Web Hosting Merchant Account: Insiders Guide
QuadraPay has been consistently providing high quality web hosting merchant accounts to businesses since the year 2016. Our team truly understands the importance of a stable credit card processing account for web hosting companies. A large percentage of web hosting businesses consistently struggle to get reliable merchant accounts that are inexpensive and do not shut down easily.
The web hosting credit card processing specialist team at QuadraPay has designed this extensive guide. We are confident that after reading this guide you will be able to easily get approval for web hosting merchant accounts. In this guide, we are going to talk about various aspects related to web hosting merchant processing such as why web hosting is considered high risk from a credit card processor’s standpoint, what are the KYC documents required to get the approval of such accounts, important features that you must look at before saying yes to a proposal. Overall this guide is going to be very beneficial for you so let’s begin.
What is a Web Hosting Merchant Account?
Web hosting merchant account is a specialized type of bank account that allows web hosting companies to accept credit and debit card payments from their customers. This specialized account can accept payments for the sale of web hosting, domain registration, SSL certificates and all other web server related products. The web hosting merchant account integrates on the web hosting company’s website and efficiently utilizes e-commerce shopping carts like WHMCS for smooth transaction processing.
Why Web Hosting Credit Card Processing Is Considered High Risk?
Almost every payment service provider considers web hosting merchants to be high risk because of various reasons including the nature of industry as well as operational challenges. The following are some key reasons.
High chargeback ratio: The web hosting industry generally operates on a subscription model and because of this sometimes customers may forget the recurring charges and can lead to raising disputes. Customers expect their website and server applications to be always available and unfortunately sometimes servers can have down times and because of this the customer may get dissatisfied and ask for money back. In this industry a small percentage of customers exist who place fraudulent orders and falsely claim that they were charged without their authorization.
Global Clientele: Cross border transactions are very common in the web hosting industry as these businesses have clients all across the world. This increases the risk of fraudulent transactions and potential disputes. In the web hosting industry business owners accept payments in multiple currencies and various payment methods. This makes the handling of such accounts even more complex.
Fraud Risks: Web hosting companies and the users of individual accounts are targets of fraudulent activities including usage of stolen credit cards and chargeback fraud. Sometimes fraudsters exploit hosting companies for illegal activities such as hacking and phishing. All of this can lead to potential fines for the merchant processor.
Industry Classification: Since the past few years many sponsor banks and payment service providers have started considering web hosting merchants to be very high risk. This is also true for other related businesses such as file hosting, VoIP and tech support. These companies sometimes unknowingly host illegal and unethical content that can be very problematic for the sponsor bank and payment service providers.
All of the above listed reasons contribute in making life difficult for an entrepreneur in getting a web hosting credit card processing account. Fortunately there are some payment service providers that specialize in supporting merchants from various high risk industries including web hosting. QuadraPay is a proud partner of such acquiring institutions. For more information feel free to email us on [email protected].
Key Components of Merchant Services for Web Hosts
Having a deep understanding of the critical components that work together for making web hosting merchant services possible can be extremely beneficial for business owners. This understanding helps entrepreneurs to compare the services offered by various processors and make the right selection. Let’s explore these important components.
Web Hosting Payment Gateways: This is a software stack which works as a bridge between various important players to make the transaction processing successful. The payment gateway gets connected to the merchant’s website through the API and when the customer submits the credit card information, the payment gateway validates the card details and then sends the encrypted information to the merchant acquirer for processing. If the transaction is approved by the credit card issuer, then the payment gateway returns a success notification to the merchant’s website and the merchant’s website built-in e-commerce platform sends a web hosting package order confirmation to the customer. This entire process happens in less than a second.
Web Hosting MID: Just by getting the approval of a payment gateway it is not possible for the merchant to process transactions. There has to be an acquiring bank which underwrites the risk of the merchant and provides a merchant identification number. This MID detail is added to the payment gateway to make transaction processing possible.
Recurring Billing Systems: All web hosting companies require billing options. Most payment gateways used by web hosting companies have a recurring billing module which initiates transactions on fixed time frames as per the approval of the cardholder. The merchant acquirer provides the card velocity schedule to the merchant. This includes how many times a card can be charged in a period of time and what can be the maximum transaction on one card within that time frame. Based on this card velocity schedule, the recurring billing system should be configured.
