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All e-commerce websites need a way to accept payments. Whether it’s a small business website selling niche products or a huge organisation with a diverse catalogue of goods or services, an e-commerce website simply doesn’t work without a way for customers to make payments. An Internet Merchant Account (IMA) provides a secure and efficient way for e-commerce websites to take card payments and process transactions from customers. However, there are different options available, and website owners need to think carefully before they decide on a banking solution for their e-commerce needs.

What is an Internet Merchant Account?

Any online business that wants to accept debit or credit card payments from customers needs an IMA. An IMA is a service which processes payments from customer’s credit or debit cards. After a customer has purchased a product and the transaction has cleared, the IMA transfers the balance to a nominated business bank account. However, an IMA is not like a typical bank account in that it doesn’t offer direct access for depositing and withdrawing funds. Processing a transaction and transferring from an IMA can take several days, so the payment process is not instant. IMAs can accept different currencies and different payment cards, including international banking transactions.

The Importance of Payment Service Provider (PSP)

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A Payment Service Provider (PSP) offers a secure gateway which handles the transaction between the customer and IMA. After the customer has entered their credit or debit card details, the PSP encrypts the data so it can be sent securely to the e-commerce website’s IMA. The PSP essentially handles all of the processing requests needed for a secure payment, including authorisation checks and verifying with the customer’s bank that they have enough money to pay for the transaction.

Choosing Between a Bank and a PSP

Website owners can choose between a PSP and a bank for their e-commerce banking. Although a PSP and IMA are two separate components of the online payment process, some PSPs also offer IMAs so users can have a complete payment package with one provider. Likewise, some banks provide a PSP for customers who want to open up an IMA with them. E-commerce owners must carefully weigh up the advantages and disadvantages of choosing an IMA from either a bank or an independent PSP.

Many e-commerce owners may instinctively think that the best approach is to go with their existing bank when opening up an IMA but it may not be the best solution. Some banks can be apprehensive when approving new, small online merchants or those with riskier business plans, and the application and review process in such circumstances can take time. This can be problematic for e-commerce owners who are eager to get their website up and running. Also, if the bank doesn’t offer a PSP with their IMA, this will mean that another provider will have to be sought to handle all of the website’s payment transactions. If the bank does provide a PSP as part of their IMA package, the service may have limited features compared to those offered by an independent PSP specialising in electronic payments

Many independent PSPs offer IMAs provided by established banks. The application process for e-commerce owners is still rigorous, but the specialised services of an independent PSP is more likely to recognise the needs of small, new merchants who want to establish an online commercial presence. Also, an independent PSP with IMA service will be more likely to have flexible payment services compared to an IMA provided by a bank. For example, many PSPs offer additional payment options, like PayPal, which customers can use instead of debit or credit card payments. They may also offer bespoke payment processing services for businesses with specific requirements.

Fees and Transactions

E-commerce owners need to be aware of the different fees and transactions that come with an IMA. IMAs charge different rates for debit and credit card transactions as well as additional fees for the likes of 3D security verification, refund requests, authorisation checks and, in some cases, initial setup and administration costs. Also, some IMA providers have minimum term contracts and monthly service fees. These fees and rates can drastically vary between providers, so owners are well advised to try and get as many different quotes as possible before choosing a provider.

Choosing an IMA can be difficult, especially for new online merchants. All e-commerce websites have different requirements, budgets and specifications, and shopping around before making a decision is essential. Whether they choose an IMA from a bank or from a PSP, website owners should look at the features, rates of the account and posibility of a merchant cash advance before they make a final choice.

This article was written by a financial blogger from London

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