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.
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