to your ISP to install this system. The credit card processing software will cost another $350-400. However, since you paid to have the system installed on your server and bought the processing software, your only recurring cost will be the phone line.
Some Internet Service Providers already have a credit processing software installed on their servers, so you will be able to easily plug in your store. But, you will have to pay about $200 for the setup and a per-transaction or per-month fee for using their system. With this solution, you won't be able to transfer your system if you change your ISP.
If you use real-time processing, make sure that the software does not keep the transaction log on the server, because the log containing all the credit card numbers, may become a target for hackers. If your Internet Service Provider hosts several merchants, it may store thousands of credit card numbers. If hackers break into their system, the merchants will be responsible for card numbers' loss.
Deferred Processing
If you defer credit card processing, you cannot fill the orders immediately. So, this processing method is more suitable for businesses that cannot deliver their goods over the Internet.
The advantage of using deferred processing is that you can inspect your orders manually, and correct them before you ship the order. For example, a customer called you and told you that he is from a non-profit organization, and arranged a 20% discount on his purchase. He can still use the order form, and then you can correct his order. You can do any discounts or surcharges for any orders, or otherwise edit the orders, before you process them. Real-time processing doesn't provide this convenience.
When order cards are processed, the credit card issuer's network may be down. This is especially true, if your customers are in China, Brazil, or other distant countries. In these cases, the credit card processor returns the 'CALL CENTER' answer, which means that you must call the center to authorize the transaction. If you do real-time processing, these transactions will be reported to the customer as declined. Not only do you loose a sale, but the customer may be confused by the answer.
Deferred processing is much cheaper than real-time processing because you do not have to pay anybody for any special processing. All you need is a credit card processing software, which you can buy for $350-400. You can use this software for both Internet and phone orders, which is a big advantage. You do not incur any additional costs for processing. The orders are delivered to you by your storefront software and then processed. However, deferred processing requires daily attention because you need to download your orders and process them every day. This may be just a single mouse click, but it needs your attention every day.
If you use deferred processing, the orders stored on the server must be securely encrypted. If the orders are just e-mailed to you, then anyone with administrative privileges on the server can read the orders and steal card numbers. So, before you use the system, ask your ISP or storefront software vendor how the orders are encrypted to secure the orders against hackers.
It is not easy to decide which method is the best for you because you have to choose a storefront software consider integration issues. at the same time, and We will talk about storefront software in one of our next issues.
Accepting Credit Cards Online
Accepting online credit card orders is a must for everyone who does business on the Internet. If you do not accept credit card orders you could lose at least 85% of your potential orders. Most online businesses report that 95% of their orders are through online order forms.
Accepting online credit card orders is easier than it appears. To accept online credit card orders, you need three basic things:
Merchant Account
Software
Internet Service Provider
Merchant Account:
A Merchant account is a special account that you have with a financial institution in order to accept credit cards. Even if you already accept credit cards for your offline transactions, that may not be enough. Credit card companies consider Internet transactions to be riskier than other standard transactions; so, not all accounts permit Internet transactions. If your current account does not allow Internet transactions, you have to contact your financial institution to correct this.
There are many brokers available who can open a Merchant account for you. Their conditions for opening an account may vary drastically, which can make it difficult for you to decide which account is best for you. Most brokers will offer to sell or lease expensive equipment to you, when they open your account. Do not be fooled; That is how they make their money. You do not need any software or equipment to open a Merchant account. . To open an account, all you should have to do is pay is processing fee, which should not be more than $100. That should be enough for you to start accepting credit cards.
To maintain your merchant account, you must pay the following monthly fees:
Discount fee - For Internet sales, this fee should be between 2.5% and 2.9%. You should be suspicious of any discount rate that is less than that.
Transaction fee - This fee should be between $0.20 and $0.30 per transaction.
Address Verification Fee (AVS) - This fee should be $0.05 per transaction. Some (very rare) financial institutions may not require this service, but it is a must for you because it helps to prevent fraud.
Statement fee - This fee is usually between $10 and $15 per month.
For example, if you sell software applications for $20 , and you sell 20 applications per month, your fees are only $25-30 per month, which is approximately 7%. So, even with a small sales volume of $400 per month a Merchant account is not expensive. We will discuss how to select the best account in one of the next issues of our newsletter.
Software:
Most brokers who open Merchant accounts offer software or hardware to process credit cards. If you want to accept credit cards over the Internet, you need a software solution, not a hardware solution. Even though a hardware solution saves you $50-$100, you will have to enter all your transactions manually. With a software solution, you will never have to enter your transactions manually.
