Thursday, May 31, 2007

The High Risk Merchant's Hottest Guide on Selling Digital Items

Digital Item: What is it?

They say experience is priceless but in the age of the Internet, even experience can be sold online. In fact, if you can sell digital text in the form of theses, e-books, and articles, digital images in the form of digital photos, movies, and videos, digital sounds in the form of downloadable mp3 and other digital content such as blueprints for building designs and presentations, you are essentially selling a digital item. Which is to say the least, a big market demand these days. A lot of digital sellers may start small with a few items on the catalog and grow into a huge company selling hundreds of items. They evolve to finally adopt a processing system with the help of a high risk merchant account provider.

High Rewards, High Risks?

A high risk merchant account provider? You ask. You heard it right. Selling digital items is not exactly the type of online business that regular merchant account providers approve of. There is no catch to it. Digital items are considered high risk items since there is a high incidence of hacking and fraud involved. Also, the biggest problem of most digital sellers is that they are unable to protect their intellectual property rights and thus lose their sales by copycatting.

I'm hitting the nail straight on the head. Selling digital items has such a high incidence of fraud and chargebacks that digital sellers have come up with various ways to protect themselves from these. For example, content would encoded in .pdf format as well as watermarks in order to protect themselves from copyright infringement. More advanced methods include using secure encryption systems.

Dealing with chargebacks is harder. Unless digital sellers have a way of tracing and verifying the transaction, customers will see loopholes for incurring chargebacks against them. They can merely download the product and call for chargebacks saying they did not download it. The best defense for this is to have the product shipped in tangible version such as CDs. Otherwise, create a contract that binds the customer into non-refundable, non-returnable product agreement.

Luckily, the rewards of selling items online is enormous. Not only because you have the whole internet-using world as your client base, but because you are freed from extra costs of shipping and setup that brick-and-mortar and brick-and-click stores have to pay for. Now, I don't have to convince high risk merchants of this idea, they already know and are quite aware of the benefits. This includes the fact that if you own an offshore merchant account, you enjoy such a high tax reduction that international banks bestow.

Also, if you have a good reputation for coming up with original content and have good marketing skills involving social media, there is even a greater potential to earn money. Most digital content sellers begin with free samples of their product and eventually grow into a profitable digital company. The trick is to sell consumer-oriented items that are of practical use to customers. When the latter can get access to your digital products (unlike in bookstores or record bars), there is more potential for increased sales.

Where and How to Sell your Digital Items?

There are several avenues to selling digital items. You can put up your products on eBay, register in a community mall where you own your customized storefront, or even build your own online store with the help of some programming and credit card processor (may or may not be affiliated with high risk merchant account provider).

Each avenue has its advantages and pitfalls. For example, eBay charges a high commission for certain products posted on certain period of time in the auction site. However, there is a high percentage of items getting sold since eBay is the world's biggest marketplace. The same happens with community malls but you have more freedom to customize your storefront and take advantage of more features that these online public markets provide.

For merchants selling digital items in bulk, it's best to create your own website where you can put up a limitless number of products and services. You will need an efficient shopping cart and a user-friendly online catalog displaying products, product descriptions, prices, and even customer reviews. You will also need a reliable credit card processor that can verify transactions in real time, fast. Above all, if you are a startup, applying for a high risk merchant account that will handle your transactions depending on their terms of processing is an excellent way to get your business running in no time. Only when you have established yourself as a digital seller of good profit and credit rating will you be able to own your independent merchant account. By then you can own your own credit card processing system and handle all your business processes from sales tracking to building your own affiliate program at your own pace.

Merchant Account Provider Fees : Let's Talk Pricing

Buying a credit card payment solution for your merchant account is like getting hitched. The first tip is to look out for a partner that you can rely on for the long haul. That simply means adopting a merchant account provider that will not give you hassles throughout the lifespan of your business. If you look closely, it's not just the choosing that takes time and effort. The process of merchant account application itself can also be a grueling ordeal! My article "Insider Tricks to Successful High Risk Merchant Account Application" will help enlighten you more about it.


In addition, it's important for merchants to get a clear picture of the the fees (and I mean all fees that are covered but not disclosed directly by the merchant account provider) and the schedule of fund transfer on your account. Once these issues are cleared up, the applying merchant must calculate the total cost, study the contract, and find out the grounds of termination of the said contract.

Now, don't be discouraged when you find out the cost of a low risk or high risk merchant account that you are applying for. There are tons of advantages to having one. You just have to know your way around it so you don't face fiascoes like non-refundable fees or misinformation resulting in your application being declined.


So what exactly are the types of fees involved in a credit card processing payment solution for a merchant account? Obviously, if you are a brick and click retailer you will pay for startup costs involving a credit card terminal, which is cheaper compared to the fees that a MOTO or Internet merchant will pay. A lot of merchants within this business category will have to question themselves and decide whether to buy a terminal/software or lease it. Buying means you will adopt the system and use it as long as your business exists (unless you intend to switch). Leasing means you will use the system for a certain period of time, and pay for a lower cost. I'll make it a point, however, that leasing isn't exactly going to cost cheaper in the long run. Not only will you have to pay for as long as the contract is still valid even if your business goes bankrupt, you will also face x cost on taxes and be granted a high or low rate depending on your credit rating.


