Finding reliable and affordable merchant account services has been the most difficult challenge facing many of the pharmacy operators today. Only a few solutions are available with astronomical rates and fees attached to these accounts; merchants have experienced difficulty in finding long-term solutions. One of the most reliable and economical ways businesses have solved this problem is by using pharmacy echeck processing services.
Other merchants have used credit card processing services to handle pharmacy transactions. This has not always been an easy task, with payment processing services coming and going, many merchants have shut down their pharmaceuticals businesses. After numerous failed attempts for honest and reliable merchant services, many merchants have concluded that pharmacy merchant accounts are impossible.
What are Online Pharmacy Merchant Account Services?
Online pharmacies that operate online need a financial services to accept payments. As more and more consumers turn to online purchases, the demand for merchant accounts has followed in step. Most transactions occurring online use some payment card; whether it’s a credit card or debit card. The future demand for ecommerce and merchant account services does not appear to be slowing down any time soon.
Most pharmacies have experienced trouble establishing reliable and affordable merchant services for themselves. This problem is due to the many terms and conditions and restrictions imposed on banks, payment processors, and the payment card industry. Government regulations regarding online pharmaceuticals’ problematic history have made merchant accounts all but impossible to find. Many merchants in the industry have exhausted their search and resorted to more consistent solutions, including echeck payment processing services.
One of the most common ways for an online pharmacy business was to set up their merchant services through an aggregated merchant account. Like an eWallet system like Stripe, aggregated payment processing allows businesses to combine their payments with others to remain relatively unnoticed. This has often helped businesses remain operative longer than obtaining a dedicated merchant account. Though the costs for the solutions are substantially higher and payouts much slower, for some businesses, it remains their best option.
How Does Pharmacy Credit Card Processing work?
Payment card transactions accepted online or through a terminal are similar to how they are handled. Customer information is sent along the same circuit, using all the same protocols and security measures as a general retail transaction would require.
The payment card network is the most notable organization involved in a credit or debit card transaction. This includes the likes of Visa, MasterCard, Discover, and American Express, along with other payment card schemes. The payment card association connects the merchant’s acquiring bank and the customer’s card issuing bank. Along with security, the network also maintains the technology to keep up with demand.
Every payment card transaction, including debit and credit cards, will require the services of a payment processor. Sometimes the processor also acts as the acquiring bank, this organization receives the payment authorizations before sending the request to the customer’s bank. The payment processor handles the technical support and other account management services for merchants.
Between every merchant and the payment card network is the acquiring bank. Sometimes, the payment processor will also be the acquirer, but they are often separate organizations. The acquirer maintains the direct relationship between the processor and the payment card network, accepting liability for the merchants approved through their channels or the payment processor. The acquirer maintains the security of the merchant’s network through PCI-Compliance guidelines and regular security checks.
The other end of the transaction includes the customer. The bank used by the customer, known as the card-issuing bank, handles the account maintenance of the customer’s credit or debit card accounts. These are some of the largest credit cards banks like Capital One, Chase and Citi. The card issuer performs various security and financial checks on every authorization request, protecting themselves, the customer and potentially the merchant.
The final piece of a credit card transaction is the terminal. This allows the merchant to collect the customer’s information and send it to the payment processor. The terminal can be either a payment gateway on the merchant’s website, a virtual terminal operated online or a physical terminal in a storefront. Regardless of the type of terminal, the equipment and software need to be completely PCI Compliant to prevent the possibility of any losses.
Authorization requests start at the merchant location with the customer card, and account information is sent through the payment processor and acquirer to the payment card network. The card type is determined at the network, and the request is passed along to the card issuer for approval or denial. Once a determination has been made, the card issuer sends a response back through the network to the acquirer and informs the merchant if the transaction is approved or denied.
This process takes seconds but allows an online pharmacy merchant to accept pharmacy payments from nearly any global customer using a partner credit or debit card.
Online Pharmacy Merchant Fees for Payments
Online pharmacy businesses face higher costs when establishing merchant accounts. These higher costs are because they are generally considered a higher-risk merchant. This factor can significantly increase the costs associated with payment solutions.
There are three main ways that merchant accounts can bill an online pharmacy; tiered, flat-fee, or interchange pricing.
Tiered is one of the oldest methods for billing, where businesses are set up with different cost buckets, and transactions are placed into each pricing bucket. These systems are grossly expensive due to their inefficiencies.
Another common solution today for merchant accounts are the flat fee providers. Generally reserved for wallet systems and similar services, the flat fee does as their name suggests and charges one price regardless of the card type. For simplicity, it is the best but similar to tiered, it is very inefficient. Not allowing the online pharmacy to take advantage of the different pricing of each card.\
Of all merchant accounts, interchange pricing is the fairest. Merchants are guaranteed a flat fee on top of the true price of each card type. This allows an online pharmacy to take advantage of low-cost debit cards without being gouged with higher-fee rewards cards.
Paying attention to the banking agreement sent out to a new online pharmacy, a higher risk merchant can prevent excessive payment solution costs by using a fee structure beneficial to their needs.
Risk concerns faced by a Pharmacy Merchant
Selling various pharmaceutical drugs creates concern and challenges for merchants and payment processors alike. Some of the most common issues seen during the underwriting of online pharmacy merchant account applications include:
- Chargebacks
- Violations
- TMFs
Ensuring the merchants the acquirer and payment processor are contracting with have a solid track record in the drug industry is essential to starting a long-term payment processing relationship. Merchants with a history plagued with problems or other troubles will usually not be approved, or if approved, will quickly have their merchant accounts shut down.
Excessive chargebacks can mean a few different things about a business. The way they accept payments could be misleading or even fraudulent. This is why having a terms and conditions page and a refund policy will help reduce the number of chargebacks a business faces. Another concern could be the fulfillment time. Products that take a long time to be delivered are usual candidates for a chargeback.
Merchants with a history of violating guidelines, whether from the payment processor or government, stand the possibility of repeating. Offenders that have sold controlled substances might find it extremely difficult to set up with another payment processor if another has dropped them.
One of the final checks is that of the TMF, or match file. Businesses that have had their credit card processing revoked due to one of the above reasons, or owe money, might find themselves on the TMF list. Once a merchant is listed, it becomes extremely difficult to be removed and most payment processors will not partner with that merchant.
Besides these main concerns, most pharmacy payment processors are willing to work with online pharmacies as long as they abide by all rules and regulations.
Start Accepting Pharmacy Payments Today!
Customers who apply for an online pharmacy merchant account can contact our payment processing team. Our merchant services professionals will happily help apply your business to our payment processing network. If at any time merchants have questions, our support team is available to help resolve your concerns.