Payment Options for Your Online Business
You will need multiple payment options available if you want to attract different types of customers. Having the ability to accept and process credit card transactions makes it especially easy for your customers to follow the impulse to buy something from you. You are able to generate much more sales than you would otherwise.
But while credit cards are easy for shoppers to use, they also make your life as an online merchant more complicated. You have two options:
1. Allow your customers to pay with a credit card through an online payment service. This requires them to register with the same online payment service. But they gain protection from payment service security methods.
2. Register with your merchant account. This allows you to shop and choose the service with the lowest fees or the best service. But you have to jump through some hoops to get such an account.
You need to be aware of the steps (and expenses) associated with being credit card ready, many of which may not happen to you when you’re just getting started. For example, you may not be familiar with one or more of the following:
1. Merchant Accounts: You must apply for and be approved for a special bank account called a Bank Merchant Account to process the credit card requests you receive. If you work through traditional banks, approval can take weeks. However, a number of online merchant account companies offer heated competition, which includes streamlining the application process.
2. Fees: Fees can be high, but they vary widely, and are feasible for shopping. Some banks charge a merchant application fee ($300 – $800). On the other hand, some online companies, such as 1st American Card Service, do not charge any application fee. But other fees apply.
3. Discount rates: All banks and merchant account companies (and even payment companies like PayPal) charge a usage fee, misleadingly called the discount rate. Typically, this fee ranges from 1 to 4 percent of each transaction. Additionally, you may have to pay a monthly premium fee in the range of $30 to $70 to the bank.
4. American Express and Discover: If you wish to accept payments from American Express and Discover cardholders, you must make arrangements through the companies themselves. You can apply online to become an American Express merchant by going to the American Express Merchant homepage and clicking the Apply Now link (or similar).
On the Discover Card Network merchant site, click the Start Accept link and find your current “buyer” or bank that you use for other credit cards, so you can expand your account with that bank to accept Discover.
5. Software and hardware: Unless you rely on a payment service like PayPal, you need software or hardware to process transactions and transmit data to the banking system. If you plan to only accept credit card numbers online and don’t need a device to handle actual “card withdrawals” from personal customers, you can use a computer modem to transfer data.
1st American Card Service allows you to use software called Virtual WebLink to process transactions using your browser, but you have to purchase the software for $39.95 and pay the usual discount rate and fees. This special package includes Virtual WebTerminal that allows you to enter information manually and send it to the credit card network.
Other systems require you to have a peripheral device or phone line, which you can either buy for $200 or more or rent anywhere from $17 to $26 a month, depending on the length of your lease.
As the web’s second decade has progressed, the payment landscape hasn’t changed significantly. But things have changed a little. The changes actually give buyers and sellers more choices:
1. More and more people are paying bills online. This change has taken place over several years and consumers are increasingly comfortable with the process.
2. PayPal is not the only game in town. This payment service is owned by eBay, but can be used by anyone who wants to send or receive money online. Millions of auction sellers use PayPal every month, but ecommerce store owners can use it, too.
3. Google wins. Google Payments charges no less than PayPal. However, shoppers and sellers alike flock to it. It provides an alternative to PayPal, which is not popular with many buyers and sellers.
4. In-person payments are a square deal. Lots of vendors also sell at flea markets and art galleries. They can accept face-to-face credit card payments thanks to a device that connects to a smartphone and processes the payment by calling the credit card service. The most popular service is called Square Register. Similar options appear, such as LevelUp, Bank of America Mobile Pay On Demand, and PayPal Here.
5. Consumers abroad are using new and innovative payment systems. At some point, if you accept payments from abroad, you may be asked to accept Western Union transfers or other payment schemes. It is the wave of the future as e-commerce becomes globalized.
Creating your own merchant account is useful if you are running a physical business related to your online store. But if you don’t want to face this problem, you can consider a payment service like PayPal or Google Payments.
Watch for credit card fraud – Criminals use stolen numbers to make purchases. You, the merchant, are responsible for most of the dummy transactions. Cardholders are only liable for $50 in fraudulent purchases. To combat this crime, before completing any transaction, verify that the shipping address provided by the buyer is the same (or at least in the same vicinity) as the billing address.