If you operate an online business, you will likely have come across the variety of payment processors available to help you accept credit card payments. The Payment Card Industry Data Security Standards (PCI DSS), Privacy Act 1988 (Cth) and other Australian law will apply when taking payment online. Before selecting a payment processor, it’s important to understand the legalities of accepting credit card payments online.

There are two main options to accept your customer’s credit card payments and land your hard-earned cash in your bank account:

  1. setting up a merchant bank account; or
  2. using a third party payment processor.

This article will explain the differences, as well as the pros and cons of these methods, to help you understand how different laws will apply to your business. 

You may also need to comply with the PCI DSS, the provider’s terms of service and Australian privacy laws. We unpack all three issues in this article.

Merchant Bank Account

A merchant bank account acts as an intermediary between the customer and your business bank account. Once your payment processor approves your customers’ payments, the funds are deposited into your merchant bank account. After a period of usually 2-7 days, the funds are automatically transferred to your business bank account.

As businesses are processing a high volume of transactions, they can potentially negotiate lower fees for their merchant bank account. Also, businesses have less control over the time it takes for payments to clear the third party payment processor’s merchant bank account compared with using their own business merchant bank account. If you’re operating a bigger business, this delay can make planning and budgeting harder to manage.

Third-Party Payment Processor

On the other hand, if you use a third party payments provider such as Stripe, Braintree, Pin Payments or PayPal, your customers’ payments are deposited into the third party’s merchant bank account. A third party payment processor’s merchant bank account can save you money because the transaction fees they charge can be lower than those a merchant bank provider charges.

What is the PCI DSS?

The PCI DSS is a set of standards developed to protect against credit card scams and fraud. Most merchant banks and third party payment processors require you to comply with the PCI DSS. 

For instance, Stripe’s Terms of Service expressly states that the business must comply with the PCI DSS. You must also allow NAB agents, employees or contractors reasonable access to your property during business hours to check your compliance with the Financial Services terms and data security standards, including the PCI DSS. NAB provides Stripe’s merchant bank account.

While third party payment providers will provide reasonable security measures, you have ultimate responsibility for complying with the PCI DSS. This makes it all the more imperative that you implement industry-standard security measures such as antivirus software, firewalls and encryption software to protect sensitive information.

Terms of Service

When using a merchant bank service or a third party payment processor, you will need to agree to their terms of service/terms and conditions. You should read and ensure you fully understand what you are bound by, and ask the provider if you have any questions.

Do Privacy Laws Apply To My Business?  

Businesses that handle personal information and have a revenue of over $3 million in any given financial year must comply with the Australian Privacy Principles (APPs) in the Privacy Act 1988 (Cth) (Privacy Act). 

If your business does not have revenue of over $3m, you may still be required to comply with the APPs if your business is, for instance:  

  • a health service provider, 
  • related to another company which is subject to the Privacy Act, or
  • a credit reporting business. 

If the business does not have revenue of over $3 million or fits within one of the named categories, the business does not need to comply with the Privacy Act. 

Although the Privacy Act may not apply to your business, if you collect personal information and use it for marketing purposes, customers must consent to receive any marketing material, including emails. Consent can be either express or implied. A well-drafted privacy policy should include a clause relating to consent and marketing material. A privacy policy also signals to your customers that you take privacy seriously. Your policy should set our how you collect, store and use personal information so customers can easily find out how your business can use their information.

It’s also sensible to create an internal privacy manual to complement your privacy policy that sets out easy to follow guidelines for the team and ensure they understand how to handle your customers’ personal information.

Key Takeaways

Processing credit card payments are a crucial function for online businesses. With over 16 million credit cards in Australia, there are strict obligations for business owners and payment platform operators to manage the risks of processing payments online. It is important to ensure your business is set up to manage this risk, and that you understand your compliance obligations under the terms of the merchant bank or third party payments processor and Australian privacy laws. If you handle credit card details, you may also have PCI DSS compliance requirements.

If you need assistance setting up a payment platform or accepting payments online, get in touch with our online business lawyers on 1300 544 755.

Chloe Sevil
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