Choose a Vendor to Process Your Online Transactions
BY Delilah Obie
To process online orders, you must offer online payment options. The most widely used form of payment currently is the credit card. Marketing studies show that you'll lose 60% to 80% of your potential orders if your Web site is not set up to accept credit cards, and furthermore, if you accept credit card payment, not only will you receive more orders, but those orders will be substantially larger. Credit cards enable impulse buying, reassure customers of your legitimacy, and simplify your billing. Other methods of collecting payment include charging purchases to a phone bill, using electronic funds transfer (EFT), paying by electronic check, and various forms of prepayment. Each of these methods requires payment processing either in the form of software added to your Web site or by linking to a payment processing service.
Understand Merchant Accounts and Their Fees To accept credit cards, you must establish a merchant account, which is a special bank account for handling the revenue (and fees) from credit card transactions. Your merchant account provider (MAP) -- a bank or other institution that processes online credit card transactions -- will verify the credit card, process the transaction, and deposit the results into your account, usually within two to four days.
Evaluate Alternative Online Payment Methods Credit cards still reign as the leading method of payment for online purchases, but other payment options are available. Your product and your customers' buying preferences will influence which payment methods you accept. In other countries, credit cards are not as pervasive, so you may want to consider offering alternatives for your international customers. Offering multiple payment options on your Web site, if you can afford it and maintain your profit margin, is a means to increase sales by increasing customer convenience and confidence. Many alternative methods are better suited to micropayments (charges under $1) because the processing costs are often lower and credit card merchant account fees don't apply.
Determine the Fee Structure that Maximizes Your Profit Margin Not every product sells the same way, and not every MAP charges you the same way. Choose a provider that suits your business. Begin by considering the nature of the products you sell - are they large and expensive? Perhaps then you ought to seek a MAP that offers a higher flat-rate transaction fee and minimizes the discount rate, since even a hefty $1 transaction fee will be far lower than a 2.5% deduction from the charge. On the other hand, if you rely on small, high-volume sales, even a $0.30 transaction fee can erase your profits.
Specify Your Technical Requirements Different MAPs require different "gateways" on your site. These gateways are the pieces of code that transmit your customers' orders to and from your bank's transaction authorizing agent. If you plan to process your orders manually, a secure Web form might be good enough to capture credit card information that you can process offline.
MAPs, like most banks, pay close attention to the companies with which they do business. Such factors as your company's length of time in business, outstanding debt, debt payment history, goods and services offered, and even your personal history (for new businesses) will affect the fees your company pays to process credit card transactions on theNet.
Find MAPs You Can Work With Many MAPs refuse accounts to start-up firms or firms and individuals with bad credit histories. Some MAPs will not accept high-risk accounts, a term that usually encompasses adult sites, online casinos, and sites operated by firms outside the MAP's own nation. Others refuse to process any transactions that originate on the Internet - even from their own existing brick-and-mortar clients - or may require that you create a separate merchant account to process orders that are not taken face-to-face but are received by mail, phone, or via the Internet.
Compare Fees and Technical Capabilities Once you've developed a list of MAPs that might offer you an account, you need to compare their different offerings. Be certain to ask detailed questions about each MAP's technical requirements, and make sure your system can work with your MAP's gateways -- the software that actually submits your customers' credit card information for payment authorization.
Secure All Your Transaction Data and Prevent Fraud Credit card information is extremely sensitive, and plenty of villains are waiting to exploit any breach in your security. Online merchants are as susceptible to credit card fraud as face-to-face retailers. Make sure your MAP has addressed these issues.
Prepare for International Payment Processing Many payment processing and merchant account providers do not accommodate international commerce. If you plan to market your product globally, you may need to search specifically for an international provider.