------------------------------------------------------------ copyright (c) Pavel Lenshin ------------------------------------------------------------

Small online businesses are mostly represented by home-based entrepreneurs. In this regard any payment scheme or system should meet at least two criterions:

First. It should be relatively cheap. Individuals are usually not enjoying huge investment potential in contrast with legal entities. Second. It should lead to complete automation of financial transactions as a result of lack of time or inability for majority of entrepreneurs to hire support stuff to serve these transactions.

In short, it all comes down to shortage of money and time. For these simple reasons, sophisticated e-commerce systems based on merchant accounts are expensive, hard to establish and support for an average entrepreneur. That is why third party payment processors that will handle all online orders on your behalf became widely popular among small businesses. They require very little effort to establish and even less effort to support. In most cases they will provide you with completely automated as well as quick and reliable for your customer way of payment.

This will allow you to accept payments 24/7 focusing your business to work on other tasks and activity.

In practice once set up, whole customer paying and product delivering process becomes fully automated and consists of following steps:

1. Customer fills out order form and clicks on submit button to pass order to payment gateway; 2. Automatic payment gateway routes credit card (e-check etc.) data and purchase amount to payment processor of merchant (seller) acquiring bank; 3. Acquiring bank sends authorization request to payment processor of customer's issuing bank; 4. Issuing bank validates customer's account, credit limit and authorize transaction, freezing specified amount on customer's account; 5. Issuing bank routes authorization code (or "transaction declined" message) to acquiring bank's payment processor; 6. Acquiring bank routes payment approval (declined) message to payment gateway; 7. Payment gateway notifies merchant (seller) about approved (denied) transaction; 8. Provides customer with product s/he ordered, details of shipping etc. or notifies about payment problems; 9. Banks' clearing settle mutual transfer of funds, crediting respective merchant (seller) account with specified amount of purchase.

All these steps due to complete automation process, if we don't speak about phone or mail orders etc., will take somewhat between several seconds to several minutes, still usually faster than when you are billed at store's pay desk and much faster considering speed of going for online shopping instead of "offline".

This publication intended to analyze existent picture of third party processing companies and represent you comparative facts that would help you to determine your preferences based on business needs and capacities.

The table below will provide you with basic features of most "visible" today's online payment processing players. Please note, that online financial market evolves extremely fast, so table data is accurate as on February 2003 what I cannot guarantee in a month, all more in a year, so my advice here is to choose 3-5 most acceptable and affordable financial intermediaries (even if some important for you feature is missing) and recheck their services and fees once more at their web-sites before making any final decision.

------------------------------------------------------------ Company Name in alphabetical order: 1) Setup fees 2) Monthly fees 3) Commission structure*

2CheckOut: 1) $49 2) no 3) $0.45 + 5.5%;

CCNow: 1) no ($11.95 for Int.) 2) $9.95 3) $0-$100 - 0%, $100+- 9% (11% for Int.);

ClickBank: 1) $49.95 2) no 3) $1 + 7.5%;

IBill: 1) no 2) no 3) $0-$9,999 - 15%, $10,000-$24,999 - 14% etc.;

MultiCards: 1) $15 or $150 2) no 3) 11.9% or 9.9%;

PayPal: 1) no 2) no 3) $.30 + 2.9%;

PaySystems: 1) $49.00 2) no 3) $1.00 + 3.95% or $0.45 + 5.5%;

ProBilling: 1) no 2) no 3) $0-4,999 - 13.5%, $5,000-12,499 - 12% etc.;

With both types there are fees for withdrawing funds for non U.S. banks and rate conversion fees.

The big difference is with receiving funds. PayPal charges Premier and Business accounts to receive payments. Personal accounts are free, but may not receive credit card payments.

The business account fees to receive funds can be as high as 2.9% of transaction plus an additional $.30 per transactions. This can be very expensive, especially on smaller amounts.

The main reason you would set up a business account is so that you can accept credit cards. You are probably only accepting credit cards if you are running some type of business.

However, with a business account you are charged fees when you receive money, even when it is just a transfer from another U.S. PayPal account. This type of transfer would be free in a personal account.

If you run a business you have little choice but to have a business account. However, there is nothing to prevent you from also having a personal account.