by E. E. Lester
The
ever increasing market for ecommerce has created a wide
variety of methods by which a budding entrepreneur may do
bushiness 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.
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