Etsy to Process Credit Card Payments on Behalf of Sellers

In EcommerceBytes' recent Sellers Choice Awards, a number of Etsy sellers said they wanted more choice in payment methods beyond PayPal. On Tuesday, Etsy announced a new optional payment method on its site that will allow U.S. sellers to accept credit card payments in their shops, including Visa, Mastercard/Eurocard, Discover Network and American Express.

The "Shop Payment" accounts are not credit card merchant accounts. Instead, Etsy will be processing the payments on behalf of the seller. Buyers will be able to checkout without being redirected to another site in order to complete their payment.

It's a step closer to Amazon's model in which it processes all payments on behalf of all sellers, but Etsy assured sellers Shop Payment was completely optional, and Etsy will continue to offer PayPal as a payment method.

The new feature takes away the headaches for small sellers who might find dealing with a merchant credit card account too burdensome or not cost-effective. However, those sellers who choose to use Shop Payment will have to wait longer to get their money - there's a minimum waiting period of 3 days.

In addition, Etsy will only deposit payments into sellers' bank account once a week, on Mondays, and the funds will take another 3 - 5 business days to appear in the account. (Note that Monday is the default. If sellers wish to deposit funds as they become available, they can select the "Request Earlier Deposit" button in the Shop Payment Account.)

The amount resulting from a sale, less payment processing fees, will be available for deposit to sellers' bank accounts once the order is marked as "shipped" and three days have passed. (Etsy says in certain circumstances, a shop may have a deposit delay of more than three days based on investigative action.)

Direct checkout will cost sellers 3% of the transaction amount plus 25 cents per transaction. The fee is automatically subtracted at the time of sale and will be reflected in the seller's Shop Payment Account. If the seller issues a refund to a buyer, this fee, as well as the transaction fee, will be credited back to the seller proportionately.

Like PayPal and credit card merchant accounts, Etsy has the ability to issue refunds to buyers from sellers' Shop Payment Accounts in the event of a dispute (the seller will have 4 weeks to try and resolve the issue before an Etsy case manager reviews the case, and Etsy will notify sellers before any is action taken.)

Etsy CEO Chad Dickerson said direct checkout was an important step forward for Etsy, making it easier and faster for people to buy from sellers, and laying the groundwork for future improvements, like gift cards and expanded international payment methods.

The announcement and user discussion is available on this Etsy page, and more information is available on this FAQs page.

Updated on February 9, 2012.