eCommerce Online Payment Options


by E. E. Lester

The ever increasing market for ecommerce has created a wide variety of methods by which a budding entrepreneur may do bushiness online. This article will review the most common methods available to allow customers to pay for goods on a website. These include, in rough order of complexity, online check solutions, 3rd party processors, and finally merchant account / payment gateways. Depending on the nature of your business, one of these will probably suffice. Larger businesses may even consider providing multiple payment methods in order to cover as many potential customers as possible.

Online Check Solutions
Online check solutions allow customers to submit payment via their checking account. This requires the customer provide their checking account number and routing information to the processor in order to complete payment. In theory online check payment will reach a broad range of potential customers, since it is more likely to find someone with a checking account and no credit cards than with a credit card and no checking account. Online check solutions may also be able to hook up with an existing business checking account and not require the opening of additional banking accounts, unlike most merchant account solutions. Broad reach and ease of use are the main positives, but there is a negative. Increasing emphasis on Internet fraud has created a public concern about the safety of doing business online. Some may not wish to make online purchases with their checking account, in absence of the easier resource a chargeback on a credit card provides.

3rd Party Processors
Increasing in popularity, 3rd party processors allow online shop owners to take credit card payments but alleviates the need for them to apply for their own merchant accounts. As the term implies, 3rd party processors perform the credit card transactions through their own merchant accounts, and charge a percentage of the transaction, plus perhaps other fees, to the merchant. These transaction fees are usually higher than a merchant would pay through their own personal merchant account, but the inconvenience of obtaining a merchant account is part of the broad appeal of 3rd party processors. The most well known of the 3rd party processors is PayPal. There are competing services, though. Some, such as ClickBank are geared towards so-called "downloadables," and others like CCBill target other niche markets such as subscription websites.

If you are considering the use of a 3rd party processor, first think about the nature of your business and the volume you can reasonably expect. If you are selling downloadables like software packages, or are considering a subscription site, PayPal may not be the best choice. If you are selling physical products, then think in terms of volume. With a 3rd party processor you will be paying higher percentage fees and transaction fees, which, if you start doing a brisk business, will cost you more over time. If your volume goes up, it might be better to consider the use of a merchant account with favorable terms. Finally, keep in mind one downside to 3rd party processors. In the eyes of a prospective customer, they can make the store appear less reliable and reputable. The very difficulty of getting a merchant account does lend it an air of respectability, as theoretically, the owner had to provide more credentials and undergo closer scrutiny.

Merchant Accounts
Full merchant accounts allow store owners to charge customer credit cards directly, without the help of a 3rd party company. The money charged goes directly into their account. Having a merchant account can create a more secure identity in the minds of your client, as they are not as easily obtained as a 3rd party processor. Unlike the comparatively small selection of 3rd party processors, there is a much wider selection in merchant account providers. This makes careful shopping a must. Again, look at your product and try to estimate demand. There are a variety of fees associated with a merchant account, and how a specific account assesses these fees can make all the difference. Stores that sell a low volume of goods in a monthly period should look for a merchant account with a higher transaction fee in exchange for a lower base monthly fee. Higher volume stores should look for the opposite, lower transactions fees and a higher monthly fee. More money may be saved with the higher monthly fee in concert with a low transaction fee percentage. Some merchant account providers, like PayQuake, offer a variety of tiered services to meet both kinds of need.

Where to look for a merchant account? You may want to start with your current bank. Most banks have merchant account solutions, and starting with an institution with which you are already a member may have some benefits. Make sure you discuss merchant account solutions for online transactions, as their accounts and fees (as well as approval difficulty) may differ from those designed for "brick and mortar" store fronts where a card is physically swiped for payment. Prospective online shopkeeps are by no means restricted to working with their current bank for merchant services. A number of large institutions provide merchant account services over the web. CardService International is one such organization, as is PayQuake (mentioned earlier), but there are many others. Shop around and look for the deal thats best for your particular needs. What might be right for one business won't be the best fit for another.

With any merchant account from any provider, verify it provides a payment gateway that is compatible with your ecommerce store software. The payment gateway is the bridge between your online storefront and your merchant account. There are a great deal of them, just like different store software, but most perform equally as well as the next. There will probably be a "gateway fee" charged as part of a merchant account package's costs. Most of the common store packages support a variety of payment gateways, so finding one that is compatible with a chosen merchant account shouldn't be too difficult.

Conclusions
A number of options have been considered. Online checks, though common, may make customers uncomfortable in a world where Internet fraud is such a hot topic. 3rd party processors make taking credit cards easy, but that same ease works against them in the eyes of the picky consumer who won't take a PayPal store "seriously". Merchant accounts provide the most common, respected means to take payment, but they can be difficult to obtain and the sheer number of choices can be confusing. No matter what option, or options, chosen, do the necessary research and find the solution that works best for your individual needs.

About The Author
Mr. Lester has served for 4 years as the webmaster for ApolloHosting.com and previously worked in the IT industry an additional 5 years, acquiring knowledge of hosting, design, and search engine optimization. Apollo Hosting provides website hosting, ecommerce hosting, vps hosting, and web design services to a wide range of customers. Established in 1999, Apollo prides itself on the highest levels of customer support.