When merchant processing goes sideways – expect it

LinkedIn has gotten boring and uninformative.

All the supposed  SEO and eCommerce groups have become as tepid as a lukewarm single bag decaffeinated cup of green tea. “Content is king” – backlinks – due date hasn’t changed in a decade.

I’ll be coming at you like a cup of coffee with five-hour energy replacing cream – be ready to grab on.

All merchant processors are scum-sucking thieves.

In 14 years I’ve gone through 18 merchant processors – at one time I ran 110 websites mostly affiliate stuff but I needed to take money on the web in 2004 – so this is what I’ve learned over 12 years. Not once have I had a good experience.

Never one to make assumptions, allow me to provide clarity as to what a merchant processor is and does.

For a website to receive credit card payments you need a two-sided equation – a payment gateway and a merchant processor.

Very first thing you’ll need is an SSL certificate (a whole nother discussion), as it is required to process money and is installed by the issuer or the web host. It’s what helps secure the credit card information by encrypting the data and sending said data to the processor with the encryption key that gets unlocked behind the firewall of the processor.

If that is too fuzzy, here’s what an authorize.net plug-in looks like in my Zen cart store:http://screencast.com/t/coL8cHRnkog. After a customer enters his or her credit card information and clicks “confirm order” – authorize.net does its best to ensure against fraudulent transactions and then passes the data to a merchant processor. In our case, we are now using Flagship.

It is nowhere near a straight line that the previous statement would indicate. Here’s an excellent infographic on the path the data takes while that wheel is spinning for what seems like hours.

http://visual.ly/how-online-credit-card-processing-really-works-9-steps –

how onlince credid card processing works

but don’t you dare hit your back button or the Internet will break!

There are dozens if not hundreds of gateway companies. Authorize.net is the 900-pound gorilla and I’ve stuck with them. I’ve had gateways that shut down for six and eight hours preventing our site to take credit cards which is why I maintain (at the time this was written) a redundant system of two gateways that I can swap out in case one becomes damaged.

Before we get to PayPal not everybody is aware that one of the products is called PayPal Payflow Pro, not to be confused with PayPal Payments Standard. I’ve used Pro for many years – it is a credit card merchant processor just like authorize.net – but it has its own built-in gateway providing its own security.

The single biggest advantage it has is that it is possible to get approval for instant funding including for American Express which with some merchant processors normally take 3 to 4 business days to get you.

That means when the credit card is run on your site the money flows directly into your PayPal account. You can then use it instantly via your debit card earning 1% or if you are approved for next day transfer you can put it into your verified bank the next business day.

And then there’s PayPal Express – enough said.

In 2008 I conducted my own experiment. Every credit card company you talk to “will save you money over the other guy” but if that were true eventually you can reach free and it never happens.

One year I had four or five different merchant processors on my website.  Over 3 years I easily had 10 or 12 for a variety of reasons – including trying to save money and get my money deposited more quickly into my bank.

In spite of all those promises to save money, I looked at one of my charts of accounts in QuickBooks online called “credit card processing fees” which include PayPal express.

Oh wait – pop quiz! If your merchant processor is taking a daily discount, PayPal is taking a daily discount, American Express is taking a daily discount – upfront – meaning the customer’s card was charged one hundred dollars but you’re only getting $97.

Ask your bookkeeper or your accountant how they are accounting for the three bucks because it’s part of sales but never enters the ACH banking system.  It is also an expense. I’ll cover that in a “how miserable QuickBooks makes everybody’s lives but your accountants and bookkeepers” – rant.

Back to the experiment – I took three years of one chart’s total for those years all merchant processing fees from all conventional merchant processors and PayPal. The number is 2.9% every goddamn year it didn’t matter who was processing the money. If you’re not building 3% into your e-commerce transaction for that fee that is a fact of life – you’re a dumb ass.

This week’s experience with my new processor is pretty typical. Put on the crash helmet, swing your legs over the passenger seat – sit back, make sure your beverage is secure in the cup holder – the motorbike is warmed up and we are going for a ride.

Rebuilding WindyCityParrot.com from the ground up (which took eight months and will be part of a series of posts I’m working on) has pushed me and my team to rethink everything. Not only rebranding but how we keep books and how the money flows. We’ve dissected everything and decided to lessen our reliance on PayPal – dropping them as our credit card processor and replacing them with a conventional credit card processor supposedly pushing our money back one business day.

That slight push at your back was me shifting into second.

