What are the costs involved in online payment processing?

Costs of Merchant Payments Processing

When entrepreneurs approach the prospect of starting their own business, one of the first considerations they have to take into account (especially online) is how they will accept payment from customers. A common question among new merchants is how much they can expect to pay for the ability to accept transactions from their customers. Because each third party payments solution has its own fee structure, the cost of payment processing typically varies based on how many vendors a merchant works with.

When a merchant works with an acquirer or PSP, they can expect the vendor to have a basic fee or MDR (merchant discount rate), and, often, these vendors will also have a set transaction fee (usually a set percentage of each transaction).

In addition to using an acquirer or PSP, merchants can also work with any number of additional services, such as a gateway, an anti-fraud engine, or a shopping cart provider, and each of these will have its own associated fees. Each service has its own fee structure, often charging a set fee per transaction, a monthly fee, and overall account management fees among others.

Finally, when the merchant accepts payment via credit card, there is also an interchange fee that they must pay. More costs are incurred if merchants accept international credit cards, when currency conversion rates and cross-border fees are involved.

Do you have any payment-related questions? Feel free to tweet me your questions or post them on Quora for me to answer.

This answer originally appeared on Quora.com.

Five Points Every Retailer Should Know about Big Data

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The term Big Data has generated considerable buzz in recent years. What is the meaning of this concept and how can retailers benefit from it?

The term Big Data refers to the gathering of large and complex sets of data and the analysis of these data sets for relationships. The development of Big Data is the result of significant advances in the collection, storage and interpretation of data. The technology uses various algorithms and techniques to infer general trends over an entire set. Big Data refers to data as a resource that can be used and reused, often in ways that were inconceivable at the time the data was collated.

Big Data – A Retailer’s Dream Come True

  • Competitive agility – Retailers can achieve a competitive edge by enhancing their understanding of customers, multiple shopping channels, markets and the supply-chain. Armed with easily attainable data, it is possible to identify and satisfy general trends and changes in consumer behavior in real time.
  • Tailored shopping experiences – Big Data enables the creation of a personalized omni-channel shopping experience for the buyer. Using this data, retailers can automatically provide customers with their shopping channel of preference, regardless of whether it is online from a laptop or mobile device, by phone or in an actual store. The fact that retailers can now focus promotion only on products of interest to the specific customer boosts sales and makes everyone happy.
  • Product improvement – The in-depth information and input gleaned from Big Data enable retailers to understand how prospective buyers view their products as well as how to tweak them for different audiences and locations.
  • Inventory forecasting – In the past, most retailers had limited predictive capabilities when it came to inventory needs. Orders were based mainly on seasonal considerations and upcoming holidays. Big Data supplies many new parameters such as promotional activities, new trends, shifts in demand, and more. By using predictive analytics, retailers can cut down on wasted inventory.
  • Payment data analysis – The use of smart payment platforms enables retailers to collect payment data and perform assessments based on credit card networks used, locations, acquirer success and fail rates in different regions, and more. The parameters collected as payment data can be leveraged by merchants to decide which acquirers to use, with which credit card networks to connect, possible markets to explore, etc.

When Sir Francis Bacon coined the phrase “knowledge is power” back in 1597, he had no inkling how the nature and mass of knowledge or information would evolve. Taking it one step farther, more knowledge (or Big Data) means a lot more power for retailers.

Can hackers open a merchant account with stolen merchant data?

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A merchant recently asked on Quora whether a fraudster could use stolen identity information to open a merchant account in someone else’s name. This is an interesting question in its own right, but it also indicates how shrouded in mystery the process of opening a merchant account is for most merchants. In this post, I will explain which documents are required to open a merchant account, and why it is unlikely that a fraudster could open a merchant account using stolen identity details.

Each country regulates the exact procedures and documents needed for opening a merchant account; however, in general, merchants are asked to provide standard business documents, such as company registration papers. Often, when opening a merchant account, a merchant’s bank will ask for both personal and company bills, for things such as local tax payments and phone bills, etc. For example, if the business is registered to a home address, the bank might ask to see an electricity bill for that address.

As a fraudster, it is difficult to counterfeit these bills – it is technically possible, but very improbable.

Even if a fraudster were able to provide convincing falsified documents, there are various services that specialize in identifying fraud cases like these using algorithms that detect identity fraud, such as IDScan and Au10tix, which would likely prevent the fraudster from opening an account in someone else’s name.

It’s important to note that even businesses that enable quick go-to-market capabilities go through the same Know Your Customer (KYC) processes with merchants. They will start payment processing for merchants immediately, but will not credit their merchant accounts until the KYC protocols have been completed and the merchant has been approved.

Do you have any payment-related questions? Feel free to tweet me your questions or post them on Quora for me to answer.