ONLINE BUSINESS

How to Handle Online Credit Card Processing

If you are ready to take your small business's website to the next level and create a retail component, it is vital that you find a reliable (and affordable) credit-card processing gateway.
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If you're a retailer, and you're not managing your own online sales, you should stop and think: What's stopping me?

These days, there isn't much. Sure, plenty of third-party sites – think eBay or Etsy – exist to pedal small merchants' goods online. But if you're ready for autonomy from those fee structures and site-design limitations, it's time to set up your own retail site, including payment processing.

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Handling Online Credit-Card Processing: Find a Provider


For small businesses with a website already equipped with a store and shopping cart system (a few options are Volusion, Shopify, or Matneto, or you can upload products to Google's product search, Base), it's extraordinarily simple to set up online payment processing with the help of a credit-card processing service. By taking the security and paperwork issues out of your hands as a small business, working with a bank or online payment service directly over the Internet, is consistently worth the small processing fees (not unlike fees paid by corner gas station every time they accept a credit-card payment) and monthly fees.

Most of the available services are similarly easy to use: they offer either to route your site's customers from their shopping cart on your site through a secure-payment system on their own site or to allow you to directly embed their payment button on your site. Because secure encryption can be difficult for the non-tech-savvy, you might want to contract a web developer to help with setup. If that's impossible, most of the credit-card processing gateways offer extensive customer service and setup assistance.

When Nikhil Roychowdhury, founder and owner of the online shop The Simple Leaf Tea, set up his online payment system a few years ago, he shopped around for months for a payment site with a pay structure that matched his needs. He expected sales to grow, but wanted to leave room for them to boom. He went with a company called authorize.net, but declined to accept American Express due to the higher fees involved.

"Before went live with them, it was pretty straightforward to set up," Roychowdhury said. "And you know it's working almost immediately, because funds go into your account within 48 or 72 hours."

Basically, you want your processing service to be reliable (customers will flee if the process isn't consistent), versatile (it should enable you to accept all forms of payment from anywhere at anytime) and secure. Be prepared to pay – and negotiate – gateway fees, statement fees and a percentage fee per transaction.

Out of hundreds of services to choose from – and keep in mind that most use a parent gateway such as Authorize.net, VeriSign, or Orbital – are some payment-gateway options, with approximate costs, though they are flexible and negotiable in some cases.

Authorize.net
With a wide customer base and billions in transactions logged annually, Authorize is one of the largest services, though it is sold primarily through its third-party resale partners. It allows merchants to either link to or host their own secure payment form. Offers online shopping cart tools and a developer directory for help starting out. Can handle recurring billi ng.
Cost: Setup is $99, with a gateway access fee of $20 per month. Transactions costs are some of the lowest on the market at $.10.
What else you should know: Other payment gateways, such as Transaction Group and Merchant Account Express simply use Authorize.net as a portal – so before adding another middleman to the process, check out all steps involved. Due to its large user base and transaction load, it has had at least two major outages, in September 2004, and on July 2009.

VeriSign Payflow Link

One of the most highly regarded secure payment gateways, VeriSign also offers a Pro service with 1,000 no-cost transactions per month. Also supports recurring billing.
Cost: Setup is $179, with a monthly fee of $20 and a gateway access fee of $20 per month. Transactions are $.10 after the first 500 each month.
What else you should know: VeriSign works with merchant providers instead of selling their services to you directly, so you'll have to check with your actual provider about fees in addition to the VeriSign cost structure. VeriSign was in 2002 sued for domain slamming.

Flagship Merchant Services
Known as a credit-card service provider for Main Street merchants, Flagship is building its reputation as an online gateway provider.
Cost: Monthly gateway fee of $10, $8 statement fee and $20 monthly minimum with a transaction fee of $.24.

Merchant Warehouse

Offers a choice of plenty of different payment gateways, including Authorize.net, LinkPoint, VeriSign Payflow link and  VeriSign Payflow Pro. Offers the standard customer support with also the availability of live chat online.
Cost: Monthly charge is $10, with an $8 statement fee and $25 monthly minimum and a $.21 transaction fee.

First Data Global Gateway
Formerly known as LinkPoint, FirstData is a gateway used by a host of other customer-service oriented gateway products. Although it has no start-up costs, its rates are not the lowest on the market. Also offers a mobile service.
Cost: The gateway fee is $19.95 per month, with a $10 customer service fee and a $.25 transaction charge.

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Handling Online Credit Card Processing: PayPal and Other Services

In addition to using a standard credit-card payment gateway, some savvy online merchants have found it's possible to broaden their customer base by also adopting options that some customers are more comfortable with.

Despite its higher transaction fees, small merchants need not shy away from PayPal – especially due to its ease of use. When Mary Etchison founded her online boutiques, Hunky Dory and Dada Baby Boutique, she found installing PayPal into her existing shopping cart was simple.

"I did that first, but I think because that is really easy to set up, though it's not quite as cost-effective as other services," she said. "Once the business expanded I brought in other services, but it's still something customers reliably choose because they are used to it."

In a move to add convenience for Google-loving customers, Echison recently added Google checkout as a payment option on her sites. Roychowdhury, founder of The Simple Leaf Tea did so as well – and got a great deal on it. Because he was already a Google Adwords customer, he was not charged transaction fees for his first year of use. Now, he finds that while 20 percent of his customers choose to pay through PayPal, about 30 percent are using Google Checkout.

Dig Deeper: Tools for Creating an Online Shop

Last updated: Feb 18, 2010

CHRISTINE LAGORIO-CHAFKIN | Staff Writer | Senior Writer

Christine Lagorio-Chafkin is a writer, editor, and reporter whose work has appeared in The New York Times, The Washington Post, The San Francisco Chronicle, The Village Voice, and The Believer, among other publications. She is a senior writer at Inc.




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