Accepting Payments Online

The following page is due for review and update. While the general concepts present remain valid, many of the details continue to evolve.

Accepting payments on your web site is, sadly, not as simple as some would like to believe.

So called e-commerce has for some time been touted as the next big wave to ride for business. And by no means has e-commence been a failure - it's just that there's more to it than first appears.

Yes, there are some simple options. PayPal is one of many online payment providers who will facilite the transaction between you and your customer. They do this for a fee and small percentage of the sale value. Setting up an online shop as part of a shopping web site (for example Shopify) is another option. Again the merchant pays the provider a joining fee (often) and a percentage of sales.

The benefits here are that the set-up is often quite simple and the upfront costs is not significant.

Best for your business
But you have to decide whether this is a good option for your business. There may be a number of limitations when employing third party online payment providers. For example flexibility in applying freight costs may be limited, applying volume discounts, dealing with local taxes or those occasional special cases.

Besides this, your customer's expectations may not be met when you to send them off to a third-party site to process their online payment. They may become confused, the process may not work as expected and you are removed from the operation of the service. You may not be seen as a serious player if you outsource your online payements - although many significant business do use such services.

You will have some idea of your customers and their expectations of their online interactions with you. How do you think they would respond to this payment option?

The more desired alternative is to be able to process payments through your own web site. But what does this take? Well, quite a bit actually.

How it works
Say customers comes to your site, and like what's offered. They then indicate which products or services they wish to purchase from you. Of course they need to pay you. This is done by entering certain personal details together with their credit card details. This information needs get to a company who can arrange for the funds to be moved from the customer's credit card to a bank account in your name. And this should happen almost instantly (so you can complete the online order process), and it should be available 24x7.

This sounds simple but the process has to be totally reliable and completely safe for all parties involved. Everyone has to be able to trust each other.

Visitors to your site will not (and should not) enter their sensitive banking details unless your site displays a green padlock in their web browser. This padlock appears when your business has purchased, been verified by an independent organisation, and installed on your web server a digital certificate. This certificate confirms to the world who you are - it is an essential visible symbol of trust for your customers. This certificate is also part of the system used to protect the customer's details while in transit between their PC and your web server.

Financial Gateway
The companies who process bank to bank transfers don't deal directly with businesses. Rather, your web site employs the services of what's called a financial gateway - there are scores of these providers in each country. The financial gateway submits the online transaction on your behalf, filters out invalid or suspect transactions, and then passes back to you an indication of success or failure on the transaction.

The financial gateway looks after all the behind the scenes security, some fraud prevention and record keeping on your behalf. Your business never sees the customer credit card details - which is a good thing for you.

If everything is in order, funds are immediately transferred from the customer's account and placed in your merchant account. And your business needs one of these merchant accounts - you can't use a normal business trading account and the banks are careful about who they give these accounts to. This can make it hard for start-up business to be able to accept online payments. Again it comes down to trust.

What's required
To lay this out in point form: To accept online payments in real time, you need:

• Some sort of online shopping basket to keep track of products, freight and order details;
• A digital certificate to allow key parts of your site to be secure (known as SSL certificate or private key);
• A financial gateway provider who handles the transactions;
• A merchant account with a major bank to receive payments.

For a small business this creates a cost barrier as there are various on-going fees and costs paid to different parties. It can also seem so complex! Does it really have to be this difficult? This is what's needed to accept 'real time' online payments within your own web site. Which is why some opt for the external third party approach mentioned above.

The takeaway here is that e-commerce is alive and well on the web. Many businesses do have successful e-commerce web sites. But the challenge is that there's more than there first seems to this and if you jump in before having clear business goals and a robust strategy the results could be both disappointing and expensive.

Note: this article is general in nature and does not pretend to cover all aspects of accepting online payments.
You should consider advise specific to your situation before making decisions.