Be aware! Some brokers offer software solutions for as high as $2,000, which is way overpriced. The software should cost about $400. Sometimes, brokers may also offer you programming or software setup services at an additional cost. Do not pay for these services. All of the software comes with technical support from the manufacturers, and the bank will give you all the information you need.
Instead of selling you a processing software, you may be offered a processing software lease at a certain price per month. The lease may seem like a good solution, but it's not. For example, if you pay $29.95 during 3 years (sometimes 4), you will pay $1,078.20. Isn't that too much to pay for $400 software?
You don't have to lease or buy your own software if you decide to do real-time processing by plugging into an Internet Service Provider (ISP) that has the processing software on its server. However, you may end up spending too much on an ISP. You must calculate all of the costs and benefits carefully before making that decision.
Internet Service Provider:
Choosing an Internet Service Provider (ISP) is not easy. Some providers will provide you full service and all of the software to process your credit card orders, while others will provide only basic services. Some providers will charge $150-200 per month, or even more, while others will charge $9.95 per month.
What are the basic things that you need from an ISP? The first thing you need is a Secure Server. Many people believe that you must have a Secure Server for security and they will not place an order unless you have a Secure Server. Yet, a Secure Server is not expensive. You do not have to pay $100 a month to use a Secure Server. Many ISPs provide this server for free. In any case, you should never pay more than $10 per month for this service. The best way for you to gain access to a Secure Server is through the ISP that hosts your Web site, which is usually the least expensive; however, you may use any ISP that you want. If you have your own domain name and you want to use it as a secure server, you must buy your own certificate, which costs between $100 and $350 per year. We will discuss Secure Servers and certificates in detail in the next issue of our newsletter.
After you have your Secure Server running, you need the software to display order forms, store orders etc. You can use anything from homemade scripts to sophisticated shopping carts. The price for this kind of software ranges from $30 to $20,000, or more. The price depends on what you need. There are thousands of products available, which makes choosing the right product for your needs very difficult. When we were looking for a software to process our orders, we did not find a product that would meet our needs, so we developed our own software, and we are planning to make it available by the end of 1998.
However, you do not have to have any software to process your orders. You can easily find an ISP that will process your orders for you, but it will cost you more money. Instead of paying $20-30 per month for an excellent Web Site with a Secure Server, you may have to pay $100-200 per month. This processing service is a waste of money. For example, if you buy a software for $500 and then only pay your ISP $20 per month for Secure Server services instead of paying $100 per month for Secure Server and processing services, your initial software investment will be paid off in six month, and the software is yours. That way, if you decide to change your ISP, you will not have to invest again.
There are two methods that you can use to process credit card orders. The method you use depends on what happens when the customer presses the 'Purchase' button on the form. With the first method, the credit card is authorized immediately and the customer receives an immediate answer. With the second method, the information is delivered to you, so that you can process the order later. Both methods have their advantages and disadvantages; however, they are not in the scope of this article. We will discuss these topics in one of the next issues of our newsletter.
Accepting online credit card orders is easier than it appears. To accept online credit card orders, you need three basic things:
Merchant Account
Software
Internet Service Provider
Merchant Account:
A Merchant account is a special account that you have with a financial institution in order to accept credit cards. Even if you already accept credit cards for your offline transactions, that may not be enough. Credit card companies consider Internet transactions to be riskier than other standard transactions; so, not all accounts permit Internet transactions. If your current account does not allow Internet transactions, you have to contact your financial institution to correct this.
There are many brokers available who can open a Merchant account for you. Their conditions for opening an account may vary drastically, which can make it difficult for you to decide which account is best for you. Most brokers will offer to sell or lease expensive equipment to you, when they open your account. Do not be fooled; That is how they make their money. You do not need any software or equipment to open a Merchant account. . To open an account, all you should have to do is pay is processing fee, which should not be more than $100. That should be enough for you to start accepting credit cards.
To maintain your merchant account, you must pay the following monthly fees:
Discount fee - For Internet sales, this fee should be between 2.5% and 2.9%. You should be suspicious of any discount rate that is less than that.
Transaction fee - This fee should be between $0.20 and $0.30 per transaction.
Address Verification Fee (AVS) - This fee should be $0.05 per transaction. Some (very rare) financial institutions may not require this service, but it is a must for you because it helps to prevent fraud.
Statement fee - This fee is usually between $10 and $15 per month.
