Processing credit card orders online is a complicated process. First, you need a secureserver and some form of shopping cart software to acceptcustomers' credit card information. Next, you need an Internet merchant accountwith a bank that can accept charges from your Web site and credit them to your account.But simply having a merchant account doesn't mean that you are set up to take ordersonline. Just as in the physical world of retailing, virtual retailing also requires amiddleman to help the flow of commerce, so you also need a credit card clearingservice (sometimes referred to as a transaction processing service).

" A clearing service takes the credit card information from your site andtransfers the information to your bank, much the same as the credit card 'swipe terminal'in a physical store. It's not something a bank automatically takes care of for you," says Colleene Isaacs, vice president of business services with Segue Systems ,which, along with CyberCash, is one of the leading clearance serviceproviders. " We enable real-time credit card authorization. We are a gateway to thecredit card processing network."

Ideally, you should find a clearing service at the same time you are looking for a bankto handle your Internet merchant credit account. However, the situation can become acatch-22: The bank will ask you which clearing service you will be using, and the servicewill need to know which bank has given you a merchant account.

The solution? Isaacs suggests that businesses contact a clearing service first,find out which bank(s) it does business with, and then start the process with anappropriate bank. This can take from as little as a week to as long as a month. If a merchantcollects all the necessary financial information for the Internet merchant account andsubmits it to the bank up front, this will speed the process along. However, Isaacs pointsout that a merchant has to have at least begun the process of getting a merchant accountbefore Segue can work with him or her.

The following are some guidelines to keep in mind when you are choosing a credit cardclearing service:

  • How will the clearing service integrate into your online storefront?Some sites may want to integrate it themselves with a simple CGI or Perl script thatlinks the order form and clearing service. Some shopping cart programs already have thisintegration built in, so be sure to check with the software manufacturer for availability.
  • What is included in the setup fee and standard service? In addition tojust transferring the transaction information between your site and your bank, someclearing services may offer additional services, such as batch settlement, apassword-protected management feature that enables you to review all transactions andimport the information into a spreadsheet. Some clearing services also offer a" virtual terminal," which allows you to issue credits and perform otheradministrative functions such as those available on a regular swipe terminal.
  • How much is this going to cost, and what is the fee structure? " Peopleexpect everything to be free, which is unrealistic. There's a cost to doingbusiness, even on the Internet," says Isaacs. In addition to setup costs, somecompanies charge a flat fee for the service, plus an additional per-transaction fee. Seguecharges a flat fee for the number of transactions completed, based on volume: $49 foras many as 250 transactions per month, $79 for 251 to 500 transactions, and so on.
  • Will you be able to upgrade your service as your online business grows?Make sure you are not locked into a contract or service that penalizes you for exceeding atransaction limit. A service that makes it easy for you to scale up is preferable.
  • What is the performance and reliability of the service? Performance isdetermined by the time it takes to complete transactions. Reliability refers to the numberof transactions that go through compared with those that fail. See what the service claimsfor performance and reliability, then talk to some of the firm's customers to check if theservice lives up to its claims.
  • What kind of support will you receive? Does your service provider offeryou direct customer support, or is it merely acting as a reseller for others? Someservices essentially act as resellers for banks. If any problems occur, the bank acts asthe first line of support -- not the clearing service. Make sure the service youchoose has a relationship with you, so it will help resolve problems directly.

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