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XcAuction Pro and XcClassified Pro contains a billing system that integrates with the XUD User Management System and allows your site to charge and bill fees to visitors for certain functionality (i.e. posting an ad or auction on your site). Sites that charge for services will typically use one of two methods for doing billing which we refer to as either batch or on-demand. An on-demand system would simply charge the user’s credit card account at the exact moment the user performed an operation that would result in a fee being charged. In a batch system, fees that you charge to site users are accumulated on your site, in an account for each user, until you run your periodic billing cycle. The billing system built into XCENT applications use the batch method and can be interfaced to other merchant processing, accounting systems or online payment processing gateways. Most sites perform their billing cycle either monthly or weekly. Batch processing works very well for many reasons and supports the ability to perform transaction offline or online.
When you perform your billing in a batch, there are a couple of different ways the actual process can be performed. Offline processing is a method where you take your billing data and bring it into another system that will perform your actual merchant processing transactions. You start by exporting your billing data into a file that you can use in a variety of ways. This data file can then be imported into another software application that performs the actual billing functions. One of the most popular methods is by using a software package installed on a regular PC and is usually supplied by your merchant processor. There are a number of different software packages for doing this, but if you are new to credit card processing, it is recommended to use whatever software is directly supported by your merchant processor. This is because the help desk for your merchant processor may not be familiar with any other packages in the event you run into any questions or difficulties. A package called ICVerify, from www.cybercash.com, is commonly used by many merchant processors and is usually directly supported by their help lines. If you already use an accounting package, some may have optional credit card processing modules that you can use. You would then use this software to import your billing data file. Then this software is what would perform the actual credit card transactions by sending the data to your merchant processor. XCENT applications support Offline processing by default. This is usually the least expensive method of performing credit card transactions as your merchant processor will typically charge less on merchant fees when doing offline processing. Once your software package has submitted the transactions and received approvals or declines for each transaction, you can use the report it provides to update the corresponding accounts in your XCENT application.
An even more automated way of doing your billing is by using online processing. Online processing would allow you to perform the submission of your batch of transactions to your merchant processor in one step. This would occur directly on your web server and would not require you to export/import your billing data. This method has additional requirements. First, your merchant processor must be able to accept online transactions, and have approved your account for doing so. Second, your web server will typically need some sort of component or additional software installed on it so that the web server can directly communicate to your merchant processor or gateway. Third, when using XCENT applications, an additional module from XCENT is required to perform the online processing function. See FAQ Article 338 for information about available online processing modules.
Batch processing offers some serious benefits. In nearly every way, it is superior to on-demand processing when running any "pay for services" site. Below are some observations as to why. Batch processing allows you to actually generate fewer transactions in your accounting systems. This could be a huge labor savings if you happened to do your billing using some physical method (IE, sending out paper invoices, etc.). In such cases, the more transactions you handle per end user account per invoice increases your efficiency dramatically. For example, if your active users are averaging 2-3 transactions per month, you can send out a single invoice with those 2-3 transactions rather than a separate invoice for each transaction.
If you are using a semi or completely automated way of performing your billing, batch processing provides a very valuable benefit here as well. With any merchant account, you will be charged a fee plus percentage of each transaction you perform on your merchant account. Your merchant processor is who sets and charges these fees to you. These transaction fees can substantially eat into the fees you are charging your end users. The more you can "roll-up" the individual transactions occurring on your site, the more you can actually collect of the fees for each account on your site.
To give an example of how much of a benefit this is, let's assume that with your merchant account, you are charged a flat $0.20 per transaction, plus 2% of the transaction amount. If you had one user that performed ten transactions during a particular month at $1 each, you would be paying $0.22 for each user transaction, or $2.20 for this account if you submitted transactions on-demand. When you batch the transactions, you would only submit one $10 transaction, costing $0.40 in merchant processing fees realizing a savings of $1.80 for this account. If you are billing many accounts each month, this can quickly add up to a very significant savings on your merchant processing costs.
Some site owners look at batch processing as having a major weakness in that it will subject them to too much possible credit card fraud. This is actually not true in that batch processing really helps to decrease your exposure to fraud. The first thing to keep aware of, is that if you submit a transaction that winds up being fraudulent, your merchant processor will automatically take back the fee you charged and subject you to a chargeback fee. Chargeback fees can vary by vendor, but a $10 to $15 fee is very typical. So, in our example above, if you had been submitting transactions on-demand, you could be hit with $100 in chargeback fees. By submitting in a batch, you limit your exposure to chargebacks by one tenth! It also has another significant advantage in that you may not even get hit with the chargeback at all. This can occur due to the fact that by the time you do submit your batch for processing, the transaction may not even go through by being declined. At first glance, this seems like a disadvantage. However, it is really a benefit because now you will not even be subject to any chargeback fee for this account. Some might be inclined to say, "but the person committing the fraud is getting my service for free". However, depending on the timing, this is still going to be true in nearly every scenario outlined above. The key is limiting your exposure to the risks. Which is better, loosing the couple dollars in the transaction fees you might have collected, or exposing yourself to all those additional chargeback fees? Plus, most merchant processors can and will raise your transaction fees if the amount or frequency of your chargeback transactions become problematic. The few transactions you might loose will not significantly add to or subtract from your other overhead costs for your site. So by using batch processing, you get serious benefits with hardly any real risk.
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