Many recent innovations have made our lives drastically better, eCommerce and digital banking are no different. Saving time and money, both have empowered consumers to create thriving marketplaces allowed businesses to embrace light-asset models. Open banking has since followed, trying to give customers better deals and greater control of their money. However, all this innovation is not all good.
Convenience breeds complacency.
While these advancements are time-saving and convenient, businesses and consumers are now exposed to previously unknown or undeveloped risks. Recently, however, more has been done to secure the only spaces that inhabit our lives.
Consumers have become more aware of the inherent risks of eCommerce, such as phishing, but have not explored a lesser-known threat emerging with digital banking. Thanks to open banking, it has become entirely possible to not only defraud a consumer’s primary bank but also to defraud their financial providers. As open banking and eCommerce continues to grow so will the potential for fraud.
To tackle this threat, banking and eCommerce have to adapt and continue to modernize even further. Thanks to new updates in SSL and PCI compliance, discussed here, eCommerce and banking have come together to try and protect customers’ identities. There are also constant constraints on eCommerce businesses and banks to be held more accountable for their users’ online safety.
We have also seen a change in consumer attitude and expectations. Of course consumer’s change with technology, but this shift has been more than just the introduction of eCommerce into our everyday lives. Whatever the root cause, it is more clear than ever that consumers place more trust into businesses with robust identity verification in place. As long as it doesn’t hinder the customer journey, verification is now seen as a positive thing to protect identity.
How to fight cyber-theft
Fighting cyber-theft is about using the old adage; fight fire with fire. By that I mean, that technology created these problems, but it is also the solution. AI-led digital identity verification authenticating every one of your customer’s identities is a great place to start. The AI-led processes can greatly impact the number of thefts from your eCommerce store and can help limit bank fraud as well.
Perhaps in the very near future, we will see our love of security and our love of selfies combine. Verifying each customer through facial recognition software sounds like a futuristic dream but could easily become a reality by the end of the year.
Despite all these massive changes set to happen for the eCommerce landscape, we are finding more and more businesses don’t know where to start. How do they accept online payments while staying safe? How do you start on this process when the end result is ever-changing? Well, the first step is to establish merchant accounts, which thankfully are reasonably easy to understand.
A merchant account is a type of bank account that allows your eCommerce business to accept payments with debit and credit cards. That means essentially that a merchant account is an agreement between you, a payment processor, and a bank that allows eCommerce transactions, for the settlement of credit and debit card transactions.
It’s not as forward as it sounds though. There is no eCommerce bank out there, just handling all of the transactions from every platform. This is where a merchant account comes in. When a customer to your eCommerce store pays with a card, the funds first deposit into the merchant account and then from there are transferred to your bank of choice into the business bank account. These transfers usually take place on a daily or weekly basis.
There is no way around this. If you want to operate an eCommerce website, you need an internet merchant account.
How to Get a Merchant Account
Applying for a merchant account should be a lot easier than it is. Even with the competition of businesses issuing merchant accounts, it is not a guarantee. To minimize risk, vendors use a variety of different criteria to gauge whether to approve a merchant account application including:
- Type of business and the risk of fraud and returns
- Length of time in business and the business history
- Previous merchant accounts and owners credit history
Most new business owners are more likely to get approved if the bank they apply for their merchant account also has their business or personal accounts. Having higher risk does not necessarily mean rejection, but does mean the vendor may require higher transaction or other fees to compensate for the risks. Eventually, though, the fees can be renegotiated at a later time.
An internet merchant account is a merchant account that is specifically designed to hold the proceeds from eCommerce sales and the processing of those online payments. If you already have a merchant account, you will probably notice the other main difference in the two is the fees; typically the internet merchant fees are higher because of fees associated with the higher risks of online purchases.
When taking online payments from cards, your eCommerce store will also need a payment gateway. A payment gateway authenticates the credit card information of your customers. This is the equivalence of the handheld point of sale machine in the traditional brick and mortar storefronts. The payment gateway submits the transaction request to the credit card company issuer for authorization for payment. Some merchant account vendors, such as Shopify, offer a one-stop solution that does not require a separate payment gateway.
You might be able to get internet merchant accounts from your brick-and-mortar bank but because you need separate internet merchant accounts for each type of card you wish to accept, it may be easier to purchase your merchant account through a third-party provider such as ValuePay.
Merchant accounts have fees attached to them. Unfortunately, some of these fees are not clearly stated and can be deceiving if you are not careful. Some of the more common fees include:
- Application Fees
- Setup Fees
- Monthly Fees
- Per-Transaction Fees
Additional fees can increase the total fee per transaction to over 3%. Make sure that when you are looking for your merchant account, you shop around and compare. Be aware that when you are looking for these merchant accounts and eCommerce banks, some come with minimum terms and contracts that can’t be canceled without penalties.
PayPal offers a one-stop solution for taking online payments that do not require merchant accounts. This solution may be most valuable to businesses looking to get started with online transactions but want the process to be quick, easy, and cheap. There are a few PayPal payments plans to choose from.
PayPal Payments Standard handles credit card payments, along with debit, bank transfers and regular PayPal payments on a per transaction basis. When you choose this option, a PayPal button is placed on your eCommerce website checkout page, which redirects your customers to the PayPal hosted checkout site. This creates an additional step in your checkout process and as we learned in this blog, that can create issues with shoppers’ experience from your store.
In contrast, PayPal Pro charges a monthly fee but gives our customers a more streamlined checkout experience because the checkout takes place directly on your eCommerce website. PayPal Pro also allows payments to be made through the mail, fax, or over the phone. Of course, there are more options than just PayPal, and NuEthic has integrated many different payment options to our clients’ eCommerce sites.
Online security and the need for it are constantly changing. Not only from outside pressures like the government but from internal pressures, like creating better brand loyalty and keep your customer’s information safe. Now is the time to get your merchant account and start accepting every payment type out there. Now is also the time to ensure your eCommerce website is secure and ready to handle the threat of cyber-criminals too.
Online security is a very real concern for your customers and it should be a very real concern of yours as well. Naturally, it is a concern for us at NuEthic. We can help alleviate these concerns for you though. We build and maintain eCommerce solutions that are scalable and secure.