Expert advice needed for merchant accounts and cc processing

[sk24iam]

I am starting an online business that allows someone to list a product for sale, which can be bought by another person. My sales come from a percentage of the selling price. I am attempting to build a platform that will take payment from the buyer, and distribute funds to seller, while taking a cut for the business. I have run into the dilemma of fraud issues and I'm looking for any input or recommended resources for how to handle the payments. Here are a few options I am looking into:

A. Setup merchant account to collect credit card payment from buyer to distribute to my account. The website then allows seller to withdraw their sales to their account minus the fee I charge via ACH. I understand this is high risk, and also can screw me with chargebacks in the event a buyer claims the seller did not ship the item or the item was damaged.

Buyer ----credit card---->Website -----ACH----->Seller

B. Buyer pays on my site through paypal. Seller withdraws funds on my site via Paypal transfer minus the commission fee. I'm not sure if it is possible to setup automated paypal withdrawals and I've heard so many paypal horror stories.

Buyer ----Paypal----> Website ----Paypal------>Seller

C. Buyer pays seller directly through paypal for item. Seller then is billed by my site for the commission fees. Seems like seller can get away with not paying me commission fees and this also makes returns complicated.

Buyer ------Paypal----->Seller ------Paypal----->Website




Any advice or direction would be very helpful. Thanks

[SteveGerencser]

Now you know why eBay bought PayPal..

A. If you want total control then you process the payments and disburse the left over to the seller and then hope the seller actually ships.. Otherwise you end up on the hook for the money when the buyer reverses the charges on his CC and they take it from you..

B. Buyer pays you, you hold the money until the product is confirmed delivered (sort of like escrow).. Then you run in to the problem if the buyer claiming they never got the item and demanding their money back and the seller claiming it was sent and delivered..

C. Least risk to you since you get paid after the fact by the buyer and you can simply cut them off if they don't pay and you really aren't out much..

D. The seller uses a credit card to open the account and agrees that any fees can be "automatically" drawn on that credit card.. Still the same risk as C, but a little less..

E. Charge a "listing fee" instead of a "sale fee" that is considerably less than what you would get on a sale but get paid every time something is listed.. No risk to you, but no perk of getting a big commission on a big sale..


This is why I sold my auction domains.. Too much drama..

[melanie6789]

Seems like I was looking into this before and if I remember correctly amazon checkout has something like this where you can transfer some money the seller and keep some for yourself. I would recommend looking into that.

[Shift4SMS]

Be very careful and do a lot of research before you spend any development time or money. An important thing to remember is that you (your website) is where all the liability resided as far as the payment is concerned -- via true merchant account or a Paypal account. If the buyer claims to have never received the goods, or if the buyer claims to have never placed the order, you're the one that will be getting the chargeback and there are fees associated with chargebacks. If you already paid the seller, you'll need an iron clad agreement and guarantees that the seller will reimburse you for the sale and associated fees. Something somewhat common in new startups like this, the seller does a few ligitimate sales, enough to get a track record, and then does a slew of fraudulent transactions and skips town once he gets paid.

Like I said, be very careful.

[radhika]

C. Buyer pays seller directly through paypal for item. Seller then is billed by my site for the commission fees. Seems like seller can get away with not paying me commission fees and this also makes returns complicated.

Buyer ------Paypal----->Seller ------Paypal----->Website

First one too risky.

Second one is big nuisance.

Third one better of the three. I will go with this. Atleast until I know ins and outs of the business.

I know scripts can do like this if you can custom made them:

Seller hosts their product(s) on your site -----> Buyer enters credit card details -----> scripts makes TWO Transactions of the amount. One amount goes to you and other to the seller. You need explain it to buyer that like - 'Total product price $10.00 will be authorised as two transactions of $4.00 and $6.00 on your card'.

I know this works as some companies charge the card as two small transactions , so end user should notify the company the exact amount to authenticate creditcard ownership.

.

[SkeeterZ71]

In order to get the merchant account type you want approved, you would have to be well funded. The products are not yours that you are processing cc's for. Huge hurdle to get over there. I know, been in the biz 13 yrs.

[califmerchant]

warning about merchant accounts - watch out for small processors. we had a small processor who dropped us without warning for selling computers - it turns out that was a high-risk prohitibited items. go with a large established processor, such as a big bank (ie wells fargo), linkpoint or authorize.net.