March 14, 2007 | Posted By : Peter Damato found at  thewhir.com

You already have enough on your plate trying to increase revenue, decrease costs, combat churn, provide support, and the list goes on.

Adding payment processing to your existing services can either be a headache or a liberator depending on your approach. To ensure it is the latter of the two, it is imperative to completely think through the relationship with your chosen partner for payment processing.

There are two significant items to take into consideration: compensation and a non-competitive agreement. That said, traditional merchant account providers tend to cater to them both in a way that is very favorable for web hosts.

The majority of traditional payment processors offer handsome revenue sharing programs to their hosting partners and are eager to sign up new accounts while rewarding their partners for their contributions. For other providers, such as PayPal, that is not the case. While they offer a low-cost, affordable solution, and are a good fit for your customers that are just starting their online businesses, you won't be able to enjoy much additional revenue for referring them to PayPal.

PayPal's solution eliminates all set-up fees and monthly fees. The only revenue they generate from their merchants is from the 2.5% discount rate and $.30 transaction fee they charge for processing. The challenge is that 60% of all online merchants never process a dime. Therefore, the majority of accounts you refer will never process. And, you will never receive any additional revenue for offering ecommerce as a value-added service to your clientele.

The second piece to take into consideration is related to the actual agreement you enter into with your payment services partner. It is vital to ensure your partner agrees not to refer your customers to potential competitors. Again, traditional merchant service providers are typically very accommodating to this request and have no reservations about refraining from referring your customers to other web hosts.

However, larger providers, such as PayPal, don't usually go into as much depth with partner agreements. When a customer calls PayPal to sign up an account, they don't even ask if a web host referred them. In fact, when asked if they could recommend a cheaper hosting solution to switch over to, they suggested GoDaddy.com.

Bottom line: you should be thorough when choosing a payment services partner and entering into an agreement. It is important to ensure you are making the best choice for your particular needs as a web host. Partnering with a traditional merchant account provider gives you the ability to increase revenue while eliminating the potential threat of the 3rd party referring your customers to another host.