Last Updated: May 28th, 2013.
2Checkout (2CO) is an international third-party payment processor that, at its most basic level, allows money to be transferred from a buyer to you after a purchase is completed. Like its main competitor PayPal, 2CO is the name buyers will see if they check transactions on their credit card bill. The PCI-compliant company offers several features, including recurring billing and custom checkout.
If you’re a business that brings in a few thousand dollars per month or less, you’ll probably earn a higher discount rate from 2CO than what’s offered by standard merchant accounts. Another perk of using a third-party processor like 2CO is that you’re not held responsible for fraudulent or disputed charges, although you will have to pay a fee to 2CO for transaction disputes.
After you fill out an application with 2CO it will be reviewed by underwriters before gaining approval, just like when you apply for a personal credit card. Once you’re ready to use 2CO, you’ll either use 2CO’s “Plug and Play” shopping cart software or integrate the processor into your existing cart. When customers place orders on your site, they will be redirected to 2CO to complete transactions. That’s one downside of working with some third-party processors like 2CO: Buyers will have to leave your store to finish their purchase, which could theoretically lead to lost sales.
There are several positive and negative facts to consider when working with 2CO. Withheld funds and frozen accounts are a main complaint of 2CO users. Still, with more than 50,000 vendors 2CO remains a real alternative to competitors like PayPal. Read on to get a better grasp of the processor and see if it’s the right fit for your business.
Columbus, Ohio. (Additional offices are located in Dublin and Hong Kong.)
Products and Services:
2Checkout offers several helpful features, including a handy app, integration with tablets and smartphones, recurrent billing, direct checkout, and the ability to accept 26 currencies in 15 languages. The dashboard includes sales history and trends and the option to grant various amounts of access to different users. 2CO is PCI Level 1 compliant and all transactions undergo a fraud review within 24 hours of completion.
2CO offers two main payment solutions for businesses:
- Dynamic Checkout.
- Direct Checkout.
Customers won’t have to sign up for a 2CO account to complete a sale but can quickly make purchases using debit or credit cards with either plan. While both services allow your business to complete transactions by redirecting customers to the 2CO site, there are some differences.
- Automatically displays checkout optimized for customer’s device format (i.e. laptop, tablet, smartphone.)
- Marketed to sellers just starting out or with a smaller number of product offerings.
- Payments can be customized and localized.
- Format gives customers the impression they’re still on your site.
- Includes overlay payment form.
- Cuts down on the number of fields that must be completed to finish a transaction.
In my opinion, unless it’s really important for your site to remain visible in the background while customers complete purchases and you’re a small to mid-range store Dynamic Checkout is a solid pick.
Fees and Rates:
2Checkout charges no statement, recurrent billing, cancellation, or other monthly fees. Although at one time merchants were required to pay a $49 setup fee, 2CO now advertises that it charges nothing to set up accounts. Service commitments are month-to-month. You can view the full fee schedule including chargeback rates here.
You will come across a few extras costs as a 2CO customer, including a $10.99 set-up fee. Depending on your account, chargebacks will range from $20 to $50 for disputed transactions processed using U.S. dollars and $25 to $65 for disputed transactions processed using non-U.S. dollars. Also, each account’s reserve for chargebacks begins at 5% of your gross sales per pay period--that amount is held for 90 days before it’s released.
2CO keeps rates simple across the board, taking a flat 2.9% and $0.30 for each processed transaction regardless of how much you process. Although new accounts qualify for the 2.9% rate, 2CO charges significantly more per transaction (5.5% and $0.45) for accounts it considers high-risk, if, as the website states, "the Products or business practices of a Sub-Merchant create a potential or actual financial or reputational risk to 2CO, such as the sale of Restricted Products or high chargeback percentages." International sellers pay 5.5% and $0.45 per transaction. International sales may cost an extra 1% per transaction.
Contract Length and Cancellation Fee:
2Checkout’s payment solutions are contract-free and are offered on a month-to-month basis.
Sales and Advertising Transparency:
2Checkout offers merchants plenty of ways to garner information and encourages social media interaction but doesn’t appear to use gimmicky marketing tactics. Pricing is straightforward and advertising is standard and mostly limited to the web. 2CO attracts new customers either via their site or referrals, and I found no evidence of an old-school sales force making cold calls to potential customers.
Customer Service and Support:
2Checkout offers several ways to reach its customer service, including:
Negative Reviews and Complaints:
Merchants report a broad range of complaints about 2Checkout, with most centering around product and service issues. A member of the BBB for more than a decade, the business maintains an A+ rating. Of the 65 complaints issued in the past three years, 54 have been resolved. You can read more details here. While Merchant Maverick is dedicated to completing exhaustive online searches for complaints, we weren’t able to read all of the issues users reported online. With that in mind, we were able to cull several common 2CO negatives, including:
- Account Termination - 2CO appears to closely monitor accounts, with users reporting account closure with no notice. If your business could be considered high-risk you might want to choose a processor such as Durango Merchant Services. Read more about how to avoid freezes, fees and the termination of accounts here. You can also check out 2CO’s prohibited products list for more info.
- Withheld Funds - Merchants report dissatisfaction with 2CO’s policy to hold funds 90 days after accounts are terminated.
Positive Reviews and Testimonials:
There are also positive 2Checkout comments out there to balance out the negative feedback. While many merchants report spotty customer service, others are satisfied. Common positive interactions with 2CO include:
- Convenient Checkout - The one-page checkout setup is fairly straightforward.
- Widely Accepted - 2CO works with eight payment methods and can accept foreign currency in 15 languages and more than 20 currencies.
- Easy To Use - Merchants report that 2CO is quick to setup and operate.
Integrations and Add-Ons:
2Checkout supports more than 50 third-party shopping carts. Click here to view a full list. It can be integrated with various add-ons, including online booking service Checkfront, classified software Listbingo, and FreshBooks cloud-based accounting software.
Like other third-party processors, 2Checkout is more likely to take on sellers with less than flawless credit scores and is better at dealing with risk than merchant accounts. As mentioned above, the company also deals with fraud for you, which is a big perk.
If you choose to work with 2CO, it’s a good idea to take time to familiarize yourself with the processor’s procedures and fee structure so you’re one step ahead of the game. 2CO offers plenty of features and is compatible with virtually all shopping carts.
If possible, apply for a traditional merchant account as well as a third-party processor like 2CO. That way you’ll have access to funds in case there’s ever a problem with either resource. Whether or not the commission you earn after paying 2CO fees makes sense with your bottom line is important to consider. I like that 2CO has a broad reach and integrates well with mobile devices. However, its wide assortment of merchant complaints would make me take pause.