Before You Start a Penny Auction Site Get a Merchant Account!

**NewComer** · 09-08-2010, 11:23 PM

I am really surprised no one has made a big deal of this yet. A word of advice for all of those who want to enter the Penny auction business. Better find a bank that will process your credit cards for this business model first. We ended up having to put up a 50K deposit with our bank after having contacted over 20 different banks. Almost every bank we talked to would not underwrite this tpe of business. Ecommerce credit card processors consider this business HIGH RISK and you are going to have to hunt for a company to let you take credit cards. You can almost guarantee that PayPal will shut you down a few weeks into your venture so you NEED TO find a merchant account before you start investing money and time into a Penny Auction business. Anyone who knows of banks that are in the USA , not overseas, that will handle this business model should list them in this thread for all to see.

**Rob** · 09-09-2010, 01:25 AM

Hey NewComer,

While I completely understand your point, I have a few questions.

You may have mentioned this elsewhere, but did Paypal stop service to your site? Did you exhaust every possible legitimate payment gateway on the internet before you reached out to banks? Did you contact Paypal before you launched your site? Is your site built from scratch, or is it a clone script that by this time Paypal is well acclimated to?

If I understand you correctly, you eventually found a bank to process cards for you. How are you implementing this? Does your bank provide you with code to place in your site, or a link maybe to the processor on your bank's page?

Now I understand that you had to deposit a large sum up front for this service. Was any of that actually "petty cash?" For not a lot of money, relatively, you can go buy your own payment gateway or build your own. There's even a few open source ones out there.

I'm very interested in your experiences, please explain more if you can.

**NewComer** · 09-09-2010, 10:46 AM

We have PayPal at the moment. We are also not live until 9/23 but from what I have seen many sites have PayPal drop them once they are live for a short time. Building or buying a gateway (such as authorize.net) is the easy part. Finding a mechant account (ie - a bank to underwrite and process your credit card transactions) is the hard part. Our deposit is held in the event of a large volume of chargebacks since our bank is very worried about this business model. No matter what gateway you use at the end of the day it is the underwriting bank that is taking all the risk. Unless you are going to start your own bank, there is no way around this.

**NewComer** · 09-10-2010, 02:15 PM

We just had Paypal review our site for compliance and they approved it. However the risk department may elect to discontinue service if the volume is too high or ask for a huge reserve.

"On September 10, 2010, the PayPal Compliance Department reviewed your website www.vacation4pennies.com and determined the website meets PayPal’s compliance requirements as of this date. Please understand that under the terms of the PayPal User Agreement, PayPal reserves the right to suspend an account based on business needs and/or risks."

**softmedia.biz** · 09-11-2010, 01:50 PM

Hi NewComer,

Many our customers have PayPal on their websites, some of them have merchant account, some of them personal premier account. No big problems.

**Rob** · 09-12-2010, 06:19 AM

Originally Posted by NewComer

We just had Paypal review our site for compliance and they approved it. However the risk department may elect to discontinue service if the volume is too high or ask for a huge reserve.

Personally, that's easily the most disheartening aspect I've read about regarding P.A. sites and Paypal.

So you also got a bank to underwrite just in case?

Btw, it seems like we both have a site going live around the same time

Good luck.

**NewComer** · 09-12-2010, 02:39 PM

I believe anyone who starts a Penny Auction site without a merchant account in place may be putting themselves in a very bad situation, since one company(payPal) will have the power to basically shut them down whenever they choose. Good luck with you site.

**PennyAuctionWatch** · 09-12-2010, 02:44 PM

A site owner told me she's using Spectrum and that they understand penny auctions & aren't shutting them down like PayPal.

**NewComer** · 09-12-2010, 03:06 PM

Hi Amanda,
I did a Google search on "spectrum" and could not locate them. Can you get us a URL for this one? Thanks

**PennyAuctionWatch** · 09-12-2010, 03:12 PM

I think this is what she was referring to: Spectrum Merchant Services, credit card processing services I'll invite her to join here if she wants.

