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Which banks are happy to offer you a merchant account if you are selling virtual stock?
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April 20, 2012
Hi Matt / other people. I have a good question that I really need help answering.
Basically to begin with we will be buying stock on a virtual / just-in-time / drop-ship basis (i.e. buying stock from a supplier as we sell it). Some of our suppliers are happy to dispatch the items directly to our customers, others will only dispatch to us, meaning we ourselves need to then dispatch to the customer.
We have chosen to go with Sage Pay for the payment gateway to accept card payments on our site however we still need an actual merchant account from a bank, and this is where the problem is… all the main banks I’ve spoke to up to now said they are not willing to open a merchant account for us because they want us to actually own the stock ourselves in the first place. They told me that as a “drop-shipper” we are basicaly just be acting as a third party between our suppliers the customer and they don’t feel comfortable with that. They said anything could go wrong between the supplier dispatching the item and our customer receiving it, mainly the fact that we might sell an item that we can’t actually buy because it is out of stock, to which I explained that in that case obviously we would just refund the customer or offer them the same item in different colour / style or whatever… but this still didn’t seem to satisfy. They also said that they would not be covered against ‘chargebacks’ made by our customers. I don’t really understand what those are but that’s what they told me also.
I asked the banks if there is just a certain amount of stock we would need to ‘own’ first for them to be satisfied… they still all said ‘no’ we need to own all stock. Which leaves me asking myself, why don’t I just lie and tell the banks that we WILL be owning the stock, as how n earth can they prove we don’t? Don’t know if this will come back round and bite us on the arse in the future but I can’t see another way around it? They did mention something about how they would accept a written letter / formal agreement from our suppliers to say that we actually do own the stock but they are just storing it for us, but that seems too much of a mess around and I don’t even think the suppliers would be willing to do this.
So… does anyone know of a bank who is not arkward about this kind of thing? Surely there are other ‘drop-shippers’ who have merchant accounts. I presume it would need to be a UK bank as well as we are based in the UK.
Thanks alot in advance for your help!
That’s a really curious question and I just don’t know the answer to the banks question.
BUT This is exactly why PayPal, Amazon Payments & Google Wallet (formally Checkout) are soooo attractive, they just work and don’t have the red tape normally associated with merchant services.
As much hate that PayPal can get at times. PayPal specifically does a bloody good job at easing people into merchant services without all the pains that are normally surrounded, as you’re just finding out.
Anyone else have experience(s) with merchant services and this issue before?
May 21, 2012
Hi Matt/George/Everyone,Just spotted this post and as i will also be in this possition in the very near future i was intreged.
Are the banks you spoke to “actually for real!”, do they honestly beleive that every online store (even off line stores come to think of it, eg catelouges), actually own all the stock listed on their websites. Hmmm i dont think sooooo (wake up banks). Whilst i wont mention names, everyone does it, who doesnt, maybe small niche stores perhaps? But to some extent or another all big stores do it. Clearly the banks are either being awkward, or they have not a clue about the real world.
I would love to hear some feedback about which banks are willing to do this as it really does seem a bit odd to me.
April 20, 2012
Hi John and Matt… I’ve ended up using PayPal Web Payments Pro in the end for accepting card payments, and just got a business bank account (not an actual merchant account) with Natwest. I can accept payments from Maestro, Mastercard, Visa, Visa Electron and Delta. To accept American Express I need to apply separately with them which I will be doing soon.
PayPal web payments pro is £20 per month. I’m not 100% happy with having to use PayPal for card payments to be honest as I’ve read a few people moaning about ‘charge-backs’ which I don’t entirely understand yet, but I could have been waiting up to 6 weeks before hearing if my application for a merchant account was successful if I went through a bank.
I’ll see how I get on anyway with PP for now, as ideally Sage is the way to go – is that still true Matt?
Chargebacks, they’ll happen which ever path you take, PayPal gets a bad rap, but to be fair it makes the merchant account/payment gateway side damn easy, all you need is an email. You’ll get these no matter which provider you use, some handle them well, some do not. But it’s a cost that should be factored into pricing as it will happen sooner or later.
Having PayPal Pro for a while and then moving to another provider is a good route, because you’ll then have history to show them and use to your advantage :)
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