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Billing without a third party

Posted on 2013-11-16
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Last Modified: 2013-11-18
I need to know what code would be needed to bill directly to a bank. What to read to accomplish this.

I work for a small business and steps into technology will be slow. We're just researching right now.
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Question by:burnedfaceless
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by:John Hurst
John Hurst earned 100 total points
ID: 39654051
Do you mean:

(a) Rendering an invoice for your services and charging your customers' banks directly? I don't think any customer would stand for this.

OR

(b) Paying your bills to vendors without writing cheques?  That can be done. There are two ways:

(I) If your vendor is set up, go to your bank account and pay.

OR

(ii) Better: Use a service like Telpay. Your vendors must register but Telpay allows two approvals, batching and distribution to vendor bank accounts. Some of my clients pay me this way.

http://www.telpay.ca/

.... Thinkpads_User
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by:Dave Baldwin
Dave Baldwin earned 300 total points
ID: 39654060
I'm not sure what you mean by "bill directly to a bank".  Does that mean you are going to send the bank a bill for services?  

Or are you talking about accepting credit card payments online?  If that's what you mean, I can tell you that banks do not do that directly.  They may have merchant accounts that you can sign up for.  And they are likely to Require third-party payment processors.

The first thing you Must do is call Your bank and find out what they require.  As soon as you start dealing with electronic payments, you step into a world with a great number of security restrictions and rules to follow.  That includes physical security if you are storing credit card data at all.  You must not allow un-authorized people to gain physical access to the computers that have the personal and credit card info.

This is the web site for PCI DSS - Payment Card Industry Data Security Standards.  https://www.pcisecuritystandards.org/

There really isn't any 'little' way to go online with electronic payments.  The security requirements are there as soon as you start doing it.  That is because stolen credit cards can be used world wide in seconds after they are stolen.
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by:Scott Fell, EE MVE
Scott Fell,  EE MVE earned 100 total points
ID: 39654099
If you are asking about using credit card payments and going around the third party and avoid the 1.7% to 3.5% discount fee that is not possible if using a traditional credit card.  As Dave said you first sign up with a bank or merchant processor.  The merchant processor will set you  up with a gateway service like authorize.net although some processors are now using their own private label gateway.  When you run a transaction, the credit card info hits the gateway, the gateway talks with the card holders bank which returns an answer to the gateway who then returns an answer to you.  This scenario is over simplified as there are a lot of options that go along with the transaction.  The visa network has a fee that is charged to the processor that varies depending on the type of business.  The fee is typically about 1%.  In addition, the gateway has charges that are routed through the processor to you.  Tot total of the visa network, gateway and profit make up your fee.

There is a service that is a few years old called dwolla https://www.dwolla.com that has a flat 25 cent transaction fee for any transaction over $10.  In this case the customer must have a dwolla account that they keep money in or have linked to their checking account.  The merchant sends an invoice and the customer pays directly via dwoalla.  Both merchant and customer must have a dwoalla account.    The only disadvantage with this is you have to get your customers to have a dwoalla account.  This would be the closest thing to not going through a third party.
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by:burnedfaceless
ID: 39654547
I'm not asking about going around the credit cards - I know a bank will charge a merchant fee.

I want to go around a third party site like pay pal. That will add more costs.

Directly to a bank is what I was thinking.
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by:burnedfaceless
ID: 39654577
Basically how does the system work? You can find an actual bank to receive the money who will take a merchant fee correct?

And if you have a few competing for your business you might get a lower rate?

Is this correct?
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by:Scott Fell, EE MVE
ID: 39654707
I think I answered how the system works.   Assume you have a site that takes a payment.  

1) First your site hits the gateway and submits the credit card info and amount.

2) The gateway "talks" to the customers bank via the merchant processor and gets an authorization code or denial.

3) The gateway reports back to your site the result.

4) If accepted, the money is transferred from the customer to the merchant account.

Again, this is very simplistic, the actual workings are more complex.

You can get a merchant account without using paypal, but your rates may not be much better.  This is a very competitive business and the difference in rates is usually not very great and especially if you are only doing less then $500,000 the difference in rates is not going to be very much.  The rate structure can be complex and when you see "easy" rates, they will tend to be higher.  Your discount rate is based on multiple items like the type of business (retail, food, gas, mail order), the type of card (debit, traditional, rewards, business), if the card was swiped (card present) or hand keyed or via your site (card not present).   A retail store, swiping a traditional credit card can be in the 1.7% range.  A website taking a traditional card will be in the 3% range.

There is no way around accepting credit cards to go directly through the banks.   As I said, there is one company that has established a work around (dwoalla) but it requires both merchant and customer to have a dwoalla account.  The transaction fee is flat 25 cents if the transaction is $10 or $10,000.  If you read up on this business, you will see they had a lot of hurdles to go through.

