There are some great answers here.. I'll take a higher-level perspective of looking at having your own merchant account versus using a payment processor's merchant account (e.g. Stripe, Braintree).
By establishing your own merchant account with the processor, you'll have lower rates but signing up will require a lengthier process of providing your business info and having that reviewed. Basically this mean that you're taking on the risk of fraud or chargebacks directly. The benefit of course is that you'll have lower net costs esp. at higher transaction volumes with the variable pricing aspects that has been mentioned here already. It also allows you to add more value-added services that align to your business needs, such as subscription billing or other servicing layers.
On the other side, signing up under a payment processor's merchant account (e.g. Stripe, Braintree) can get you up and running instantly with a simple pricing structure. This often make sense for businesses who need to get up and running quickly without having to go through a merchant account review process. Also, the risk is actually taken on by the processor since it's their merchant account with the processor. Of course the processor in this case monitors fraud on your activity in order to protect themselves. What you'll find though is that as your volumes grow, there will be an inflection point where it'll be more cost effective to switch to the first option.
There's benefits in both models, but as always, companies should see what makes sense for them.
There are some great answers here.. I'll take a higher-level perspective of looking at having your own merchant account versus using a payment processor's merchant account (e.g. Stripe, Braintree).
By establishing your own merchant account with the processor, you'll have lower rates but signing up will require a lengthier process of providing your business info and having that reviewed. Basically this mean that you're taking on the risk of fraud or chargebacks directly. The benefit of course is that you'll have lower net costs esp. at higher transaction volumes with the variable pricing aspects that has been mentioned here already. It also allows you to add more value-added services that align to your business needs, such as subscription billing or other servicing layers.
On the other side, signing up under a payment processor's merchant account (e.g. Stripe, Braintree) can get you up and running instantly with a simple pricing structure. This often make sense for businesses who need to get up and running quickly without having to go through a merchant account review process. Also, the risk is actually taken on by the processor since it's their merchant account with the processor. Of course the processor in this case monitors fraud on your activity in order to protect themselves. What you'll find though is that as your volumes grow, there will be an inflection point where it'll be more cost effective to switch to the first option.
There's benefits in both models, but as always, companies should see what makes sense for them.
By establishing your own merchant account with the processor, you'll have lower rates but signing up will require a lengthier process of providing your business info and having that reviewed. Basically this mean that you're taking on the risk of fraud or chargebacks directly. The benefit of course is that you'll have lower net costs esp. at higher transaction volumes with the variable pricing aspects that has been mentioned here already. It also allows you to add more value-added services that align to your business needs, such as subscription billing or other servicing layers.
On the other side, signing up under a payment processor's merchant account (e.g. Stripe, Braintree) can get you up and running instantly with a simple pricing structure. This often make sense for businesses who need to get up and running quickly without having to go through a merchant account review process. Also, the risk is actually taken on by the processor since it's their merchant account with the processor. Of course the processor in this case monitors fraud on your activity in order to protect themselves. What you'll find though is that as your volumes grow, there will be an inflection point where it'll be more cost effective to switch to the first option.
There's benefits in both models, but as always, companies should see what makes sense for them.