E-commerce is soaring and with it comes an increase in digital advertising and marketing firms that focus on digital promotion. It only makes sense that online marketing agencies use a digital payment option. But contrarily, merchant accounts for small businesses of this nature can be difficult to acquire.
We’ll outline the biggest hurdles to overcome, and the most common issues business owners face so you can secure a merchant account with the least amount of pushback.
Digital products are “problematic” for credit card processing
In a world that’s driving further towards digitization, it is surprising that credit card processing for digital goods falls so far behind. The idea behind having such stringent rules is for consumer protection and service provider protection (i.e., banks).
It is easier for merchants to win a chargeback dispute when the product is question is physical because of the evidence that surrounds it. Photos can be taken of the damage, lack of functionality, or packaging issues. That isn’t to say chargebacks don’t happen with physical goods, but they are much more challenging for the customer to dispute and lowers the chargeback ratio overall.
For marketing businesses, many customers attempt to make a chargeback when their Return on Investment (ROI) is lower than expected. The customer is valuing your service only as much as they gain in the month or so that they’ve used you.
Marketing firms that specialize in organic SEO, for example, may have a particularly difficult time because customers only understand the importance of SEO, not how the service works. If there isn’t an immediate increase in expected results, customers complain and request a refund.
For digital goods, the customer can receive your digital service, but then ask their bank or credit card to refund the transaction. There are ways for merchants to win these disputes, but payment processors prefer physical evidence and thus physical goods.
The solution is to find a merchant account that understands your business and provides chargeback security or prevention, like with DirectPayNet. It can feel like an uphill battle when dealing with banks on your own, but high-risk merchant account providers understand the industry and can easily communicate the benefits your business brings to banks.
Variable pricing makes securing a payment gateway difficult
Most of the time, pricing from digital marketing agencies varies based on what a client wants or what they can afford. This variability is not an attractive quality for banks, credit card processors, and many merchant accounts.
The reason behind this is because providers like to investigate the digital packages that you offer. If all of your pricing schemes entirely depend on a customer communicating their needs to you and thus cannot purchase a package instantly, then that’s a red flag for payment providers.
Banks want to see what you provide and the consistency of that product. You can submit individual proof of your successful orders and denote what each service costs. Even then, it’s a hard sell. A popular solution is to offer various packages that include a certain number of additional services, or a base package that a customer can submit add-ons to.
Choosing a merchant account that understands your industry and pricing scheme is the best solution. This is a no-compromise way of providing completely customizable digital solutions without facing the stereotypically high fees associated with high-risk businesses.
MOTO is popular but riskier than digital payment solutions
Payments received by Mail Order / Telephone Order (MOTO) from customers is a popular processing solution for many industries, including digital marketing. Even though the internet and online shopping has been around for decades now, MOTO is still largely used. It may seem outdated to make a telephone call or mail in a payment form, but these methods are still accepted and used.
Keep in mind that MOTO transactions are among the riskiest. Of course, online payments can be made fraudulently, but there are certain protections against this that do not apply to MOTO. MOTO payments aren’t secured by Secure Customer Authentication regulations. They are not considered electronic, as would be the case with online payments via a credit card payment gateway, and thus are exempt from the regulation.
The upside to MOTO payments, and a likely reason why they are still accepted, is that there’s less shopping cart abandonment and a simpler checkout experience.
With this simplified experience comes less security: no signature, no PIN, and nothing written that confirms the customer is the cardholder. These are Card-Not-Present transactions. This lack of evidence makes disputing chargebacks or fraudulent payments incredibly difficult. Thus, merchants that accept MOTO are considered of the highest risk merchants.
Using online payment terminals or Point of Sale systems (POS) and virtual terminals where applicable with which customers must accept terms and conditions provides a level of security that protects you, the merchant, from fraud. Online payments are among the easiest for customers to make and selecting the “Accept our terms” button is a fast way to protect you from fraudulent purchases.
We are among the merchant account providers that provides true fraud prevention services. There cannot be a guarantee against 100% of chargebacks and fraud, but you can still protect your revenue from the consequences that will accrue without proper prevention.
Products based on subjectivity are risker in terms of chargebacks for merchant services
Subjectivity can make or break a business. That concept is especially difficult for digital sellers like marketing agencies because revenue, brand perception, and satisfaction is based on entirely different experiences. From customer to customer, results differ and thus, so does their satisfaction with the service.
If customer satisfaction is too low, that customer might attempt to initiate a chargeback directly from their credit card provider instead of contacting you about a refund. It’s akin to someone leaving a bad review about a restaurant because they didn’t like the food. But in that situation, it’s incredibly difficult for that customer to win the debate over receiving a refund because they physically received the product. All that’s left is a bad review which other viewers can compare with not only other reviews but photos.
As a digital goods seller, your reputation hangs on the words of your customers. The best solution is to use a merchant account with consistently low fees notwithstanding your online reputation.
How a merchant account provider can protect transactions and maximums revenue
Merchant account providers like DirectPayNet are well connected within the payments industry. We use our payment processing expertise and relationships with banks to keep fees low while offering fraud protection and chargeback prevention services.
You can avoid the insanely high fees from popular services like PayPal and Stripe to maximize revenue without fear of your account freezing due to a customer’s fraudulent activity or chargebacks. Merchant accounts keep online transactions simple without sacrificing the customer experience. With intuitive user interfaces and minimal steps to complete transactions, shopping carts won’t be abandoned.
With merchant services from DirectPayNet, accepting payments from all major credit cards, debit cards, ACH transfers, and more that work perfectly with sites like Shopify is possible for digital ad agencies. We even offer international payment solutions, so you can scale your business and accept customers from anywhere in the world.
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