Third-party payment processors vs merchant accounts

A third-party processor allows e-commerce businesses to accept online payments without the need for a merchant account of their own. Instead, they let businesses make use of their own merchant account But, it has to be under their terms of service.

With this type of service, payment processing is outsourced to a third party by the merchant. When a customer is ready to make a purchase, they’ll be redirected to a check-out page hosted by a third-party provider.

This way, there’s no need for the merchant to purchase and install payment gateways or SSL certificates. Any sensitive personal data is entered on the third-party server, which means they’re responsible for handling it securely. PayPal, Amazon Payments and Google Checkouts are a few examples of the better-known third-party service providers. 

The problems with third-party credit card processors

• Security: Third-party payment processors do offer security measures - but they don’t  offer as much safety assurance as merchant accounts.
• Lack of customer service: While the simple set-up of third-party processors may be appealing, the downside is you may not be able to get help with any problems right away. Sage UK’s customer service team is available 24 hours a day, 7 days a week.
• High transaction fees: You might think a third-party processor should be cheaper but their transaction fees tend to be significantly more expensive. These fees can be as high as 3 % - much higher than the average merchant account rate.
• Appears less professional: Regular merchant accounts are usually deemed to be more trustworthy than less secure third-party payment processors.