Friday night September 16, 2016 – I navigated to the authorize.net site – I had an old gateway that was there from 2009 and was able to login, but at some point there was a splash page where they appeared to be offering merchant processing – it looked like authorized.net was in a new business which proved to be not true.

I fill out the merchant processing application and submitted it – at which point, I found that it turned out to be for cybersource/global. Then off for a weekend of fun and festivities. I waited till mid-afternoon Monday the 19th check on the status of my application when I was informed it was not received. And the salesman’s email signature who responded to me had a phone number that went to an out of service message – there’s a red flag.

I call back authorize.net who then copies me in an email that looks as though it’s the application being forwarded to cybersource. They said this could take one to two business days, so I waited until Wednesday at noon to find out that cybersource still did not have my application.

There was also a problem with the seven-year-old gateway so at some point during the day I ended up with a shiny, brand-new gateway which I immediately installed in my Zen cart store.

Earlier last Friday I also sent a request for quotes from merchant processors before applying with cybersource – Authorize.net, by the way, is available 24 seven by phone.

At that point, I needed to move forward so I called Flagship. The salesman was professional and efficient. Five hours later authorize.net was processing through Flagship and I could dismount PayPal payments Pro. We kicked it into third briefly then in fourth – I’ve cracked the throttle – your neck might have snapped a little – sorry I forgot to warn you about that – we’re doing 75 (my bike goes 0 to 60 in about five seconds). Every 24 hours your gateway will batch out releasing the funds to your bank.

Sidetrip – years ago when I was hosting with Miva – I was concerned about a $10,000 batch that had not shown up for three business days in one day funding scenario. Nobody at the merchant processor support could help me – I forget the name but they are were a reseller of Orbital.

I reached out to the vice president of Miva to see if he had any relationships with Orbital – which he did – it took an hour. When he got back to me and said he had confirmed with his contact there that my $10,000 batch wasn’t stuck in some sort of cache but I would be seeing it in one to three business days.

Remember I talked about this here. The two key questions I asked my salesman were: 1.Where can you take a daily discount (in other words take their fees each day rather than getting a bill for hundreds/thousands of dollars on the first day of the month)? The answer was yes <- Another SMB cash flow control mechanism…and 2.Can I get zero day hold funding – meaning I get my deposits the next business day – the answer was yes. For the first two weeks with any new product that affects cash flow I make sure I look at it every six hours to make sure it’s working – processing my own test orders with my credit cards to make sure there is no friction in the process.

Thursday morning I see one small deposit from Flagship. A single transaction – and then Friday morning (in my commercial bank account).

Before consuming too much whiskey Friday evening, I dialed into authorize.net and it appeared as though everything was processing fine.

It wasn’t until Sunday morning – hung over – that I was seeing unsettled batches meaning that there was no way they would make it into my bank account. A real WTF moment.

After a couple of confusing authorize.net phone calls (the very first thing you want to be doing after drinking till 3 AM – not!) our forensic investigation determined that Cybersource had somehow inserted itself as my merchant processor sometime on Thursday – which was odd, not having the application or least that was the information passed on to me the customer – erroneously.

There’s a truck in the way so we split lanes at 90 kick it in the fifth touch 100 because we can and settle back into traffic – Helps me clear the brain.

In a few minutes, authorize.net resets Flagship as our merchant processor but I only see about $300 come from flagship on Monday morning. I call customer service and they tell me that I’m on a one day hold meaning I’m funding contrary to what my salesman said. I call said salesman and pose the question to him and backing him verbally into a corner. I finally get him to admit that he must have forgotten to tell me that it takes 2 to 3 business days for zero-day hold to kick in – his apology and five dollars will get you a cup of coffee at Starbucks.

Tuesday morning still missing close to $1000. Working backward I go to flagship merchant support who says they don’t even see the batches containing the thousand dollars.

I call back to authorize.net to confirm my suspicions that cyber source had received the funding – which took about 10 minutes to verify. Now I’m not getting the thousand dollars for 3 to 5 business days – Redefining “next-day funding” into “next week funding”.

Now one more call needs to be made to my Flagship salesman to fix the zero day hold thing.

You can’t make this up – you’ve been warned.

If you want to add horsepower to your ecommerce site email[email protected].

Caveat: I was backing out at 7:45 PM PST 9:45 PM CST having always done that – I found out in one of my conversations with Flagship merchant support that they (Flagship) batch out at 4:00 PM PST

This means I’m chopping up my batches unnecessarily and I’m now batching out at 3 PM PST to avoid the rush and getting a full day’s worth of money – this is the only place you will learn about these facts!

Stay tuned.

1925 words of original content written by Mitch Rezman

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