By the time you, as a merchant applicant, have finished going through the round of paying for startup costs, it's time to face payment of the processing fees. Whatever the discount fee your chosen merchant account provider will charge you will always depend on the following:

  • type of transaction (card present/card absent)

  • assessed company risk

  • average sales ticket

  • sum charge volume

Another is the monthly minimum fee, which you can have lowered depending on your monthly volume. Merchant account providers will charge you a monthly minimum fee if you do not meet the required amount that your monthly volume has to reach. For example, if the monthly minimum fee is $50 and your monthly volume is $30, you will need to pay for the $20 to meet the minimum fee.

There are fees involved with cancellation of merchant account as well as fees written in fine print. As I've mentioned earlier, it is wise to go through the whole contract and find out all hidden costs before embracing a merchant account provider's services. Other fees include programming fees (and other extra setup fees), shipping fees, charges for technical support, and annual fees.

Wednesday, May 30, 2007

Insider Tricks to Successful High Risk Merchant Account Application

Many merchants complain about the lack of information when it comes to high risk merchant account application. It's not that there's no information at hand; it's more likely because merchant account providers do not provide standard customer service or are simply too lazy to share the nuts and bolts that the applicants need.


For example, a merchant may have already submitted his application before the merchant account provider (MAP) reveals the improbable terms: that he may not receive payment until x number of months or that he may not be approved for a merchant account unless he changes his marketing plan. When this happens, the worst case scenario is that the merchant's application may never be approved. If the company doesn't offer a money back guarantee, he may lose money even before he earns it.

The dark side of high risk merchant application involves a possibility that the MAPs may take long to approve your account. The reason is that they need to assess your business in relation to the rate of frauds and chargebacks that might be incurred. Also, you may spend more on fees than a regular merchant account.




Tuesday, May 29, 2007

Streetsmart Tips in Choosing Your Online Shopping Cart

What is a shopping cart?

All online entrepreneurs, including high risk merchants, need a highly efficient shopping cart. This fact can't be stressed too much -- many a business has failed because merchants are trying to use an incompatible shopping cart or is not using the full potential of commercial shopping carts available today.

Finding the perfect shopping cart for your online business is time consuming, if not too daunting. Merchants must acquaint themselves with the types of shopping carts in the market as well as test and experiment with their capabilities. It's important to choose the cart that will be flexible so that if a merchant changes his business' marketing plan a year later it will still be functional. In fact, the number one criteria in selecting a shopping cart is to make sure it meshes well with your marketing plan.

Types of shopping cart

Shopping carts may be classified into free or commercial, and hosted or non-hosted.

Free shopping carts are obviously very attractive options for low-budget businesses. It doesn't mean, however, that they are completely free. In fact, merchants will have to make use of a developer's skills to tweak a free shopping cart program like osCommerce. Free shopping carts are rooted from open source software and are as powerful as most commercial shopping carts. Unfortunately, they may not be as secure. Commercial shopping carts are preferred by high risk merchants who seek secure and reliable customer tools when purchasing online.

On the other hand, online merchants may use a hosted shopping cart or one that they can just buy as a software and thus configure. A remotely hosted software may include an affiliate management feature as well. Choosing a hosted shopping cart is another tricky process that may require another book to write! The advantage is that the merchant does not have to worry about the transaction process and record keeping since the host will take care of them. Other merchants prefer purchasing just the software. The advantage is it costs a lot cheaper and can be customized as required.

Shopping cart and your website: Do they mesh well?

The first thing you should consider is to make sure your website works well with the shopping cart you're adopting. The best way to do this is to research, read reviews, test, and experiment. Take advantage of the storefront demo that shopping cart sellers offer. High risk merchants should look at the following checklist as a guide in selecting the shopping cart for their online business:

Checklist for choosing shopping cart

Think Customers
Easy navigation for customers is number one prerequisite. Some carts let customers shop with a temporary ID so that they don't have to register. Another is to make sure you provide the "extras" such as search box, product reviews and product descriptions with graphics, as well as newsletters.

Hands On
It will be doubly difficult for high risk merchants to adopt a shopping cart that they find too bulky to manage. Features such as automatic alerts for new purchases, database importing, and searchable, viewable and downloadable daily and monthly reports are great add-ons for your customers.

Flexibility and Strength
How flexible are your shopping cart's features? Can you configure it to fit your business model? Can it be scaled to increase or decrease the number of products you may include or remove in the future? Can the database be expanded to fit new products and services and handle increasing customer data? It's also a must to consider how robust your shopping cart is. Make sure the database is secure and the server can handle simultaneous transactions.

Customer Support
Although price has always dictated many merchants' purchases, it's always a good move to contact the shopping cart seller's customer support even before you buy the cart. Obviously when trouble comes, you will know exactly where to go or who to find. The faster the response time is in all communication avenues (phone, e-mail, fax, or chat), the better your bet at getting an online shopping cart that is reliable.