After securing a domain, hosting, and product, the next step is payment processing. You might consider a bank’s Internet merchant account, but often they refer to ISO/MSP for a merchant account and gateway. After researching, selecting ISO/MSP and gateway, an application is needed. Carefully review the contract’s details and fees; some may differ from sales pitches. Confirm the contract duration, as promised month-to-month might turn into a three-year commitment. A hasty decision could lead to costly contract cancellations and potential listing on TMF/MATCH.
Once you have completed reading the contract, making sure it is everything you thought it would be, you are ready to start the process. It wants a lot of information, your DBA, the EIN, your address, phone number, e-mail address, how long you are in business, if you have had a merchant account before, how much monthly volume you expect, your average ticket amount. Now wait a minute, if you are just starting a business, how do you expect to know how much volume you will be receiving? You hope a lot, of course but being realistic, it might take a few months before you turn a profit.
Well what number should you enter into this field? Does it make a difference? Should you enter a number higher or lower than what you think? Some good questions to ponder.
Well, it does make a difference in the number you enter. And it makes even a bigger difference if the average ticket is a large amount. For example, if you enter $20,000 for the monthly volume and $5,000 for the average ticket, the ISO / MSP will look into this account a bit more. One chargeback could easily push you over the chargeback ratio, thus having your merchant account suspended or even terminated.
Merchant Account Suspended
In the US, ISOs/MSPs swiftly approve sub-$30,000 monthly applications, unless the product is high-risk. Some advise projecting 6-month activity. Providers monitor to avoid fraud, as they’re liable to repay customers. Spikes in volume raise flags, prompting reviews. This safeguards the provider who may suspend transactions for verification.
If you call the ISO / MSP to let them know of this increase before it happens, things will usually be a lot easier. For example, maybe next month you are considering doing an advertisement on the local radio and hope this will increase your sales. You don’t want anything to hinder your company from getting the money from those sales. The ISO / MSP might ask that you fax over the receipt from the radio station as confirmation. Email that over and maybe the next day, follow-up with a phone call to make sure everything is OK.
If your business is deemed high risk, for example e-cigarettes, MLM or web hosting, most traditional merchant accounts will not work for you, you will need a high risk merchant account, one that has experience with high risk industries that have a higher chargeback rate.
The ISO / MSP might also ask that you fax over a copy of your bank statement and complete a request for a limit increase. Do this right away to ensure no funds are held. Follow up with a phone call the next day or so, and always document who you spoke to – get their name or ID number. I am not saying that a ISO / MSP will do anything negative, it’s just always good to have documentation.
Merchant Organic Growth
Another factor in growing is time in business. Hopefully your business grows month-to-month, year-to-year. Usually, merchant account providers will take this into consideration. Merchants typically remain unaffected when their volume gradually increases over time.
Consider this – each merchant is different. Each ISO / MSP is different. I know that most like certainty – something like the Pythagorean theorem if you will. Unfortunately, there is not a formula for them (merchants and merchant account providers) to just enter a couple of numbers into to get a specific answer. Everything is on a case by case basis. A considerate and polite attitude always helps as well. I know these matters can be very delicate and patience might be needed from time to time.
If your business is growing like the example above, consider calling your ISO/MSP. Even though things seem fine, with money coming in daily, it’s worth discussing. But you are an honest businessman doing a hard day of work, so you have nothing to worry about. This will show the ISO / MSP you understand how much you respect having the account and you want to make sure you are playing by all the rules.