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The Pros and Cons of Third-party Processors

Third-party processors, like ClickBank or PayPal, enable you to accept online credit-card payments quickly and easily.

However, you may still be wondering if using these processors is really the best option for your business when it comes to accepting payment on your website. To help you with your decision, I've listed the main pros and cons of this type of payment structure.

The Pros

1. They're very quick and easy to set up.

2. The start-up cost is very low when compared to most other e-commerce setups.

3. The ongoing costs are low. In most cases the service only costs you money when you make a sale (transaction fees).

4. You don't need a merchant account. A merchant account can sometimes be difficult to get in the first place, is often expensive to set up, and - in common with third-party processors - also charge ongoing transaction fees.

5. Many of these services are geared towards the sale of downloadable products and are, therefore, well equipped to deal with the type of business you're setting up.

6. You have an end-to-end e-commerce solution. You cover all the aspects of offering a secure purchasing environment to your visitors without the need to go to all the trouble and expense normally associated with this type of setup.

7. You don't have to deal with issuing refunds. Just tell your processor and they'll do it for you.

8. You don't have to deal with chargebacks (see jargon) which can be a big headache for small businesses. Again, the processor will take care of this for you.

9. Both you and your customers benefit from the anti-fraud measures put in place by these third-party processors.

10. Customers are often more inclined to trust the security measures of a website using established third-party services than websites that are using a payment system of their own making.

The Cons...

1. While these systems are suitable for the sale of up to about three products (sold individually or in groups), they're not the best solution if you've a broader range of products on offer. In this case you would be better off using an e-commerce solution with an integrated shopping cart that allows your customers greater flexibility in choosing more than one or two products.

2. While the start up costs are very low, these services may be more expensive than other solutions in the long run. In my opinion, however, these extra costs are more than compensated for by the administrative burden that these services take off your shoulders. In particular the hassle of dealing with customer's billing inquiries, and issuing refunds and chargebacks.

3. By using this type of service, you may have less flexibility in choosing an affiliate program to run from your website. While some processors are compatible with third-party affiliate networks, most of them are not. To compensate for this, however, these processors often come with an affiliate network built in to the package. The ClickBank affiliate network is particularly suited to those of us in the ebook business and is used by over 100,000 webmasters.

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