Guide to Online Payment Solutions

March 13, 2009

Being able to collect payments from your customers is vital to your success – that’s simple enough to see. However, just how you go about doing that has become a bit more complicated in this new virtual world. No longer is money exchanging hands or being written onto a check. E-commerce merchants need to be able to accept credit card payments in order to serve their customers in this virtual environment. And here are some ways that you can do that:

For the smaller merchant that is either just starting out or doesn’t need to process many online payments, there are third party payment processors that they can use – usually for a nominal cost. Places like 2Checkout and PayPal are some of the more frequently used, but there are still others that are reputable. These payment processors work by allowing customers to submit their payment information to the processor itself, which then relays the payment onto you as the business. The non-disclosure of the customer’s financial information provides a safe place for the customer to give out their credit card number or check numbers. For a small fee, based on the transaction amount, merchants are able to accept payments without having to deal with a larger merchant account provider.

Other advantages to third party payment processors:

• Low in transactional fees
• No monthly services charges
• Built in security software
• No contracts
• Simple set up
• Can incorporate shopping cart features as well

However, once you are making more money in your business, you will want to consider what a merchant account provider can offer you. These larger payment processors will check the validity of the information that they are receiving, and then transfer the money (minus fees) to an established checking account or personal account. This kind of payment solution will not require your customers to sign up with the processor, but rather it will be a seamless feature on your business website that will take their credit card information in a secure manner.

Other advantages to merchant account providers:

• More security features to process payments and prevent fraudulent charges
• Lower costs for high volume merchants
• Can have direct access to funds more easily – some third party merchant account will freeze monies when a fraudulent charge occurs

The process of accepting online payments works something like this:

1. Customer creates a shopping cart of items or services that they wish to buy.
2. Customer goes to check out area to make final purchase, submitting their financial information to the website or to the third party payment processor.
3. That information can either go directly to the payment gateway and merchant account provider, or it can go to a pre-check site like preCharge to authenticate the information and prevent chargebacks due to fraud.
4. The information is then sent to the payment processor and the profit is transferred to an account for you.
5. You receive notification of the payment and you ship the product.

What’s interesting is that while the online payment process seems like a long one, it happens in seconds. However, choosing the right processor for your customers might take a little longer.

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