How to Receive Payments for Your Online Sales
by Nowshade Kabir
Published on this site: June 29th, 2005 - See
more articles from this month...
Once you decide which products you are planning to sell on the
Internet, and what type of web store you are going to use in order
to display your products, next vital decision that you have to take
is to figure out how your customers are going to pay you. Whatever
you plan to sell online, accepting credit card transaction is a
must! A full 90 percent of all online sales occur through credit
card payments.
There are two ways you can add e-commerce capabilities to your
website:
- Having your own merchant account
- Using third party processors
What is a merchant account?
A merchant account is a special kind of bank account where funds
received from credit card transactions are first routed to the special
account and held there before being remitted to your business account.
You as an online merchant will need an account called "Card
Not Present Merchant Account".
Having the merchant account is, actually, the first step in processing
credit cards online. You will also need a payment gateway. A payment
gateway is a service provided by billing processor which allows
real time authorization of online transactions. The payment gateway
you choose to work with has to be compatible with your shopping
cart. Three top payment Gateway providers are AuthorizeNet http://www.authorizenet.com/,
Verisign http://www.verisign.com/
and USAePay http://www.usaepay.com/.
All payment gateway providers have their own merchant solutions.
Most banks, today, work with partner payment gateway providers and
are fully capable of furnishing with a merchant solution.
If you are just starting an online business and you don't think
that your sales will generate more than a thousand dollars a month, you will be better of with a third party processor.
However, once your sales become a few thousand you will save a bundle by switching to a merchant account.
PayPal
With 72 million accounts worldwide and payment volume which is
growing at a rate of 44 percent each year, PayPal by far is the
most popular third party processor on the Internet.
PayPal is a simple and affordable payment solution for those online
merchants who are unable to or don't want to go through the complex
process of setting up a bank merchant account.
At present, PayPal has four unique solutions for merchants.
PayPal Website Payments Standard: This solution allows you
to accept credit cards on your website. However, the transaction
is processed on the PayPal secure server. The customer can choose
to pay either by credit card or PayPal. If you don't have shopping
cart as yet, you may get one from PayPal; or you can integrate PayPal
solution to your existing shopping cart.
Cost: No monthly fee. No setup fees. No cancellation fees.
Transaction Fees are 1.9% to 2.9% + $0.30 US$.
PayPal Website Payments Pro: This solution is virtually
same as having your own merchant account. If a customer pays by
a credit card, PayPal works as a payment gateway for you. The customer
does not leave your website at anytime if she pays you by a credit
card.
Cost: $20.00 US$ monthly fee. No setup fees. No cancellation
fees. Transaction Fees are 2.2% to 2.9% + $0.30 US$.
PayPal Email Payments: This is the payment system PayPal
started with. You send invoice to your customers by email and get paid on
PayPal.
Cost: No monthly fee. No setup fees. No cancellation fees.
Transaction Fees are 1.9% to 2.9% + $0.30 US$.
PayPal as an Additional Payment Option: If you already have
a merchant account and you would like to add PayPal to your
existing payment solutions, you can use this option.
If you are planning to sell products through eBay, you definitely
should have PayPal option. According to eBay, three out of four
eBay customers choose to pay by PayPal.
When you use PayPal as your primary processor, make sure that you
have at least one more alternative payment solution handy. The reason
is many disgruntled former users of PayPal claim that PayPal might
freeze your account anytime without any apparent reason. Read http://www.PayPalsucks.com
for more information.
However, According to a new report, Merchant losses from fraud
on PayPal are now only 0.17% of revenues, vs. 1.8% for online
merchants that accept credit cards through merchant accounts.
This gives one more reason to use PayPal.
WorldPay
If you are facing problems to get a merchant account due to the
factor that you are not located in the US, WorldPay could be the
solution for you. WorldPay is a one-stop solution for your
merchant account, payment gateway and store front. The payment
option comes with fraud protection and risk management
applications to safeguard your business. Based in England,
WorldPay is a division of Royal Bank of Scotland.
Cost: If you compare with PayPal, WorldPay's fees are pretty
stiff. 50 US$ monthly fee. 400 US$ setup fee. Transaction Fees are
3.25% + $0.40 US$. The charge for multicurrency processing is 5.25%
per transaction.
2Checkout
2checkout.com works
as an online distribution center. When customer buys a product from
your website through 2checkout, you actually make your sale to 2checkout for immediate resale to your
customer. Customers are billed by 2checkout not you. 2checkout
accepts vendors from virtually all over the world. You can also
set up recurring billing through 2checkout.
Cost: No monthly fee. 49 US$ setup fee. Transaction Fee:
5.5% + $0.30 US$.
ClickBank
For selling e-books, reports and other similar digital products,
ClickBank.com is probably
your best option. The great thing about ClickBank is it has over 100 thousand affiliates promoting
products available on the ClickBank marketplace. By listing your
product with ClickBank, you automatically tap into a huge
potential market. ClickBank accepts all major credit cards and PayPal.
Cost: 50 US$ set up fee. Depending on the percentage of
the commission you pay to your affiliates, transaction fee varies
from 2.5% plus 0.33 US$ to 7.5% plus 1 US$.
There are many other third party processing companies available
on the Internet. Two of them worth mentioning are http://moneybookers.com
and http://www.ikobo.com.
Since fees fluctuate considerably from one solution to another
depending on your location, products and other needs, make sure
to do a thorough research before signing up with any of the mentioned
providers.
Nowshade Kabir, is the founder, primary developer and present
CEO of Rusbiz.com – a Global B2B Exchange with solutions to
create e-catalog, Web store, business process management and other
features to run a business online. You can read various articles
written by Nowshade Kabir at http://ezine.rusbiz.com
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