Third-Party Billing
Third-party billing or sub-acquiring means the processing of payments via a third-party provider. Payments are transferred to a payment provider, who then settles them with the merchant. The payment provider also takes care of unfulfilled payments, the corresponding reminders or the involvement of collection agencies.
Advantages for the merchant
With third-party billing, merchants are given the option of handing over the entire payment processing to a payment service provider. This has the advantage that especially smaller merchants with few reviews or a low level of awareness can offer the buyer a secure payment method. In addition, the payment service provider takes care of the invoicing, the collection of the money and the possible reminder procedure in case of delayed or non-payment. This saves effort and costs for the merchant, but in return he must pay the payment provider accordingly. The amount of the costs depends on the specific offer.
Scope of third-party billing
If a merchant does not have his own credit card acceptance contract, payment can still be made by credit card via a payment provider. In Germany, however, it is prohibited for credit card providers to offer this service themselves. In other countries such as the USA, however, it is a common practice. Here, the provider must register each merchant with VISA, which involves relatively high costs. In return, each merchant receives a master account, even without their own credit card acceptance contract. Despite the high costs, this procedure is used by many merchants because it increases the number of orders due to the secure payment method and is therefore ultimately profitable. If payment is made by credit card via a payment provider, the billing party on the credit card statement is the payment service provider and not the merchant from whom the purchase was made. In addition to pure payment processing, the service provided by the payment provider in the context of third-party billing can also include things such as user administration, the collection of regular payments – e.g. in the form of membership fees -, extensive support and service offerings, and a webmaster program. Often, the payment provider is integrated directly into the merchant site, so that order processing and payment can be handled exclusively via the merchant site.
Advantages for the customer
Third-party billing gives the customer the opportunity to process payments securely. Especially with small or unknown online merchants, many customers find direct payment too insecure, so they refrain from placing an order. However, if the payment is made to a well-known, secure payment provider with corresponding buyer protection, the order is seen as less risky. In addition, customers often have the chance to pay with their credit card via a payment provider, even if the merchant does not have its own credit card acceptance agreement. Customers prefer merchants with secure payment processing. If this is not guaranteed, order processes are aborted more frequently.