With the right backing, credentials and vetting, I imagine you could set yourself up to be a processor.  However, this space is very competitive and probably risky to venture into.

Using authorize.net's examples, these links may help visualize what I have been saying.
http://www.authorize.net/resources/howitworksdiagram/
http://developer.authorize.net/api/howitworks/aim/
http://developer.authorize.net/api/howitworks/sim/
http://developer.authorize.net/api/howitworks/simplecheckout/
http://developer.authorize.net/api/howitworks/dpm/

If you use paypal or signup with a traditional payment processor, you will find the NET rates very similar.  Research your rates, many times quotes you get are misleading because of all the options.  There is the discount rate which will very for each type of transaction, transaction fees, statement fees perhaps minimum fees.  I have worked with enough of these things to know that one quote that looks like 2.3% and the other 2.7% come out the same when you add up the fees. http://www.experts-exchange.com/Other/Miscellaneous/Q_28216106.html#a39418900

Start with your bank as most banks have payment processing options.  Once you sign up with your bank, they will assign you to use a gateway.

I have written a lot about payment processing here.  You can find more answers:
http://www.experts-exchange.com/Web_Development/Internet_Marketing/E-Commerce/Q_28088612.html#a39054858

http://www.experts-exchange.com/Web_Development/Internet_Marketing/Q_27959713.html#a38670303

http://www.experts-exchange.com/Web_Development/Web_Services/Q_27947921.html#a38635100
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by:Dave Baldwin
Dave Baldwin earned 300 total points
ID: 39654770
You can find an actual bank to receive the money who will take a merchant fee correct?
Not when I looked into it.  Even if they owned them, they passed you off to a payment processor even after you signed up for merchant services.

But like I said above, your first step has to be calling your bank and finding out what they require.

As for getting a better rate, you are not competitive until you are working with large amounts of money each month or day.  Banks handle millions of dollars each day.  You would have to be a fairly big business to be a noticeable part of that.

And although Paypal isn't liked by some people, a lot of others have a very high opinion of them and prefer to use them.  In part because they don't have to type their personal info into another web site.  Paypal already know who they are thru their account.
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by:burnedfaceless
ID: 39654850
I work for the largest privatel owned water company in the south eastern United States I believe.

It's below my pay grade but I think we have an excellent relationship with banks.

Our customers are begging us to pay online. Those in charge are skeptical but we're looking into it. Obviously something easy for us and the customer. We don't want them to have to register with a  third party and we want to incur as few costs as possible.

I can say right now if we have to go to a third party (not a bank) my intuition is they will not be interested in online bill pay.

I'm also trying to modernize our site, make it more professional so I will be on here for that.

I am going to read those documents in detail. Thanks.
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Dave Baldwin earned 300 total points
ID: 39654882
Most large companies and utilities hire a third party payment service so that they do not have to secure their entire web site to meet PCI DSS requirements against break-ins.  My car insurance company, 20th Century, uses Western Union Billpay service.  Some others put the payment service in an iframe on their site to help with the 'branding' problem.  Or they make the payment service a 'sub-domain' of their site even though it is actually on completely different servers.

Local utilities also have payment networks with pay stations in local stores and grocery stores.  All this is done (I believe) to lower the level of non-payments and billing costs.  Same will be true of online payments.
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by:burnedfaceless
ID: 39654942
Well thanks we will look into our solutions.
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by:Dave Baldwin
ID: 39654969
You're welcome.  I'm sure you will find something that works for your company.  These days, online payment is "the thing to do".  I haven't written a personal check since 2007.  I pay online or use the local pay-stations to pay all my bills.
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by:burnedfaceless
ID: 39657479
I read the Dwolla terms of service. If you do not facilitate the charge you will receive additional charges that aren't even stated and are set.

That sounds like a horrible company to do business with. If your customers are logged in they could tax the hell out of you if you're stuck with them.
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by:Scott Fell, EE MVE
ID: 39658246
>I read the Dwolla terms of service..... sounds like a horrible company to do business with.

There are no fees from Dwolla for under $10 and only 25 cents flat fee if the transaction is $10 or over.

They allow developers to build in their own optional fees.  Those fees would be disclosed up front before you used the third party's app.  Since YOU would be doing the coding, you would not build in any extra charges for yourself.   Or if you hired somebody else to do this for you, they may choose not build in extra charges.  But if you have somebody build an app for you and you don't want to pay them up front, you may mutually agree to have the developer take a little off the top per transaction.  Of course that option would cost you a lot more in the long run because the risk is shifted and risk=reward.

Many merchants use dwolla directly.
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