Once you decide which products you are planning to sell on 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 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 merchant account is, actually, 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.
With 72 million accounts worldwide and payment volume which is growing at a rate of 44 percent each year, PayPal by far is most popular third party processor on Internet.
PayPal is a simple and affordable payment solution for those online merchants who are unable to or don’t want to go through 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, transaction is processed on 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 payment system PayPal started with. You send invoice to your customers by email and get paid on PayPal.