For example, if you sell software applications for $20 , and you sell 20 applications per month, your fees are only $25-30 per month, which is approximately 7%. So, even with a small sales volume of $400 per month a Merchant account is not expensive. We will discuss how to select the best account in one of the next issues of our newsletter.
Software:
Most brokers who open Merchant accounts offer software or hardware to process credit cards. If you want to accept credit cards over the Internet, you need a software solution, not a hardware solution. Even though a hardware solution saves you $50-$100, you will have to enter all your transactions manually. With a software solution, you will never have to enter your transactions manually.
Be aware! Some brokers offer software solutions for as high as $2,000, which is way overpriced. The software should cost about $400. Sometimes, brokers may also offer you programming or software setup services at an additional cost. Do not pay for these services. All of the software comes with technical support from the manufacturers, and the bank will give you all the information you need.
Instead of selling you a processing software, you may be offered a processing software lease at a certain price per month. The lease may seem like a good solution, but it's not. For example, if you pay $29.95 during 3 years (sometimes 4), you will pay $1,078.20. Isn't that too much to pay for $400 software?
You don't have to lease or buy your own software if you decide to do real-time processing by plugging into an Internet Service Provider (ISP) that has the processing software on its server. However, you may end up spending too much on an ISP. You must calculate all of the costs and benefits carefully before making that decision.
Internet Service Provider:
Choosing an Internet Service Provider (ISP) is not easy. Some providers will provide you full service and all of the software to process your credit card orders, while others will provide only basic services. Some providers will charge $150-200 per month, or even more, while others will charge $9.95 per month.
What are the basic things that you need from an ISP? The first thing you need is a Secure Server. Many people believe that you must have a Secure Server for security and they will not place an order unless you have a Secure Server. Yet, a Secure Server is not expensive. You do not have to pay $100 a month to use a Secure Server. Many ISPs provide this server for free. In any case, you should never pay more than $10 per month for this service. The best way for you to gain access to a Secure Server is through the ISP that hosts your Web site, which is usually the least expensive; however, you may use any ISP that you want. If you have your own domain name and you want to use it as a secure server, you must buy your own certificate, which costs between $100 and $350 per year. We will discuss Secure Servers and certificates in detail in the next issue of our newsletter.
After you have your Secure Server running, you need the software to display order forms, store orders etc. You can use anything from homemade scripts to sophisticated shopping carts. The price for this kind of software ranges from $30 to $20,000, or more. The price depends on what you need. There are thousands of products available, which makes choosing the right product for your needs very difficult. When we were looking for a software to process our orders, we did not find a product that would meet our needs, so we developed our own software, and we are planning to make it available by the end of 1998.
However, you do not have to have any software to process your orders. You can easily find an ISP that will process your orders for you, but it will cost you more money. Instead of paying $20-30 per month for an excellent Web Site with a Secure Server, you may have to pay $100-200 per month. This processing service is a waste of money. For example, if you buy a software for $500 and then only pay your ISP $20 per month for Secure Server services instead of paying $100 per month for Secure Server and processing services, your initial software investment will be paid off in six month, and the software is yours. That way, if you decide to change your ISP, you will not have to invest again.
There are two methods that you can use to process credit card orders. The method you use depends on what happens when the customer presses the 'Purchase' button on the form. With the first method, the credit card is authorized immediately and the customer receives an immediate answer. With the second method, the information is delivered to you, so that you can process the order later. Both methods have their advantages and disadvantages; however, they are not in the scope of this article. We will discuss these topics in one of the next issues of our newsletter.
Ecommerce Solutions Compared
There are dozens, perhaps hundreds of businesses and organizations eager to assist you sell your product online. Basically, they fall into four categories: credit card transactions, digital cash transactions, electronic fund transfers and telephone billing systems. No solution is perfect and each comes with its own set of pros and cons. The right choice for you depends upon your specific business requirements.
1. Merchant Internet Accounts.
If you have a merchant status, you will need to consider the following factors:Pros:
Consumers are familiar with credit cards
With credit card transactions, consumers don’t have to download and install special plugins.
Credit card sales lends itself to impulse buying.
You have the customers' contact information for follow up sales and marketing purposes. (This is a pro for the merchant but a con from the point of view of many customers, who prefer anonymity.)
Cons:
Consumers still have concerns regarding providing financial information online.
Not everyone has a credit card.
This method does not lend itself well to the purchase of down loadable soft goods, such as software, art, graphics, etc. Vendors wanting to sell down loadable soft goods will will need to find a way to ensure the product is paid for, once downloaded.
