Continuing with the eCommerce theme I thought I would review the various options for taking payments online. For the people who have never taken payments online, first an introduction.

1. What do you need to take payments online?

If you are new to taking payments this actually is more complicated than you might think. To accept online payments you need:

• A payment processing service (PSP) or ‘payment gateway’ – this service collects and sends payment details to the banking network.
• An internet merchant account (IMA) – All the payments you receive are paid into your merchant account before being transferred to another business account.
• A personal or business bank account where the funds from the IMA are transferred to.

Some providers provide just a PSP service so you need to source a separate IMA but I am going to concentrate the rest of the article on those providers that supply both services together.

2. How do you choose a payment provider?

There are lots of players in the market and a lot of choice so what sorts of things should you be looking for? My personal criteria for selection is the following:

1. Reliability – how reliable is the service, PayPay has suffered in the past from a bad reliability record and if your payment provider is down then you cannot take payments. If you are a high transaction business this can cost you a lot of money.
2. Integration options -  what are the different options to integrate payment onto your site, can you take payments on your own website or do you have to redirect to the payment providers site?
3. Support – how good are their support teams, what hours are they available, ecommerce is a 24/7 business.
4. Fees – what is their charging structure, do they offer volume discounts for large numbers of transactions? Fees vary a lot and a few % per transaction can affect your margins.
5. Perceived quality to the customer – if you use a well respected brand for payments this perceived quality will help put your customer’s minds at ease.
6. Fraud protection – what steps, procedures and tools do they offer to reduce fraudulent transactions?
7. How quickly funds are released – some providers hold funds for as long as 30 days which can hurt your cashflow.
8. Reporting – how easy is it to run reports for your business reporting?
9. Ease of use – how easy is it to issue refunds or check charge backs?

Other less important criteria might be:

• Can you take payments over the phone?
• Can you take multiple currencies?
• How much do they charge for fraudulent transactions or charge backs?
• Do they accept recurring payments (repeat transactions for subscription sites)?
• Do they accept PayPal payments? The large payment providers now accept PayPal as well as credit cards.
• How customisable are the payment pages?

3. What will it cost me? Who are the main players?

The total cost of accepting payments is the combination of payment processing charges (per transaction) and the internet merchant account (usually a fixed monthly fee). There will also be one off set-up costs and addons for extra fraud protection etc.

The per transaction costs vary quite a lot and depending on the volume of your business can be negotiated.

A lot of the best payment providers only cater to US business in the UK the the main players are:

• SagePay – formerly Protx and now owned by the accounting software company Sage. They offer a range of integration options at no extra charge, and they are personally my choice of payment provider.
  • £20 per month
  • Per transaction costs of 2.5% for credit cards and 40p for debit cards
  • No set up fees
  • No minimum contract term

• RBS WorldPay - recently purchased by RBS and offer a superb, reliable service with great technical support. They are also a great choice if you do not have a lot of trading history and need to be up and running quickly.The downside for me is that the payment pages cannot be customised as much as I would like.
  • £15 per month
  • 3.35% per transaction + 15p per transaction
  • £75 set up fee

• PayPal – have a long history taking payments and a brand that consumers trust. In my experience they are not as reliable as other services, testing your service is harder than it should be and the consumer experience is not as good as the previous choices.
  • £20 per month (or they have a free option if you do not want to take payments on your site)
  • Transaction charges are 1.4% – 3.4% plus 20p, depending on sales volume
  • No set up fees

The high street banks also have solutions, Barclays have ePDQ and HSBC have a solution (which when I last used it was very cumbersome to integrate).

So that is the quick overview to taking payments online. Next week I will be going through the various ways to integrate payments into your site once you have chosen a provider and what that means for your business.

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Tags: ecommerce, merchant accounts, payments online, psps

This entry was posted on Wednesday, June 16th, 2010 at 8:16 pm and is filed under General.
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