**NewComer** · 09-12-2010, 03:21 PM

Thanks a lot Amanda. She must have asked for less than a 25K a month line. There are several "wholesalers" like this one that will underwrite 25K until you start getting chargebacks then Wells Fargo usually freezes the account. Look at the bottom of the ad

"Spectrum Merchant Services is a registered ISO/MSP of Wells Fargo Bank, N.A., Walnut Creek, CA."

Wells Fargo is repped by more than 200 agents. We contact Wells Fargo directly since we can't live with just a 25k line a month line and there risk department told me that we would have our account frozen for sure the moment the chargebacks starting coming in. I was told OUTRIGHT that Wells Fargo rather NOT HAVE our business model. This was very disappointing since 8 out of 10 people we talked to were being underwritten by Wells Fargo.

Again, thanks so much for trying to help. We are still looking and would like to find a bank to do this since we would much prefer to have our 50K deposit back which can be used to buy a lot of advertising time.

**PennyAuctionWatch** · 09-12-2010, 03:24 PM

Originally Posted by NewComer

Thanks a lot Amanda. She must have asked for less than a 25K a month line. There are several "wholesalers" like this one that will underwrite 25K until you start getting chargebacks then Wells Fargo usually freezes the account. Look at the bottom of the ad

"Spectrum Merchant Services is a registered ISO/MSP of Wells Fargo Bank, N.A., Walnut Creek, CA."

Wells Fargo is repped by more than 200 agents. We contact Wells Fargo directly since we can't live with just a 25k line a month line and there risk department told me that we would have our account frozen for sure the moment the chargebacks starting coming in. I was told OUTRIGHT that Wells Fargo rather NOT HAVE our business model. This was very disappointing since 8 out of 10 people we talked to were being underwritten by Wells Fargo.

Again, thanks so much for trying to help. We are still looking and would like to find a bank to do this since we would much prefer to have our 50K deposit back which can be used to buy a lot of advertising time.

Not a problem- I'm not too sure really, but keep us posted and anyone else who has suggestions feel free to chime in!

**Rob** · 09-12-2010, 06:56 PM

You know what's kinda weird to me is the fact that winners on p.a. sites are bidding on an item they like and eventually win, only to then, for whatever reason, start the chargeback process.

I'm sure there are of course instances but I guess I'm surprised that this ever becomes an issue for a p.a. site in the first place.

I wonder how a site like Etsy handles instances like this.

**rad** · 09-23-2010, 12:50 AM

These guys will setup an account for penny auctions. I looked everywhere too. Check out Spectrum Processing :: Merchant Processing. You'll need to have pretty good credit. Hope this helps.

**Parallel_Solutions** · 09-27-2010, 04:47 PM

Parallel Solutions is a merchant account broker who has access to many processors who are PA friendly. Jeff Little is who you want to talk to.

**dalpaythorsten** · 10-05-2010, 09:32 AM

...these related threads on payment processing for penny auction sites:

http://www.pennyauctionwatch.com/for...-friendly.html

http://www.pennyauctionwatch.com/for...-game-web.html

**Parallel_Solutions** · 10-06-2010, 02:52 PM

I have 3 different banks that will process for Penny Auction Sites. I would encourage anyone to reach out to me to discuss the options. [email protected]

**Parallel_Solutions** · 10-06-2010, 02:54 PM

I have 3 banks that I use to process credit cards. Please contact me to disuss some options. [email protected]

**rb4129** · 11-30-2010, 03:09 PM

I am new to this site. As a high risk merchant processor we are being inundated with requests by auction sites for merchant accounts. Just like everything on the web, good business models are copied quickly and margins are squeezed in a fairly short time. I am interested in hearing from auction sites that have some history behind them. How much have your margins shrunk in the last six months or so. It seems like it is "ametuer hour" for this model based on the apps we are recieving.

**momoffourgirls2010** · 12-01-2010, 07:55 PM

I just contacted Jeff

**realbidtowin** · 12-01-2010, 10:57 PM

authorizenet is the most experienced and most used gateway by PA's. Also as a bidder they have the best interface as well

**momoffourgirls2010** · 12-02-2010, 03:47 PM

Originally Posted by bid-to-2-too-win

authorizenet is the most experienced and most used gateway by PA's. Also as a bidder they have the best interface as well

I set up my gateway through authorize.net. Now I'm just waiting to hear back from someone from Parallel Solutions.......