You will have to deal with chargebacks.
If you can’t or won’t get a merchant account through your regular banking institution, you still have the broker option open to you. Brokers can often arrange merchant accounts for businesses who are deemed high risk. Setup fees and discount fees apply.
2. Electronic Cash Transactions
Electronic money is an arrangement whereby the customer pays for the merchandise using, well, electronic money. Examples of this are the well known DigiCash, Cyberbucks, CyberCash, etc. As consumers become more comfortable providing credit card information over the Net, these methods are less utilized.
The Pros
No credit card transactions are required.
No concerns re chargebacks.
Lends itself well to micropayments.
Cons
Many people are unfamiliar with the concept and shy away from unknown entities.
The process is perceived as "a hassle" to some shoppers who prefer to simply give credit card information.
Both merchant and customer must be participating in the same scheme before this method of ecom can be used.
Eliminates the possibility of impulse buying, unless both customer and merchant are already in same scheme.
May not be available globally.
Check out Digicash and Cybercash
3. Electronic Fund Transfers
Funds are transferred electronically from the customers bank account to yours. (This is a highly simplified explanation, and is accurate in the most general sort of way. However, the bottom line is that the customer buys, and at some point the funds are removed from his or her account and ultimately deposited into yours.)
The best known method is the issuing of electronic checks
Customers pay for merchandise by writing an electronic check that is transmitted by email, fax or phone. The "check" is a message that contains all of the information that is found on an ordinary check, but it is signed digitally, or indorsed. The digital signature is encoded by encrypting with the customer’s secret key. Upon receipt, the merchant or "payee" may further indorse by encoding with a private key. When the cheque is processed, the resulting message is encoded with the bank’s secret key, thus providing proof of payment.
NetCheck or Cybank are examples.
Pros
No credit card worries
Available to persons who don’t have credit cards
Cons
A very new technology that some perceive as being less secure than other forms of ecommerce.
Many customers aren’t set up to issue electronic cheques; time required to make the arrangements eliminates impulse buying.
May not be available to international consumers.
4. Telephone Billing Systems
A very new approach, telephone transactions allow the customer to purchase an item or service, and the amount is billed to his or her telephone bill. To date, this is being used for the sale of soft items such as downloads, time measured services (i.e. time spent at a Web site) or for making charitable donations online. eCharge Corporation is a pioneer in the use of this technology.
Pros
Eliminates worries about credit cards (for both consumer and merchant)
Safeguards soft merchandise – no possibility of theft or pirating.
Available to customers without credit cards
Coverage includes the US and points in Europe. Canadian coverage is expected soon.
Cons
Customer is required to download and install a plugin.
Currently only available for soft merchandise but can do some limited transactions for hard goods.
Not currently available for Mac users.
Currently available for sales using telephone modems, and will not work for transactions over cable modems and ISDN lines.
5. One-Stop Shops
More recently, with the huge interest shown in ecommerce, a multitude of services and products have become available. It's now a possibility to find a service that will broker your Internet Merchant Account, as well as providing web site storage, a template for designing your site, shopping cart software, a form generator, a secure line for safe online ordering, and more. IBM, ICAT and Vantage are examples of businesses offering these all-encompassing services. They are excellent starting points for the entrepreneur who wants to delve into ecommerce.
1. Merchant Internet Accounts.
If you have a merchant status, you will need to consider the following factors:Pros:
Consumers are familiar with credit cards
With credit card transactions, consumers don’t have to download and install special plugins.
Credit card sales lends itself to impulse buying.
You have the customers' contact information for follow up sales and marketing purposes. (This is a pro for the merchant but a con from the point of view of many customers, who prefer anonymity.)
Cons:
Consumers still have concerns regarding providing financial information online.
Not everyone has a credit card.
This method does not lend itself well to the purchase of down loadable soft goods, such as software, art, graphics, etc. Vendors wanting to sell down loadable soft goods will will need to find a way to ensure the product is paid for, once downloaded.
You will have to deal with chargebacks.
If you can’t or won’t get a merchant account through your regular banking institution, you still have the broker option open to you. Brokers can often arrange merchant accounts for businesses who are deemed high risk. Setup fees and discount fees apply.
2. Electronic Cash Transactions
Electronic money is an arrangement whereby the customer pays for the merchandise using, well, electronic money. Examples of this are the well known DigiCash, Cyberbucks, CyberCash, etc. As consumers become more comfortable providing credit card information over the Net, these methods are less utilized.
