The best way to take payments online by David Rushton, Webwave
Author: David Rushton
Last Updated: 12/12/2009 11:44:03 AM
Summary
It seems everyone wants to take payments online, and why not? Taking payments online can be a dream in terms of optimising your business processes. No more chasing customers for cheques, postal orders or cash!
Article
There are literally dozens of services all promising to make
taking payments on your website easy, but from the outside it can
all sound a bit complicated. There are of course, always some
people only too willing to share horror stories of stolen credit
card details online, but if done properly, the chances of this are
very minimal.
In fact only a small percentage of credit card fraud takes place
online. Let's face it, it is a lot easier for a fraudster to copy
your credit card details when you hand it over in a restaurant,
than it is to extract them from an encrypted website.
Taking credit card payments online basically boils down to three
options:
Use a hosted service such as PayPal
This is the easiest way to take payments online, and also the
scenario which gives you least responsibility. When someone wants
to pay you for something online, you simply redirect them to a
hosted service (a website outside of your own such as PayPal) and
they take care of the rest. PayPal (there are others) will take the
card details, take care of all of the security and deposit the
funds into your PayPal account, which you can later transfer into
your main bank account.
In this scenario you are not actually taking the payment, you
are simply transfering the customer to a trusted third party which
takes the payment on your behalf.
PayPal takes a small percentage (typically 2-3%) as a
commission. There are no recurring fees.
Use a hosted service but take the payment yourself
This is where you still use a hosted service such as PayPal but
you actually take the credit card details yourself. You then
securely pass these details to PayPal who then process the
payment.
You are probably wondering why you would ever do this when you
could get someone else to do all of the hard work?
However there is an advantage to this, the customer never has to
leave your website. In the previous example the customer had to be
redirected to PayPal who took the payment. Customers can get a bit
nervous when doing this, and from a marketing perspective this
introduces an extra step in the process, which can turn people
off.
In this scenario you can gather the card details, pass them to
PayPal for processing in the background and keep the visitor on
your website.
Sounds great, but this does introduce some security issues. The
main issue being that you have to securely pass the credit card
details to PayPal, i.e. you have to properly encrypt them. You will
need a professional to set this up properly for you.
PayPal (and others) will usually charge a small monthly fee for
this service, as well as the standard 2-3% commission. Generally
this is recommended for growing websites, which want to appear a
little more professional and may want to have complete control of
the sales process.
Open a merchant account
This is how the big boys do it. Most banks will offer long term
businesses (those with atleast 3 years trading history) a merchant
account. Basically a merchant account allows you to take credit
card payments.
You have a merchant account, but you still need a third party
such as WorldPay to use it. Your website talks to WorldPay which
then in turn talks to your merchant account.
The process is seamless and the most professional of the
solutions. However it is also the most timely and costly to set-up
and maintain. There are the set-up costs and then recurring fees
from both the bank and the third party!
Like the previous example there are security issues which need
to be dealt with and banks are very choosy about who they give
merchant accounts to. Generally speaking 90% of websites will use
one of the first two solutions.
Summary
If you are a new website starting out, the first option is
probably the one for you. Everything is taken care of and the work
to set this up is minimal. For the websites which are looking to
take things to the next level, the second option is probably the
most effective.
If your online store is an aspiring Amazon, then a merchant
account is the way forward, although it will not come cheap. You
may wish to hire a web developement company on a retainer based
contract here to actively keep on top of the system.
The Author
David Rushton is the owner of
Webwave a Staffordshire based specialist
provider of web technology outsourcing services designed to benefit
advertising, marketing, design and print agencies.
For more information visit: www.webwave.co.uk