**primepenny** · 04-09-2011, 11:34 AM

I'm an authorize.net reseller and can get an account with them turned around (open and ready for use) usually within 24 hours. My issue is with the Merchant Account itself. PayPal shut our PayPal Pro account down 3 days after it was opened before we even had our first transaction yet. I've contacted Jeff and am waiting on his reply.

**brandyace** · 06-07-2011, 12:04 PM

We provide payment processing to penny auction sites. Multiple banks on a single platform allows you to easily diversify accounts to protect your business operations. Minimum of $100,000 in payment processing required to apply for account. [email protected]

**PainlessProcess** · 06-08-2011, 11:03 PM

Painless Processing openly accepts Penny Auction merchants. They have a section about it on their website. It's under the Merchant Solutions - Merchant Account Bar, noted as Penny Auctions. Check them out.
PainlessProcessing_logo1.jpg

**PennyAuctionWatch** · 06-09-2011, 03:50 AM

Welcome to PAW, PainlessProcessing - when you refer to them do you mean your company or have you tried them?

**PainlessProcess** · 06-09-2011, 11:04 PM

I am a managing member of Painless Processing. Recently, we experienced an influx of Penny Auction merchants inquiring with regards to our services. We were able to successfully and seamlessly provide the payment processing solutions they needed. One such client made us aware of this forum and recommended we address the issue on this sight. Understandably we are not supposed to advertise, however, after reading the several other merchant providers posts on this thread I felt I was within reason to inform all of our capabilities to solve such industry issues. I am more than happy to answer any questions and would love to know if there is a more appropriate place for us to simply advertise such services.

**BARVAS11** · 06-30-2011, 09:24 AM

I am laughing reding this just now.... I was just about to lauch my penny auction site a lot of work money and hassle involved. The last thing was to get a merchant account which is almost impossible! I am going crazy! Opening penny auction site in the UK!!! Nightmare!!!

**ethanparker** · 07-04-2011, 04:48 AM

I am also searching for a best offshore merchant payment. I live in USA and looking for some best and, super fast responses and excellent customer service. I had a account but I am not satisfied with the services. I am dealing with big deals in business for that i need good services. Can anyone suggest me? Thanks.

offshore merchant account

**claudsimms** · 08-26-2011, 04:14 PM

Originally Posted by NewComer

I am really surprised no one has made a big deal of this yet. A word of advice for all of those who want to enter the Penny auction business. Better find a bank that will process your credit cards for this business model first. We ended up having to put up a 50K deposit with our bank after having contacted over 20 different banks. Almost every bank we talked to would not underwrite this tpe of business. Ecommerce credit card processors consider this business HIGH RISK and you are going to have to hunt for a company to let you take credit cards. You can almost guarantee that PayPal will shut you down a few weeks into your venture so you NEED TO find a merchant account before you start investing money and time into a Penny Auction business. Anyone who knows of banks that are in the USA , not overseas, that will handle this business model should list them in this thread for all to see.

Credit Card Processing, Merchant Accounts and Merchant Services from North American Bancard i think they'd be able to help

**EMC2Billing** · 08-26-2011, 04:56 PM

Originally Posted by claudsimms

Credit Card Processing, Merchant Accounts and Merchant Services from North American Bancard i think they'd be able to help

We have banks that will take this business, although selectively. Contact me if anyone is interested.

**Jshurgs** · 09-02-2011, 12:03 AM

Thank you to everyone who contributed to this thread. The information was very helpful and significantly decreased the learning curve regarding PA merchant account providers. As I am a newbie to this site, I hope to repay everyone over time as I learn more about the PA industry and tips for success in it.

Thanks again,

Jason

**Payments Pro** · 09-20-2011, 11:05 AM

Its actually impossible to get a merchant account BEFORE you finish the site. The final site needs to be reviewed and made sure its in compliance before a MID is released. That being said, you can definitely start the process and speaking to people who are accepting this business.