For the Indie Agent: Processing Credit Cards Online
Thankfully, 37Signals (creator of various business web applications like Basecamp, which is what we marketing folks use at InsureMe) sheds some light on setting up credit card processing online. Because paying insurance premiums online via PayPal just isn't going to cut it.
Jason, kicks things off by telling us about merchant accounts:
First off, we have a merchant account. A merchant account is needed to accept credit cards. Every business that accepts credit cards needs to have a merchant account.
As you begin your search for a vendor, Jason recommends looking for a reputable company with good rates (they currently use account through Chase bank). While the rates might not make a big difference in the early stages of your business, they will affect your bottom line if your daily volume picks up.
The caveat: Getting a merchant account could provide a challenge. Take 37Signal's experience when they were developing Basecamp:
[W]hen we explained our business to the company we picked to process our credit card transactions, they balked. They wouldn’t allow us to charge annually because we were unproven, we didn’t have a corporate credit history, and they didn’t really get the idea of subscription-based software. When we couldn’t provide a marketing brochure (didn’t have one), an annual report (didn’t have one), or anything “official” on paper (we still don’t have official letterhead stationary), I think they may have thought we were peddling porn.The main issue was that if we went out of business in three months, they’d be left holding the risk of an annual subscription fee. So if someone paid us $149 in April for 12 months, and we went out of business in July, the merchant account company would be on the hook when the customer came calling for a refund. That wasn’t risk they were willing to take. I can’t say I blame them.
In the end, they finessed their business model to please the money people. They switched from annual billing to monthly billing capabilities, which actually increased their bottom line.
So before you go shopping for a merchant account, get your stuff together. If you can get anything down on paper, do so. If not, be prepared to answer lots of questions and compromise where you can.
Next, you'll need a payment gateway.
Payment gateways (like Authorize.net, which is what is used for Basecamp) are mechanisms through which your systems will talk to each other.
They [Authorize.net] take the credit card charge information from us, process the charge, and then deposit the money into our merchant account. If the charge doesn’t go through they send us a denial code which we then wordsmith and present to our customer.
As you're looking into different payment gateways, keep in mind that your system will need to handle recurring monthly charges (for those clients who like to pay their premiums online monthly, instead of in one lump sum every six months). 37Signals custom built this part of their system. Look for services advertising a payment processing library. Depending on how your site is built, Active Merchant is one such library.
There's lots of good information in this post, and additional tips in the user comments. Check out the full article here, and feel free to ask questions or give your online billing insight to other insurance agents via comments!
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Comments
Actually, PayPal can be integrated into your web site in such a way that it's almost impossible to determine it's PayPal (except for how the charges appear on your bill). Beats the crap out of trying to comply with PCI requirements for a one-or-two-person agency just starting out.
Recurring billing for people who're just starting out is actually one area where letting PayPal take their cut probably ends up being worth it. They'll store the credit card number and just bill the client every month. Much simpler than setting up a PCI-compliant network and the infrastructure to support a custom payment processing solution.
There are also more manual options like credit processing through Quickbooks or any number of billing options where you (the agent) manually input the credit card number to start the billing process.
Posted by: jb. | January 2, 2008 07:44 AM
JB,
Thanks for the feedback. The only big question I have about the PayPal stuff is how it appears on the site. Can you have PayPal handle the billing on the back-end and display something a little more professional to the user? To me, PayPal is synonymous with eBay bargains and phishing emails.
Posted by: Megan | January 7, 2008 11:51 AM