Why have an online merchant account?
…and other critical questions facing new eCommerce businesses.
Do you want to grow your brick-and-mortar business? Taking your sales online is a great way to expand your audience, serve the needs of an always-demanding customer base, and most importantly to boost sales. Or if you are striking out with an online business from scratch, welcome to the movement of entrepreneurs that in just a few decades have revolutionized commerce from the ground up.
Whether you are making the jump to online sales or are starting an online business from scratch, eCommerce has blasted open the doors of possibility to millions of entrepreneurs just like you. The good news is that setting up your business to sell goods and services online is a solved problem, with multiple valid solutions.
Diving into the world of eCommerce requires thoughtful preparation as you approach key decision points along the way. Among the most important of those decisions involve selecting the right eCommerce platform and merchant services. Let’s take a look at a few of these critical choice points on the road to growing your online business.
Build your own website, or use an online marketplace?
The motivation for your online selling journey is quite clear—consensus estimates suggest that global eCommerce will surpass $3 trillion in 2019, $4 trillion in 2020, and approach a remarkable $5 trillion in 2021.
As your dream of gaining a piece of that massive pie draws nearer, forks appear in the road. One of your first decision points will be to consider whether it makes the best business sense for you to build your own website, or to take a marketplace route and use third-party platforms.
Building your own website involves more time, resources, know-how, and money. You’ll want to methodically and professionally design your website so that it’s user-friendly. No detail is too small or unimportant when it comes to creating delightful experiences for your customers to shop and purchase.
When you go it alone, you need to make all the decisions—or hire professionals to make them with you. When you go it alone setup costs will also be higher than using an online marketplace. You’ll also need to consider who will maintain your site, provide upgrades, and step in to handle urgent and timely customer issues as they may arise.
Of course, all of that time, money, and energy necessary to build and maintain your own eCommerce site put you in the driver’s seat, empowering your business with tremendous control and predictability. Building your own eCommerce site give you maximum flexibility to grow at your own pace.
eCommerce marketplace solutions offer a quick-start. For those looking to sell online with lower initial costs, fewer resources, and less ongoing maintenance, From Amazon to eBay to Etsy, your business can join the ranks of online sellers quickly, easily, and powerfully.
Setup time will be quicker with a marketplace solution. Today’s online marketplaces are designed for the budding entrepreneur with boundless energy and great ideas, yet little business or digital experience. Armed with your product names, descriptions, photos and prices, you can be up and running with an online marketplace in as little as a few hours.
Payments are easier as they are built-in the basic service, as is almost everything you’d need to build on your own. The larger marketplaces offer access to tens of millions of shoppers in a flash on marketplaces with world-class infrastructure and sterling global reputations.
Of course, there are downsides to marketplace approaches relative to going it alone. You won’t have as much flexibility compared with building your own website from scratch. Customization options are few and far between. You’ll also be paying for the simplicity these marketplaces provide
Is a merchant account right for my online business?
If your business already accepts credit card payments in-store, you’re probably familiar with the term “merchant account.” A merchant account is a special type of business bank account that allows your company to accept credit and debit card payments.
If you are building and eCommerce business and your own site from scratch, you’ll need to apply for an merchant account just like any other type of business bank account. You’ll be asked to provide a few relevant details such as the type of business, length of operation, details of your business history, and the credit history of both your business and its owners.
If you are expanding online from your physical store, your current merchant services provider should have the flexibility to offer eCommerce payment acceptance. If not, it’s time to re-evaluate your merchant services relationship and seek a partner with an offering better suited to your growing business.
Although this slightly longer setup process may seem like a burden, establishing a merchant account will likely offer your business access to lower processing rates. For the right type of merchant, this can result in substantial savings, adding a big boost to your bottom line.
Is a payment facilitator (PayFac) more appropriate?
Merchant accounts are not best suited for every business. Thankfully small businesses have many options, including Payment facilitators (PayFacs). If you operate a business that runs relatively low volume, has yet to establish a credit history, or is just looking for ease and simplicity of onboarding, payment facilitators offer a full range of payment features that are ideal for many small businesses.
A payment facilitator (PayFac) functions as an aggregator, providing payments-related services and facilitating transactions for small businesses. PayFac services include underwriting, compliance, reporting, and customer service. Many PayFacs are Software as a Service (SaaS) providers that oﬀer payments acceptance and processing as part of their overall package of eCommerce services.
Setup time will be quicker with a PayFac. You won’t need to go through the application process required to obtain a merchant account, and the processing system is much more likely to be “plug-and-play.”
There is a payment solution appropriate for every business. PayFacs are wildly popular and have helped millions of small businesses succeed the world over. Merchant accounts are best suited for businesses that run a high volume of transactions, as well as those that want to maintain maximum flexibility to customize the critical checkout process.
The choice is yours…
Taking your business to the next level by selling online is the smart move. Deciding on your exact route is up to you, as every business is different. Your business isn’t a cookie-cutter, so its online presence has to reflect your uniqueness and work for you, as well as your customers. With great risks come great rewards, so set your sights high.