| How to receive payments for your online sales
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:
1. Having your own merchant account
2. 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.
About the author
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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