Q&A: Merchant Services Providers

Question: What are the possible pitfalls of using two different credit card processors for Internet sales and storefront sales?

Answer: When you're setting up sales for both your physical store and the Web, you'll need to consider carefully how to choose a payment processor to handle credit card transactions. For small companies, making the wrong decision could break your business in high fees or penalties if, for instance, your site incurs high charge-backs. Many processors charge more for online versus physical store sales, and may charge your business the higher rate for all sales regardless of channel. This reality makes the prospect of having two payment processors appealing.

“We use two different processors and that helps us,” says Devesh Dwivedi, a business coach and consultant based in Calgary, Alberta, Canada, who manages the finances at his wife’s medical spa and skin care business. The dual-processor strategy helps the spa company keep fees low and provides a snapshot of sales performance for each sales channel.

Yet, there are drawbacks to this strategy. For one, there are the hidden bookkeeping costs to manage both processors. " You'd have more information to keep track of," says Sterling Jackson, a Denver-based software developer. “You may also incur additional costs, paying membership or subscription fees for each account.”

Using two processors may increase or complicate security and privacy risks, since customer card data is now stored with two vendors, according to Ken Koch, a management consultant in Minneapolis. On the other hand, one could make an opposite argument that having two processors spreads the risks. Dwivedi suggests that dual processors can offer a comforting backup plan, protecting sales if something goes awry with one processor. In the end, the question for a small business might be this: Why not have a single payment processor? Consider asking your preferred vendor to offer separate fees for online and physical sales, and appropriate and fair policies and guarantees for fraud, security and privacy protection. Unless your business warrants two processors due to volume, security or other special needs, or can’t attain favorable fees for managing both online and offline sales with one company, simplifying operations through a single payment processor might be the way to go.

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