Top consideration when selecting a new online payment service
As an online business owner, you want to offer your customers a variety of payment options, and the more payment options you can offer, the better.
With new online payment services opening in different international markets, these new payment options can bring new customers with them. However, there is one top consideration that you need to be aware of before adding a new payment method to your website.
In my opinion, it is imperative that the online payment service is legally registered as a money remitter in a first world banking jurisdiction such in Canada, the US, the UK or Europe. As a business owner, this needs to be verified before you look into comparing the services, rates, online security, or other attributes.
In Canada, for example, if a company wishes to provide online or offline payment or remittance services, it must be registered with FINTRAC, the Canadian government agency that acts as a watchdog to the payments industry. FINTRAC imposes a strict regulatory compliance regime on all money remitters, to insure that payments and businesses are not involved in terrorist financing, money laundering, the drug trade, or other nefarious activities.
Payment service providers are required by law to conduct payment operations within specific guidelines and limits, with government reporting requirements spelled out in great detail on the FINTRAC website. Also, by law, payment companies are required to handle client funds and credits according to set rules and practices, which gives clients rights and an avenue of recourse in the event of unforeseen problems and unsettled conflicts with payment service providers.
The online payment companies that you select to process payments for your online business, will be acting as guardians of your money/credit, until such time as you withdraw or download your credit from their online systems. If these companies are not legally registered to conduct payment operations in a first world country, you will have essentially zero recourse in the event of a problem. Thus, your money will be at risk. Simple as that.
In one of my earlier articles on bitcoins, someone commented that bitcoins were safe to accept as an online payment method because Bitpay, a third party payment processor, can process online website payments with seamless on-the-fly conversion of bitcoins into a merchant’s home country currency. I raised the question challenging whether Bitpay was a legally registered money remitter in the US, Canada, the UK, Australia, or New Zealand, and the question has not been answered.
The take-away from this post is simple: Before using any new online payment service, ask them: “Where are you registered as a money remitter and what is your company’s registration or license number?” If the company does not publish this information on their website, or will not answer this questions when asked by email or phone, then you are taking what I consider to be a significantly increased risk in dealing with them. Such a company can literally vanish overnight, along with your money.
In the US, money remitters need to be registered with FINCEN. In the UK with the FSA. And in Canada with FINTRAC.
