When doing business on-line, there are many things you need to take into consideration before you are ready to unleash your products on the world. One of the largest items to consider are payment methods, particularly Credit Cards. In the United States, Canada and much of Europe both Visa and Mastercard require any online merchant to have a MOTO account. A MOTO account is actually an outdated acronym for Mail Order Telephone Order and simply means that you are performing transactions for your clients where their credit card is not present but you can confirm the customers identity through other means.

When the MOTO account type was invented in the early 70's, it was mainly to help catalog based companies to accept the new credit cards that started to proliferate through their customer base, mainly in the United States. Presently, some merchant providers have started to use more up-to-date lingo to describe these account types but in principle there are only two you need to be aware of:

Card Present: When you physically handle and swipe your customers card while verifying their identity.

Card Not Present: When the card is accepted without it physically being present.

If you are just selling online, all you need is a Card Not Present account and many companies can easily set you up with one, sometimes without a start up fee and monthly fees under $25. To process a Card Not Present transaction you need a corresponding merchant account and also what is called a gateway, or card processor.  One of the most widely used Card Not Present processors in the United States is Authorize.net, mainly because of their ease of integration into software and web applications. Although there are well over 100 individual gateway providers, I want to cover Authorize.net is my examples as they have, in my opinion, established a well deserved leadership role in their industry.

Now that you understand the types of processing accounts and what is needed to actually accept a payment via credit card through your eCommerce software, I want to address some very common problems we are seeing in the industry and the ramifications that will start to crop up if they are not addressed:

Problem 1: Processing a Card Present Charge as a Card Not Present Charge
When you accept a credit card at your retail store for an order that is physically being carried out in person, but use a merchant gateway or virtual terminal like Authorize.net that is linked to a Card Not Present merchant account you are increasing your processing fees, and potentially losing money on each transaction. We had a client that was losing almost 3% over their normal credit card fees because their merchant account was set up incorrectly.

Problem 2: Processing a Card Not Present Charge as a Card Present
If you thought Problem 1 wasn't that bad and could live with losing a few more percentage points, I bet you can't live with Problem 2. Many people don't understand this before its too late and we have seen many companies lose their merchant accounts because of this simple mistake.  The sole purpose of a Card Not Present account is to better manage fraud protection, address verification, and credit card validation before a charge is processed. These extra steps require additional technology, time and cost the merchant gateway and your merchant account provider extra over a normal account. When you process charges that came in through your on-line store, mail order or telephone using a Card Present Account you are violation your merchant agreement.

We have seen high level point of sale systems that have this functionality built right into their software, using Authorize.net. Coupled with integrated eCommerce / Shopping Cart software, these systems simply save time and pass the "heavy lifting" of credit card processing back to the point of sale system (POS). Since the POS uses the Card Present account type to process the actual charge, it violates almost all merchant agreements for internet based transactins. To the customer and merchant everything looks like it works and no one is the wiser... until your merchant acount provider finds out.

In Closing...

When setting up an Point of Sale System, eCommerce system, merchant account or all three make sure you know how your credit cards are getting processed, and who is doing the processing. It means more than you think and can save you time, money and frustration in the long run.

You might also want to make sure no one else is taking a cut from your merchant fees... more on that later.