3rd Party Merchant Account Processors (Merchant account alternatives)

For P2P merchant account alternatives click here.

The 3rd Party Payer merchant account alternative payment method can be a little more expensive in the long run than having your own merchant account, but for merchants that are having difficulty in obtaining their own, or for those that need a simple short term solution, a third party merchant account may be a good alternative. See side-bar for a list of 3rd party payment solution providers.

How 3rd party payment services work:
In this payment method the internet purchases are charged as if the 3rd party payment service is the seller. Though the actual merchant sets up his store with products and pricing, it is the 3rd party processor that is technically the seller. The actual merchant then becomes a supplier and drop shipper.

2CheckOut example:
You may find variations of this procedure depending on the 3rd party payment service. Pricing listed on our resource pages might not be current. Check with the actual service provider for current rates and fees.

  1. The internet merchant signs up with 2CheckOut. There is an initial setup fee of $45.00 (at the time of this writing).
  2. The merchant uses 2CheckOut programs to enter product information.
  3. The merchant adds html code to his/her web site (code is generated by the above step) which creates the purchasing button/link.
  4. Customers goes to the merchant’s web site and clicks on the link to buy the product.
  5. Customer is taken to a secure page at 2CheckOut to make the purchase.
  6. 2CheckOut handles the payment processing
  7. 2checkOut notifies the merchant of the order details
  8. The merchant processes the delivery of goods or services for the order
  9. 2CheckOut pays the merchant periodically (twice a month) for the orders, less a transaction fee of $0.45 and commission of 5.5%.

If you compare the 2CheckOut fees to those of having your own merchant account you will see that the 3rd party payment service transaction fees and rates are substantially higher (compared to approximately $0.30 per transaction and 2.5% of the order total).

The primary benefits of 3rd party payment services:

  1. Easy to get started
  2. Can handle most credit cards, checks, and debit cards
  3. No monthly fees other than transaction / order related fees
  4. Detailed records are usually available online

The primary drawbacks of 3rd party payment services:

  1. Do not have universal public acceptance though the public is becoming more familiar with this option
  2. May give the purchaser less confidence in the seller since they do not have their own merchant account
  3. Much higher transaction and order related fees

Why are transaction and order related fees so much higher with 3rd party payment processors?

This is simply because the 3rd party payment processor is not a merchant account provider. In fact, the 3rd party payment processor needs to pay a merchant account provider for the items sold via their interface. Their rates then need to include their cost plus an amount that will may their business profitable.

Can I use a 3rd party payment processor with my shopping cart or another shopping cart?

2CheckOut has various methods for interfacing with their payment collection routines. Some shopping carts (such as osCommerce) already have interfaces that work with 2CheckOut. You will want to check your 3rd party payment processor to see what interfaces they have available. Custom shopping carts will most likely need have additional programming done to make them work properly. If you are looking for osCommerce hosting you may want to refer to our e-commerce web hosting company recommendations.

Merchant Account Alternatives

This page discusses – 3rd Party Merchant Account Processors (such as 2CheckOut).

3rd party payment processor additional notes:

Though 3rd party payment processors are typically very easy to get set up, you need to compare the fees you expect to pay using an estimated number of transactions and dollar amounts.

3rd party payment processor additional notes:

Plan for a reasonable point where it would be feasible to switch to your own merchant account. If you are using a third party shopping cart you will want to check their payment modules. It may be very easy to switch to a new payment method when you are ready.

3rd party payment services:

This does not attempt to be a complete list of 3rd party payment services but these are some of the most popular.


Other service providers:

Thompson Merchant Services

Understanding Merchant Accounts  
Person to Person Merchant Account Alternative