I hope you all had a very pleasant, relaxing and peaceful Thanksgiving Holiday (for those in the US …

We had 25 for Thanksgiving dinner at our house, so it was great and so much fun…

Do you remember, several months ago PaySystems announced they would freeze their Internet merchant accounts and stop doing business on the Internet as a 3rd party processor?

I’m not sure what the problem was, but I heard they were the favorite processor of spammers and their security fraud controls were less then effective.

Since then more and more Internet entrepreneurs migrated more of their business to other Internet payment systems including PayPal.com, ClickBank and 2CheckOut.com.

It was surprising to me, after doing some extensive research, how many systems there are out there.

Payment systems have one inherent problem though as I’ve discovered:

= They are all 3rd party processors =

This means that, under one primary merchant account (owned by the ‘company’) they are processing your transactions with everyone else who signed up with them using this ONE account. You really don’t have your own merchant account- you share that one merchant account with everyone else who uses their service.

It’s kind of like being on a ’shared server’ for hosting your domain. You get assigned a single IP that everyone ’shares’. You don’t know who the other accounts are, and when they get accused for spamming or doing something wrong, the IP that everyone is on gets on the ’spam’ lists.

It appears that because PayPal is a ‘membership’ organization that it may be immune from a great many problems associated with being a 3rd party processor and is relatively unaffected - for now.

Then there is Clickbank. I read on http://www.clickbanksuccessforum.com/forum/that vendors and merchants have experienced a high rate of ‘refunds’ in their accounts in the last 8-10 weeks. These rates are much higher than normal, sometimes 2x or 3x as much.

I wouldn’t doubt that it’s due to the fact that Clickbank wants to keep their ‘master merchant account’ as super-clean as possible and are refunding everyone who buys a book from them who even sneezes.

2CheckOut.com has kept new merchants waiting for payments weeks until they ‘verifiy’ them… whatever that means. In the end it’s a tactic meant to keep their primary merchant account processor happy and shows they are serious about fraud.

It also means these, and other, 3rd party processors are concerned about getting shut-down like PaySystems did and are taking steps so that doesn’t happen.

The only true alternative is to have your own merchant account- a *real merchant* account and not a shared one with hundreds and thousands of other merchants on PayPal, CB or 2CO.

There are a lot of choices and they are all going to cost you more in terms of monthly fees than the 3rd party processors, but it may be the best solution if you plan on being in business for the long run.

Ask around the forums for what people recommend as far as merchant accounts go.

One potential solution I found for Internet merchants processing $500 to $10,000 a month is, http://www.payquake.com/(not an affiliate link)

They set you up with a ‘true’ merchant account but they have a service called “Pay-For-Play” for merchants who are not yet ready for the benefits of a full merchant account with no monthly fees.

Make sure you read their PDF report on how they are different than PayPal, BillPoint, etc…: http://www.payquake.com/p2p.htm

Bottom Line: Get ready for continued shake-ups in the 3rd party processor field. If you’re doing a lot of business with any 3rd party processor it’s time to think about getting your own merchant account and using the 3rd parties as a back-up processor only.

At the very least be aware that if you’re using a 3rd party processor you run the risk of being shut down at a moment’s notice the same way merchants using PaySystems were notified.