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I know this subject have been discussed in length here and elsewhere, but most of the people that ask what is the best online payment processor never mention the price tag.

My product's minimum order will be around $1000 and goes up after that based on the number of users.

Please tell me from personal experience what online payment processor should I use for such price tag item?

P.S. Trying to stay away from Paypal.

Thanks in advanced

Tim

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5 Answers

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The cheapest product we sell is $495, but our average transaction is significantly higher than that (for example our $2995 bundle is our most popular single offering) and we use FastSpring. In our case, we handle most of the "shopping cart" aspects of the purchase and once we have a list of items for a customer hand it off to FastSpring to perform the actual purchase. We have no merchant account, and FastSpring is handling all of the international currency conversion and tax issues, which is a significant thing for us because about 60% of our business is in Europe (and that is split between many countries). They are also handling the fraud-detection and controlling our charge back risk. It does cost more than being your own credit card processor, but not a lot more (talk with them about your situation). At our current volume makes sense for us to simply not have to worry about it.

We do completely electronic fulfillment so one of our key requirements was that we could pass over a completed shopping cart and get back a web service-like hit when it was sold to complete issuing the licenses on our side. We were able to get that working quickly with them.

We also offer people the option of paying by purchase order if they are making a large enough purchase which makes some companies happy and means we don't have to worry about the FastSpring transaction fee on our larger purchases (which are usually over 5k to want a PO).

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+1 on the PO. At your price point few people will want to use a credit card anyway. – Jason Apr 20 '10 at 2:00
Kendall, thanks for the inside information. For your experience, businesses looking on paying with a PO or a CC more often? I'm referring to a $1-$3K sale. What's FastSpring's cut on such sale? – Tim Kara Apr 20 '10 at 13:33
In the $1k-$3k range I'd say we get 1:3 PO:CC. We process the PO's entirely internally (they must be paid in US$, which hasn't been an issue for us yet) so FastSpring isn't involved. Above $3k it's virtually all PO, but we've had the odd 5k exception to that. You can see pricing right on FastSpring's home page - they have a few options you can go to get the best pricing; its' better than some are suggesting so it's worth checking out. – Kendall Miller Apr 20 '10 at 18:53
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@KendallMiller "Pricing is 5.9% plus $.95 or 8.9% flat per order" - that seems really hight. Is there something about their services beyond simple CC processing that makes those numbers more reasonable than they might otherwise appear? – tnorthcutt Mar 8 '12 at 15:54
Indeed, they're doing a few things. The two key ones for us are that they are correctly handling tax collection, even internationally, which is a big deal for many customers (particularly in Europe) and secondly that they handle all of the anti-fraud/chargeback issues which otherwise you're usually responsible for when you go for a 3% direct arrangement. They also have a fully featured shoping cart/ecommerce site implementation which we happen not to use but can be a big time saver. – Kendall Miller Jun 6 '12 at 18:42
up vote 3 down vote

It really has nothing to do with how much is your minimum purchase but what is your average volume of sales. If you have a sale once in a while than PayPal may not be too bad of an option, however if you have a high volume, then you need some sort of payment processor that will be able to offer you a better % rate.

Please keep in mind, though, that most of other options will require additional setup and possibly involve setup fees. Here's a company that has been around for some time and mainly srves smal to mid-size businesses: authorize.net

Some companies may wave their monthly fee if you have no transactions. I used to use Echo for that very same reason.

Payment processing is a mature market and you can certainly find a provider that will be able to meet your business needs and sometimes will bend backwards to get your business. Good luck.

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About average volume: I'm starting now so it will be low, but I hope not for long. Authorize.net is a gateway and I need a merchant account, which is not in my plans for now. – Tim Kara Apr 19 '10 at 19:53
They will create you a merchant account, the same way any processor would. In fact Echo used to require a Bank account with their own bank. That was about 5 years ago, not sure if they still do that. If the volume is low,I'd say stick with PayPal to see what the volume will look like and once you have a better idea it will be easier to make a correct choice of the processor. – usabilitest Apr 19 '10 at 23:32
up vote 3 down vote

You should start by talking to your bank and asking what they offer in merchant accounts. Note that with an average ticket price of $1,000.00 or higher any merchant account is going to want to see a bank account that has had an average balance in the 10's of thousands of dollars for at least the last year. Chargebacks come straight from your bank account and no one is going to give you a merchant account where you can quickly take in thousands fo dollars without a way of getting it back if this is a scam.

Once you have a merchant account set up, be prepared to field phone calls from your merchant account provider about large dollar charges. They will call to see if this is correct and may delay payment to your account at first.

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Gary, is merchant accounts the only good solution I have? As I explained in the above comment is not in my plans right now for the issues you described. What I'm looking for is for the best low % rate processor for now until I have an office infrastructure. – Tim Kara Apr 19 '10 at 20:24
You can use an e-commerce provider (like fastspring mentioned here) or get your own merchant account. To get a merchant account that will handle $1,000+ transactions you need to have a very goo, established credit rating. The rate will be relatively low- 1.5% to 2.5%. If you use an ecommerce provider you don't need the credit rating, but the percentage will be 9% - 15%. – Gary E♦ Apr 20 '10 at 3:38
I didn't know that rates get so high (9-15%). You refer to personal or business credit rating? My personal is great but I just started my business. – Tim Kara Apr 20 '10 at 13:30
If you want a merchant account for your business, your business must have a solid credit rating. Fastspring has mentioned a lower rate for large transactions (around 6%, but I don't know if that applies to international transactions. Visa/Master Card/AmEx tack on an extra 1% for currency conversions on those. – Gary E♦ Apr 20 '10 at 21:58
up vote 2 down vote

Gary, the rates aren't always that high when you use a full service e-commerce service. In our case the rate for a high priced product is 5.9% plus $.95 per transaction, which is lower than the 9-15% mentioned.

The 1.5-2.5% figure you'd pay by having your own merchant account is a little low, because when you factor in amex, paypal, international, reward, and corporate card transactions the rate ends up blending out closer to 3.5-4%, especially when you account for the chargeback fees that get paid by the vendor if you have your own merchant account.

Some more info on the advantages of outsourcing vs having your own merchant account is listed here: http://tinyurl.com/c3t3qq

Hope that helps clarify things a little.

  • Dan
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We use fastspring for some of our processing, and our own merchant account too. You also have to figure in a minimum extra 1% for international transactions when using your own merchant account. – Gary E♦ Apr 20 '10 at 21:55
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Please don't post an answer when replying to another answer. Use a comment instead. Only post an answer if you're answering the original question. Thanks! – tnorthcutt Mar 8 '12 at 15:56
up vote 0 down vote

Tim,

Your best bet is too start with a e-commerce provider like FastSpring or Plimus and when you have enough sales, and probably better office infrastructure, get you own merchant account.

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