The Pros
No credit card transactions are required.
No concerns re chargebacks.
Lends itself well to micropayments.
Cons
Many people are unfamiliar with the concept and shy away from unknown entities.
The process is perceived as "a hassle" to some shoppers who prefer to simply give credit card information.
Both merchant and customer must be participating in the same scheme before this method of ecom can be used.
Eliminates the possibility of impulse buying, unless both customer and merchant are already in same scheme.
May not be available globally.
Check out Digicash and Cybercash
3. Electronic Fund Transfers
Funds are transferred electronically from the customers bank account to yours. (This is a highly simplified explanation, and is accurate in the most general sort of way. However, the bottom line is that the customer buys, and at some point the funds are removed from his or her account and ultimately deposited into yours.)
The best known method is the issuing of electronic checks
Customers pay for merchandise by writing an electronic check that is transmitted by email, fax or phone. The "check" is a message that contains all of the information that is found on an ordinary check, but it is signed digitally, or indorsed. The digital signature is encoded by encrypting with the customer’s secret key. Upon receipt, the merchant or "payee" may further indorse by encoding with a private key. When the cheque is processed, the resulting message is encoded with the bank’s secret key, thus providing proof of payment.
NetCheck or Cybank are examples.
Pros
No credit card worries
Available to persons who don’t have credit cards
Cons
A very new technology that some perceive as being less secure than other forms of ecommerce.
Many customers aren’t set up to issue electronic cheques; time required to make the arrangements eliminates impulse buying.
May not be available to international consumers.
4. Telephone Billing Systems
A very new approach, telephone transactions allow the customer to purchase an item or service, and the amount is billed to his or her telephone bill. To date, this is being used for the sale of soft items such as downloads, time measured services (i.e. time spent at a Web site) or for making charitable donations online. eCharge Corporation is a pioneer in the use of this technology.
Pros
Eliminates worries about credit cards (for both consumer and merchant)
Safeguards soft merchandise – no possibility of theft or pirating.
Available to customers without credit cards
Coverage includes the US and points in Europe. Canadian coverage is expected soon.
Cons
Customer is required to download and install a plugin.
Currently only available for soft merchandise but can do some limited transactions for hard goods.
Not currently available for Mac users.
Currently available for sales using telephone modems, and will not work for transactions over cable modems and ISDN lines.
5. One-Stop Shops
More recently, with the huge interest shown in ecommerce, a multitude of services and products have become available. It's now a possibility to find a service that will broker your Internet Merchant Account, as well as providing web site storage, a template for designing your site, shopping cart software, a form generator, a secure line for safe online ordering, and more. IBM, ICAT and Vantage are examples of businesses offering these all-encompassing services. They are excellent starting points for the entrepreneur who wants to delve into ecommerce.
Facts About Accepting Credit Cards Online
Before you can accept credit cards (either online or offline), you must have a Merchant Account, which is a special arrangement with a banking institution. Small and home businesses often experience difficulties qualifying for a merchant account, and Web based businesses run into even more problems.
The situation is this: Online transactions don’t take place at the point of sale (POS). They are considered to be "non-face-to-face" transactions. Since there is no way of ascertaining the customer’s identification, there is no way to be sure that the customer is the legitimate card holder. Therefore, financial institutions are leery about the high potential for fraud.
Moreover, the major credit card companies offer their card holders the right to contest charges on their statements that may be the result of theft, fraud or error. A contested charge is referred to as a chargeback. When a chargeback occurs, merchant will end up paying the charge to the issuing bank, in addition to a chargeback fee that can be as high as $30 or more. For example, if you sell a book for $20 through a credit card transaction, and the cardholder later contests the sale, you will end up paying your bank the $20 PLUS a chargeback fee of $10 to $30 dollars.
Consequently, many banks require a reserve fee when issuing merchant status. Typically, face to face sales have a chargeback rate of 1% of all sales. The potential for chargebacks is greater when it is an online sale, so the risk to both bank and merchant increases.
To minimize their risks, most banks have stringent requirements that a business must meet to establish eligibility for merchant status. Factors considered include cash reserves, length of time in business, tax returns, credit history, debt load, refund policies, volume of business, cost of item being sold, and other sources of income.
High Risk Processors are merchant acquirers that specialize in high risk business. They offset their risks by charging you higher transaction fees and higher rates. In the US, the Electronic Card Systems Inc. and Card Service International are two of the better known examples. Merchants living outside the US will be required to find a service that works with their own banking institutions.