Fraud reduction tools: Payment gateways also have built-in tools to reduce the risk of fraudulent transactions such as the address verification system which validates the address submitted on the checkout page with the one which is there on the card account. Other validation tools used by web hosting companies include card verification value and 3D secure processing.
PCI Compliance: Any merchant that processes credit card transactions must be compliant with the PCI requirements. In most cases your payment gateway company will handle the PCI compliance for you; however, if your company has a turnkey requirement then you may also handle PCI compliance yourself by utilizing the services of registered PCI auditors.
KYC for Web Hosting Merchant Accounts
KYC is an important process for merchant acquirers. In this process, the merchant acquirer reviews all the documents submitted by the merchant and cross verifies the information with various records including credit bureaus and national portals. Proper KYC is required for the approval of a web hosting merchant account. Let’s look at some of these documents in detail.
Only a registered business can apply for a merchant account. Keep in mind that the business can be a DBA, Limited, Private Limited, Trust, INC, LLC or any other form of registered business entity. To verify the legitimacy and the structure of the company, the merchant can provide proof of business registration; this can include the certificate of incorporation and articles of association. Another document that the merchant should submit is the tax identification number which confirms that the merchant can legally do financial transactions.
The payment processor will require a photo ID proof of the director of the company; this can include passport, driver’s license or any other national ID card. Keep in mind that the language of the card should be English or else the processor will ask for official translation copy.
For proof of residential and corporate address, recent utility bill or business bank account statement or any other valid official correspondence is required. For merchants that are looking forward to getting approval of a web hosting credit card processing account in the United States, they will be asked to submit social security number for background and credit checks.
The collected funds are settled into the merchant’s business bank account usually within 3 to 4 days. The payment processor will require some sort of document that confirms that the bank account is under the same company’s name and is valid and active. For this, the merchant can produce a letter from bank or a bank account statement or even a voided check.
To improve the chances of account approval and also to get reduced rates from the payment processor, we strongly encourage merchants to provide the last three to six months of transaction history. This document should show the overall volume, average and peak monthly sales volume as well as chargeback and return details.
In some cases where the payment processor finds the profile of the merchant to be more risky than average, then the processor may ask for additional documents. Generally this includes a signed chargeback mitigation plan which details how the merchant is going to keep the chargeback percentage in check. Another document that sometimes payment processors ask for is the service use case which basically talks about the various types of web hosting services offered by the merchant such as VPS, dedicated hosting, shared hosting and reseller hosting. Account compliance undertaking is a document where the merchant confirms that they do not host any illegal or unethical content such as phishing sites or adult material. In case if the applicant company is a reseller of a larger web hosting enterprise then the payment processor will ask for a supplier’s agreement that displays the contract of the merchant with the data center or similar service provider.
Hosting Merchant Account Website Compliance
You should make sure that their website is fully active and provides detailed information about the services. The website should be live and fully functional. If the underwriters find out that the merchant’s website is incomplete or the product details are vague then the processors may immediately decline the application. The website should have clearly defined policy pages such as refund policy, privacy policy, cookie policy and terms and conditions. The contact information should be visible on the footer of all pages. Most credit card processing companies that we work with provide integration for shopping carts like WHMCS, WooCommerce and Magento. The merchant’s website should be ready for API integration.
Web Hosting Payment Gateway FAQ
How to select the right merchant processor for hosting company?
When choosing a merchant service provider for your web hosting company, you must consider various factors and one of the most important is how much experience the payment processor has when it comes to processing transactions for web hosting and domain sellers. If a payment processor has experience of working with a variety of merchants like you then it can be very beneficial for you as the provider will be capable of handling rough situations easily.
Merchants should also confirm with the payment processor about the availability of ready-to-use plugins that can integrate with the web hosting platform. If the integration is not possible then the merchant should look for another provider.
Apart from these, we suggest that you should work with the payment processor that is ready to answer your calls whenever you need. Work with the processor that has support available over phone, chat, and email. This way you will be able to resolve issues related to technical, settlement and risk easily.
