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Moving the Money- Online Payment Options
by Eric Lester
Having a product, a website, and a shopping cart isn't enough. Learn the various methods available to allow your customers to do that most important thing in ecommerce, pay you.
The ever increasing market for ecommerce has created a wide variety of methods by which a budding entrepreneur may do business online. This article will review the most common methods available to allow customers to pay for goods on a website. These include, in rough order of complexity, online check solutions, 3rd party processors, and finally merchant account / payment gateways. Depending on the nature of your business, one of these will probably suffice. Larger businesses may even consider providing multiple payment methods in order to cover as many potential customers as possible.
Online Check Solutions
Online check solutions allow customers to submit payment via their checking
account. This requires the customer provide their checking account number
and routing information to the processor in order to complete payment. In
theory online check payment will reach a broad range of potential customers,
since it is more likely to find someone with a checking account and no credit
cards than with a credit card and no checking account. Online check solutions
may also be able to hook up with an existing business checking account and
not require the opening of additional banking accounts, unlike most merchant
account solutions. Broad reach and ease of use are the main positives, but
there is a negative. Increasing emphasis on Internet fraud has created a
public concern about the safety of doing business online. Some may not wish
to make online purchases with their checking account, in absence of the
easier resource a chargeback on a credit card provides.
3rd Party Processors
Increasing in popularity, 3rd party processors allow online shop owners
to take credit card payments but alleviates the need for them to apply for
their own merchant accounts. As the term implies, 3rd party processors perform
the credit card transactions through their own merchant accounts, and charge
a percentage of the transaction, plus perhaps other fees, to the merchant.
These transaction fees are usually higher than a merchant would pay through
their own personal merchant account, but the inconvenience of obtaining
a merchant account is part of the broad appeal of 3rd party processors.
The most well known of the 3rd party processors is PayPal.
There are competing services, though. Some, such as ClickBank
are geared towards so-called "downloadables," and others like
CCBill target other niche markets such
as subscription websites.
If you are considering the use of a 3rd party processor, first think about the nature of your business and the volume you can reasonably expect. If you are selling downloadables like software packages, or are considering a subscription site, PayPal may not be the best choice. If you are selling physical products, then think in terms of volume. With a 3rd party processor you will be paying higher percentage fees and transaction fees, which, if you start doing a brisk business, will cost you more over time. If your volume goes up, it might be better to consider the use of a merchant account with favorable terms. Finally, keep in mind one downside to 3rd party processors. In the eyes of a prospective customer, they can make the store appear less reliable and reputable. The very difficulty of getting a merchant account does lend it an air of respectability, as theoretically, the owner had to provide more credentials and undergo closer scrutiny.
Merchant Accounts
Full merchant accounts allow store owners to charge customer credit cards
directly, without the help of a 3rd party company. The money charged goes
directly into their account. Having a merchant account can create a more
secure identity in the minds of your client, as they are not as easily obtained
as a 3rd party processor. Unlike the comparatively small selection of 3rd
party processors, there is a much wider selection in merchant account providers.
This makes careful shopping a must. Again, look at your product and try
to estimate demand. There are a variety of fees associated with a merchant
account, and how a specific account assesses these fees can make all the
difference. Stores that sell a low volume of goods in a monthly period should
look for a merchant account with a higher transaction fee in exchange for
a lower base monthly fee. Higher volume stores should look for the opposite,
lower transactions fees and a higher monthly fee. More money may be saved
with the higher monthly fee in concert with a low transaction fee percentage.
Some merchant account providers, like PayQuake,
offer a variety of tiered services to meet both kinds of need.
Where to look for a merchant account? You may want to start with your current bank. Most banks have merchant account solutions, and starting with an institution with which you are already a member may have some benefits. Make sure you discuss merchant account solutions for online transactions, as their accounts and fees (as well as approval difficulty) may differ from those designed for "brick and mortar" store fronts where a card is physically swiped for payment. Prospective online shopkeeps are by no means restricted to working with their current bank for merchant services. A number of large institutions provide merchant account services over the web. CardService International is one such organization, as is PayQuake (mentioned earlier), but there are many others. Shop around and look for the deal thats best for your particular needs. What might be right for one business won't be the best fit for another.
With any merchant account from any provider, verify it provides a payment gateway that is compatible with your ecommerce store software. The payment gateway is the bridge between your online storefront and your merchant account. There are a great deal of them, just like different store software, but most perform equally as well as the next. There will probably be a "gateway fee" charged as part of a merchant account package's costs. Most of the common store packages support a variety of payment gateways, so finding one that is compatible with a chosen merchant account shouldn't be too difficult.
Conclusions
A number of options have been considered. Online checks, though common,
may make customers uncomfortable in a world where Internet fraud is such
a hot topic. 3rd party processors make taking credit cards easy, but that
same ease works against them in the eyes of the picky consumer who won't
take a PayPal store "seriously". Merchant accounts provide the
most common, respected means to take payment, but they can be difficult
to obtain and the sheer number of choices can be confusing. No matter what
option, or options, chosen, do the necessary research and find the solution
that works best for your individual needs.
About The Author
Mr. Lester has served for 4 years as the webmaster for ApolloHosting.com
and previously worked in the IT industry an additional 5 years, acquiring
knowledge of hosting, design, and search engine optimization. Apollo Hosting
provides website hosting, ecommerce
hosting, vps
hosting, and web design
services to a wide range of customers. Established in 1999, Apollo prides
itself on the highest levels of customer support. Click for more hosting
articles.
Note: These articles are provided for general interest and content purposes only, and should not be construed as "support" materials. Apollo Hosting does not guarantee the information contained within. All articles are free to reprint so long as they remain unchanged, the "About the Author" section remains, all hyperlinks are preserved, and the rel="nofollow" tag is not added to the hyperlinks.