Other Associated Expenses
The chargeback expense is the first and foremost concern for a merchant hoping to acquire a merchant account. Chargebacks can result in serious financial loss to the would-be merchant. Also, merchants who encounter too many chargebacks are at risk of losing their merchant account.
However, there are other charges and expenses to factor into the budget as well. Merchants will need to investigate hidden equipment costs, setup fees, line charges, bank transactions fees, holdbacks, and discount rates, etc. These vary considerably among service providers, so compare, compare, compare!
The situation is this: Online transactions don’t take place at the point of sale (POS). They are considered to be "non-face-to-face" transactions. Since there is no way of ascertaining the customer’s identification, there is no way to be sure that the customer is the legitimate card holder. Therefore, financial institutions are leery about the high potential for fraud.
Moreover, the major credit card companies offer their card holders the right to contest charges on their statements that may be the result of theft, fraud or error. A contested charge is referred to as a chargeback. When a chargeback occurs, merchant will end up paying the charge to the issuing bank, in addition to a chargeback fee that can be as high as $30 or more. For example, if you sell a book for $20 through a credit card transaction, and the cardholder later contests the sale, you will end up paying your bank the $20 PLUS a chargeback fee of $10 to $30 dollars.
Consequently, many banks require a reserve fee when issuing merchant status. Typically, face to face sales have a chargeback rate of 1% of all sales. The potential for chargebacks is greater when it is an online sale, so the risk to both bank and merchant increases.
To minimize their risks, most banks have stringent requirements that a business must meet to establish eligibility for merchant status. Factors considered include cash reserves, length of time in business, tax returns, credit history, debt load, refund policies, volume of business, cost of item being sold, and other sources of income.
High Risk Processors are merchant acquirers that specialize in high risk business. They offset their risks by charging you higher transaction fees and higher rates. In the US, the Electronic Card Systems Inc. and Card Service International are two of the better known examples. Merchants living outside the US will be required to find a service that works with their own banking institutions.
Other Associated Expenses
The chargeback expense is the first and foremost concern for a merchant hoping to acquire a merchant account. Chargebacks can result in serious financial loss to the would-be merchant. Also, merchants who encounter too many chargebacks are at risk of losing their merchant account.
However, there are other charges and expenses to factor into the budget as well. Merchants will need to investigate hidden equipment costs, setup fees, line charges, bank transactions fees, holdbacks, and discount rates, etc. These vary considerably among service providers, so compare, compare, compare!
Beginner's Guide to Ecommerce
Whether you call it Internet commerce, or ecom, or ecommerce, or immerce, it basically means the same thing. These terms mean buying or selling something electronically, and the time has never been better to jump in. If you have something you'd like to sell on the Net, new technologies have opened up an array of ecom options -- there's one to suit every need and requirement. Most importantly, ecom is safe. Experts tell us that online transactions are every bit as safe as face to face transactions-- although neither can be guaranteed to be 100% risk free. You're just as likely to be mugged on your way to the Bank Machine as you are to run into security problems with Internet commerce!
But ecommerce can be a confusing subject and many of us need a little help sorting it all out. If some of the jargon is confusing you, read on and I’ll explain some of the basic concepts. This document contains three categories of information:
Definition of Terms
Facts About Accepting Credit Cards Online
Ecommerce Solutions Compared
Definitions
Commerce Service Providers (CSP)
CSPs are business or web sites that provide ecommerce solutions.
Digital or Electronic Cash or E-cash or Ecash or Digital Money
These terms are also used interchangeably, and they refer to any of the various methods that allow a person to purchase goods or services by transmitting a number from one computer to another. The numbers are issued by a bank and represent sums of real money. Digital cash is anonymous and reusable. Unlike credit card transactions, the merchant does not know the identity of the shopper. Yahoo’s Listing of Companies Providing Digital Cash Cybercash and Digicash are two well known methods.
Electronic Checks or Cheques
Customers pay for merchandise by writing an electronic check that is transmitted electronically by email, fax or phone. The "cheque" is a message that contains all of the information that is found on an ordinary cheque, but it is signed digitally, or indorsed. The digital signature is encoded by encrypting with the customer’s secret key. Upon receipt, the merchant or "payee" may further indorse by encoding with a private key. When the cheque is processed, the resulting message is encoded with the bank’s secret key, thus providing proof of payment.
Various companies are selling Electronic Check software and services.
