July 7, 2011, 10:41 AM

Payment processing can challenge small daily-deal operators

Goyadeal.com lands a credit card processor after launching without one.

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Online daily deals may represent one of the hottest areas of e-commerce, but still some fledgling daily-deal operator have had difficulty landing the services of a payment processor because of the inherent risks involved in offering limited-time sales, says Marco Pimentel, director of Canada-based daily-deal site Goyadeal.com.

“Getting payment processing for daily-deal businesses has been difficult,” he says. When he launched his site in March he found that processors and payment card networks want small operators of these sale sites to agree to hold back a significant part of the payments they receive in the event of a merchant going out of business or a customer demanding a refund.

That’s what led him to launch Goyadeal without any way to process payment card transactions from customers. Instead, he offered his online discounts, which focused on businesses and services in Western Canada, to consumers via mobile phone text messages. Consumers could redeem the offers at participating merchants, with the merchants then sending back a portion of the transaction to Goyadeal.com.

At the same time he approached processors to find one that would fit his business. In total he contacted about 15 processors before settling on Canada-based Payfirma Corp. Pimentel says he is required to hold back 30% of a transaction’s amount for 90 days to cover challenged or faulty payments, slightly less than what other processors required. And for the last month Goyadeal.com has been able to accept Visa and MasterCard payments.

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