Do You Have a Backup Processor?

You know how it goes: when you first start a business online, and in its formative years, you have to be especially careful with your cash flow, and naturally try to get the biggest bang for your buck. That's why many small businesses don't have their own merchant accounts for processing credit card orders - instead, they use a third-party to manage credit card orders on their behalf. Some well-known examples include Clickbank, 2CheckOut.com, and PayPal.

I mean, what's not to like? Small application fee, fast setup, low rates... plus it's nice not to have to pay regular monthly fees. Instead, you just pay fees on every order you take (and if you don't sell anything, you don't pay anything, either). Great solution for small businesses.

... right?

Not quite. Two companies I used for years pulled the rug out from under me and hundreds or thousands of others who used their services. They were both cheap and fast to get started, reasonable fees, nothing to pay unless you make a sale. Both had payout schedules and by most accounts, paid their merchants on time.

Last year, one of them shut down all their accounts.

Last month, another did the same thing to businesses who held a particular type of account. Again, no warning. What's even worse was that some people didn't even receive notification that their accounts were closed! Some businesses found out by trial and error (or by an irate customer who couldn't place an order). On their part, this showed a total disrespect for their customers (on a separate note, some businesses can migrate to the other type of account they offer -- but why would anyone bother, after the stunt they just pulled? It's just too bad...).

Both times, businesses who relied on these companies for their processing needs were left out in the cold -- not only unable to take credit card orders, but also unable to access the funds from their sales. In other words, all the funds collected from the sale of their products and services were being withheld -- and initially with no clear release schedule, either.

You can just imagine the havoc this caused. Businesses were rightly concerned and outraged about their funds -- their customers paid and they had no choice but to fulfill the product or service. After all, it's not the customer's problem that your funds are being withheld.

The more immediate and pressing concern, though, was how to continue to take credit card orders. The vast majority of businesses accept credit cards -- people expect it, and the convenience and protection offered by credit cards helps to keep sales flowing.

It can be a real scramble (and a tremendous headache) to get things up and running again. Imagine, too, if you relied on your payment processor for recurring payments -- and with your account shut down, you've lost all your customers' rebilling information. That's just plain painful.

To be prepared for situations like these, consider having more than one way to take credit card orders. That way you can go to one of your "backup" solutions if you lose the ability to take orders with your primary solution. Check out our Useful Tools & Resources section for credit-card processing options, in both USD and other other currencies.

Another useful resource is the website www.merchantcompare.com -- you can plug in some numbers and find out how rates for various companies compare with one another. There are also lots more companies listed on this site that don't appear in the above list.

It's for times like these that it's always a good idea to have a backup in place. It's bad enough to have to change all the payment links to an alternate payment processor, at a mere moment's notice, but at least you can continue to take orders.

If worst comes to worst, make sure you provide a printable order form that customers can mail in with a cheque.

It's always a little nerve-racking when someone else holds your funds and you rely on them to release them on schedule. If your business can afford it, perhaps it's time to look into getting your own merchant account. Then at least the funds are promptly deposited into your bank account and you control your interactions with your customers - for instance, you're the one who decides if a refund is appropriate, rather than some third-party.

Always have at least one alternate credit-card processing solution. You just never know what can happen. [an error occurred while processing this directive]

Originally published September, 2004