Electronic Wallet
Electronic Wallets store your credit card numbers on your hard drive in an encrypted form. You then make purchases at Web sites that support that particular type of electronic wallet . By clicking on a Pay Button, customers initiate a credit card payment via a secure transaction enabled by the electronic wallet company’s server.
Electronic Commerce or Ecom or Emmerce or EC
These terms are used interchangeably, and they all mean the same thing — the paperless exchange of routine business information using Electronic Data Interchange (EDI) , email, electronic bulletin boards, fax transmissions and Electronic Funds Transfer. It refers to Internet shopping, online stock and bond transactions, the downloading and selling of "soft merchandise" (software, documents, graphics, music, etc.), and business to business transactions.
Extranet
An extranet is an extension of a corporate intranet. It connects the internal network of one company with the intranets of its customers and suppliers. This makes it possible to create e-commerce applications that link all aspects of a business relationship, from ordering to payment.
Disintermediation
Disintermediation is the process of bypassing retail channels or mail order houses and selling directly to the customer.
Hard Goods vs Soft Goods
Hard Goods are items that exist in the real world, as opposed to soft goods, which exist virtually or electronically. For instance, an Internet merchant selling a book that is shipped to the customer in a print version is selling hard goods; a merchant offering a book for download in electronic format is selling soft goods.
High Risk Processors
High risk processors (or brokers) are financial institutions or companies that that issue merchant status accounts to high risk businesses. They offset their risks by charging higher transaction fees and higher rates than traditional banks do. However, the initial outlay of cash that you will be required to put up is usually much less than the large deposits required by traditional banking institutions. Some brokers may offer other added features such as shopping cart software, web site templates, forms or secure lines for ordering.
Immerce
Immerce is the new term being used for commerce that is transacted totally over the Internet.
Merchant Account
A Merchant Account is a relationship between a business (i.e. a merchant) and a merchant bank which allows the retailer or merchant to accept credit card payments from customers. Many banks or financial institutions, especially in Canada, have stiff requirements and regulations regarding the issuing of a merchant account. Many small or home based businesses report that they have great (sometimes insurmountable) difficulties acquiring Merchant Status. If Merchant Status is obtained, the merchant then rents or buys special software that is used to process the transaction. In some cases, depending on the bank and depending on the type of business that you are operating, you will also need to purchase or rent a piece of hardware known as a processing terminal.
An Internet Merchant Account is a special account that permits the acceptance of credit cards online. Transactions are processed online, in real time. While the customer waits, the system checks the credit card to be sure that it has not been reported stolen, has not expired, and is listed to the same address that the customer has given. If the card is approved, the customer and the merchant are both automatically notified that the sale has transpired. This type of account is a stricter banking relationship than one involving face-to-face transactions. Web transactions do not gather signatures from purchasers and therefore there is a higher risk of fraud.
Merchant Brokers specialize in obtaining credit card accounts for online businesses. Brokers charge a setup fee and lease or sell the software and hardware as needed. Expect to pay a discount rate, which is the percentage you pay for each transaction processed, as well as various other charges that differ among services. If obtaining a merchant account through a traditional bank is proving to be a problem, merchant brokers are a good alternative. Yahoo’s List of Credit Card Merchant Services
Microtransactions or Micropayments
Microtransactions are transactions of tiny amounts – a few cents or a few dollars, typically made in order to download or access graphics, games, and information.
Phonecash
Still under development at the time of this writing, Phonecash allows customers who prefer not to use credit cards to buy items on-line by having the value of the purchase transferred from their account to another account within the Internet Banking System. For details, visit Cybank
Telephone Billing Systems
A very new approach, telephone transactions allow the customer to purchase an item or service, and the amount will be billed to his or her telephone bill. To date, this is being used for soft items such as downloads, time measured services (i.e. time spent at a Web site) or for making charitable donations online.
But ecommerce can be a confusing subject and many of us need a little help sorting it all out. If some of the jargon is confusing you, read on and I’ll explain some of the basic concepts. This document contains three categories of information:
Definition of Terms
Facts About Accepting Credit Cards Online
Ecommerce Solutions Compared
Definitions
Commerce Service Providers (CSP)
CSPs are business or web sites that provide ecommerce solutions.
Digital or Electronic Cash or E-cash or Ecash or Digital Money
These terms are also used interchangeably, and they refer to any of the various methods that allow a person to purchase goods or services by transmitting a number from one computer to another. The numbers are issued by a bank and represent sums of real money. Digital cash is anonymous and reusable. Unlike credit card transactions, the merchant does not know the identity of the shopper. Yahoo’s Listing of Companies Providing Digital Cash Cybercash and Digicash are two well known methods.
