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I am about to start a new business that will have the following structure: 1) I want to accept payments from my customers (let's call them partners) for services that I will provide to them; one of this service will be accepting payments by their customers on their behalf 2) Accepting payments on partner's behalf from their customers and sending this payment directly to the partner (after subtracting a small fee)

Additionally, I want to have the option to send out email invoices as well as have a form on my website that collects credit card/billing data and sends it to a third party server for payment processing.

I was wondering what type of service I should use for this type of business, as I couldn't find anything on this topic during my research. I saw services such as PayPal Website Payments Pro and Braintree Payment Solutions, but I am not sure if any of those would fit my needs. I certainly want to limit my exposure to chargebacks in cases where partner's customer will dispute the charges and at the same time, I want to be able to send partners their money promptly.

Any help is greatly appreciated!

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What country are you in? –  John Conde Nov 2 '10 at 18:45
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2 Answers

I used to work in the merchant services industry up until a couple of years ago so if you are in the US I can tell you about how that would work here.

For starters you will not be able to get a true merchant account for this purpose. Accepting credit card payments on behalf of other businesses is called factoring and is a major no-no. The general rule is one business = one merchant account. If you are caught factoring you may be given a chance to stop and get merchant accounts for each of the other businesses. If you continue to factor, or factored on a large scale that you weren't even given a chance to open new merchant accounts, you and your business will be placed on the Match File, also known as the Terminated Merchants File. This essentially is a black list honored by all of the major credit card issuers and will prevent you and your business from ever having a true merchant account again. Notice I said you and your business. They put individuals on the TMF file so they can't just go and open a new merchant and do it again. Ever. If you are wondering how they would catch you it would most likely be through chargebacks. Since it is your name that will appear on a customer's bank statement they will not recognize the purchase and attempt to charge it back. Besides exposing your factoring and putting you at risk for the TMF you will also incur chargeback fees which will eat away at your profits (and you will also lose the chargeback and that money).

So each business you wanted to accept payments for would have to have their own merchant account to receive payments which probably is not what you're looking for. But, if that is a possibility for you then you can do something like this:

  • Have each business get their own merchant account and payment gateway account (ideally they would all use the same payment gateway for simplicity's sake). They provide you with the API information necessary to integrate the payment gateway into a website.
  • Have the orders come through your system and they are logged accordingly.
  • The payment goes through the business' merchant account which is done dynamically through coding on your end (basically you supply the appropriate API credentials for that business)
  • At a predetermined basis (e.g. monthly) you bill them for the fees they incurred during that billing period

The biggest issue you will have with that scenario is you'll have to chase the businesses for the money they owe you instead of already having it in hand and paying them what they are owed.

As far as charging your "partners" a regular merchant account would be just fine. You could use a recurring billing service like Authorize.Net's Automated Recurring Billing API to handle the subscription payments for you.

Email invoicing isn't difficult. If you didn't want to write your own there are plenty of invoicing software available for you to use.

If you are going to accept credit card information on your website at the very least you will need an SSL certificate installed to ensure the connection is secure and that sensitive data is encrypted. You'll also need to be aware of PCI compliance issues which will vary depending on exactly how you plan to implement everything. If there's anything to know right off the bat it is don't store any credit card information on your server. That makes things dicey and is just a bad idea to get involved with it.

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John, thank you very much for such a great answer. –  Marko Nov 5 '10 at 17:37
    
Yes, we are located in the USA, so any advice you could give me would be extremely appreciated. To even better describe our business: Imagine there are a lot of ski trips organized by many ski directors. They want to be able to simply manage the number of kids who want to sign up for their trips and charge them accordingly; however they do not want to do it themselves (time, non existent programming skills, etc). We would provide them the management tools to do this (for which we would charge them, and that is our revenue). –  Marko Nov 5 '10 at 17:42
    
One part of these tools would be accepting payments from skiers that register for the skiing trips. And this is where the problems could arise. The most ideal solution would be to send the money straight to the ski trip directors and have the credit card show up their name (or the name of their ski trip). Of course, we would want to accomplish this with the lowest cost to us, so that it doesn't eat away from our profits. So again, any advice is extremely appreciated!! –  Marko Nov 5 '10 at 17:46
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It possible and it is legally possible. A lot of vacation rental companies and management companies do it. Its all about listing and how you present it. You can get a merchant account which will help you accept the payments and link it to you website, a first data certified payment gateway. You can then deduct the amount and send it to the partners or the amount is automatically deducted through a revenue share and you get your share in the end of the month.

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