What if I want to accept Credit Card Payments
by phone?
At some point you may want to consider taking credit cards for payments.
- Practice
Pay Solutions - I used them to help set up my credit
card account in Canada. They were very helpful and cost
effective for my uses. I have heard were some credit
card companies will require a deposit.
- AMEX - Some colleagues have found American Express the
most reasonable for small businesses.
Should I setup an ecommerce system?
For most businesses venturing into ecommerce, e-payment means
accepting credit cards. This involves setting up a complex system
including a SECURE order page/shopping cart software, a merchant
account (basically a bank account that receives the credit card
proceeds), and a credit card processing service. Care has to be taken
to ensure that the shopping cart is compatible with the authorization
service.
While the bulk of Internet ecommerce is still conducted with credit
cards, alternative methods of settling e-transactions have been
gaining popularity. These Web Payment Services (WPS) have ingeniously
utilized the most popular application on the internet, e-mail, to
appeal to customers.
By using an existing platform to launch their services, WPS
providers have enjoyed wide appeal with customers worldwide.
The largest of these, Paypal, has approximately 11 million users,\
processes 150,000 payments per day, and attracts over 20,000 new users
each day.
If I go ahead, how do I do it?
Are there any advantages to using these alternative payment systems
over credit card merchant systems? To help you decide, the following
criteria will be evaluated:
Setup
Maintenance
Costs
Ease of
Use/Convenience
Cash Flow Effect
Customer
Perception
Setup
As mentioned above, the setup of a credit card merchant system is
complex. It may take up to two weeks to integrate the various
components and receive final approval from the financial institution
handling your transactions.
On the other side of the scale, WPS services are incredibly easy to
set up. For example, Paypal, which is the
largest WPS just requires a merchant to go to the Paypal site to
register for an account. This whole process may take 5-10 minutes.
There is no transaction processing software to install, and,
importantly, no shopping cart to rent or buy. Paypal simply generates
HTML code that you can paste into your site.
A button click takes the customer straight to Paypal's secure
server. When customers want to make a payment they send a message to
Paypal, and Paypal, the middleman, does the rest.
Maintenance
Costs
Establishing your own merchant account for credit card processing and
installing a shopping cart can easily run into hundreds of dollars. In
addition, there are the ubiquitous monthly minimum fees and address
verification fees (a proven anti-fraud strategy).
WPS providers don't levy application setup or monthly charges, and the
costs are competitive with Credit Card transaction processing charges.
These average at $0.35 and 2.5% per transaction.
Ease of
Use/Convenience
Although WPS providers intimate that their services are very user-
friendly, the fact of the matter is that WPS services are not as easy
to use as credit card systems. WPS services require the user/customer
to register with them if they have not already done so. This is
a major disadvantage because it interrupts the flow of
"impulse" purchases. Potential customers have been known to
abandon shopping carts for less annoying interruptions.
On the merchant side, payments received in WPS accounts are not
automatically lodged to your bank account. The merchant will have to
manually claim and transfer payments into a bank account. With credit
card merchant accounts, your account is automatically
updated.
Cash Flow
Effect
Having your own merchant account will certainly increase the
flow of funds to your bank book. While a merchant account provider
will hold your funds to prevent charge back losses, the period of time
is usually relatively brief, about 48 hours. Expect to wait for at
least a week before money appears in the account of WPS
providers.
Customer
Perception
At this point in time credit cards are the medium of choice, and a
business that uses only WPS providers for transactions may appear to
be amateurish. In an online world where customers don't have a face to
relate to, perception is critical, and the ability to accept credit
cards is often seen as a mark of an established, professional company.
Conclusion
There are definite advantages to using WPS providers. They should,
however, be used as backup payment services or in conjunction with
merchant accounts. It's always to your advantage to present the
customer with as many payment options as possible.
Here's a list of WPS providers:
www.paypal.com
www.c2it.com
www.westernunion.com
www.billpoint.com
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Adapted from:
Godfrey Heron is the Web site Manager of Irieisle Online,
a leading web hosting and design company. Hosting solutions
starting from US$9.95. http://www.irieisle-online.com