Electronic Checks or Cheques
Customers pay for merchandise by writing an electronic check that is transmitted electronically by email, fax or phone. The "cheque" is a message that contains all of the information that is found on an ordinary cheque, but it is signed digitally, or indorsed. The digital signature is encoded by encrypting with the customer’s secret key. Upon receipt, the merchant or "payee" may further indorse by encoding with a private key. When the cheque is processed, the resulting message is encoded with the bank’s secret key, thus providing proof of payment.
Various companies are selling Electronic Check software and services.
Electronic Wallet
Electronic Wallets store your credit card numbers on your hard drive in an encrypted form. You then make purchases at Web sites that support that particular type of electronic wallet . By clicking on a Pay Button, customers initiate a credit card payment via a secure transaction enabled by the electronic wallet company’s server.
Electronic Commerce or Ecom or Emmerce or EC
These terms are used interchangeably, and they all mean the same thing — the paperless exchange of routine business information using Electronic Data Interchange (EDI) , email, electronic bulletin boards, fax transmissions and Electronic Funds Transfer. It refers to Internet shopping, online stock and bond transactions, the downloading and selling of "soft merchandise" (software, documents, graphics, music, etc.), and business to business transactions.
Extranet
An extranet is an extension of a corporate intranet. It connects the internal network of one company with the intranets of its customers and suppliers. This makes it possible to create e-commerce applications that link all aspects of a business relationship, from ordering to payment.
Disintermediation
Disintermediation is the process of bypassing retail channels or mail order houses and selling directly to the customer.
Hard Goods vs Soft Goods
Hard Goods are items that exist in the real world, as opposed to soft goods, which exist virtually or electronically. For instance, an Internet merchant selling a book that is shipped to the customer in a print version is selling hard goods; a merchant offering a book for download in electronic format is selling soft goods.
High Risk Processors
High risk processors (or brokers) are financial institutions or companies that that issue merchant status accounts to high risk businesses. They offset their risks by charging higher transaction fees and higher rates than traditional banks do. However, the initial outlay of cash that you will be required to put up is usually much less than the large deposits required by traditional banking institutions. Some brokers may offer other added features such as shopping cart software, web site templates, forms or secure lines for ordering.
Immerce
Immerce is the new term being used for commerce that is transacted totally over the Internet.
Merchant Account
A Merchant Account is a relationship between a business (i.e. a merchant) and a merchant bank which allows the retailer or merchant to accept credit card payments from customers. Many banks or financial institutions, especially in Canada, have stiff requirements and regulations regarding the issuing of a merchant account. Many small or home based businesses report that they have great (sometimes insurmountable) difficulties acquiring Merchant Status. If Merchant Status is obtained, the merchant then rents or buys special software that is used to process the transaction. In some cases, depending on the bank and depending on the type of business that you are operating, you will also need to purchase or rent a piece of hardware known as a processing terminal.
An Internet Merchant Account is a special account that permits the acceptance of credit cards online. Transactions are processed online, in real time. While the customer waits, the system checks the credit card to be sure that it has not been reported stolen, has not expired, and is listed to the same address that the customer has given. If the card is approved, the customer and the merchant are both automatically notified that the sale has transpired. This type of account is a stricter banking relationship than one involving face-to-face transactions. Web transactions do not gather signatures from purchasers and therefore there is a higher risk of fraud.
Merchant Brokers specialize in obtaining credit card accounts for online businesses. Brokers charge a setup fee and lease or sell the software and hardware as needed. Expect to pay a discount rate, which is the percentage you pay for each transaction processed, as well as various other charges that differ among services. If obtaining a merchant account through a traditional bank is proving to be a problem, merchant brokers are a good alternative. Yahoo’s List of Credit Card Merchant Services
Microtransactions or Micropayments
Microtransactions are transactions of tiny amounts – a few cents or a few dollars, typically made in order to download or access graphics, games, and information.
Phonecash
Still under development at the time of this writing, Phonecash allows customers who prefer not to use credit cards to buy items on-line by having the value of the purchase transferred from their account to another account within the Internet Banking System. For details, visit Cybank
Telephone Billing Systems
A very new approach, telephone transactions allow the customer to purchase an item or service, and the amount will be billed to his or her telephone bill. To date, this is being used for soft items such as downloads, time measured services (i.e. time spent at a Web site) or for making charitable donations online.
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