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The eCommerce guide to accepting online payment

24 June 2013 by Daniel Lewis


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If you’re setting up online, you’ll need to be able to accept online payment from your happy web customers. The more forms of payment you can take, the more convenient your eCommerce store will be – and the more transactions you’ll process. So how do you go about setting up secure online payment systems which offer you flexibility and good value? This blog will look at everything you need to get started, offering alternatives to Paypal and talking you through the biggest and best service providers including Sage Pay Online and Netbanx.

What do I need?

First things first, what do you need to get started? To start receiving credit card payments through your eCommerce store and raking in those lucrative pennies you’ll need:

•    Around 2-4 weeks to play with
•    A merchant bank account
•    A payment service provider (PSP)

What is an online merchant account?

If you’re taking your business onto the web from an existing business out there in the real world, you’ll already have a merchant account with your bank. This, however, won’t cut the mustard when it comes to taking credit card payment online. To get underway with eCommerce, you’ll need an internet merchant account with a financial institution. Most banks offer this service and you may be able to combine your web account with your existing account.

How much does an online merchant account cost?

The cost of this service will vary. Every account comes with fees, but these will be charged either periodically (i.e. weekly, monthly) or per transaction. Take a good look at how different accounts charge you and how your business will work online to get the best deal.

How to set up your account

Before applying you’ll need to decide which types of payment you want to accept as these will vary from provider to provider and will affect how your account is set up. You’ll also need to submit an application form with your details to confirm you are a legitimate business before your application is accepted. Once you receive approval, you’ll need a payment gateway through a payment service provider (PSP). Many online merchant accounts will have their own system or a PSP partner they can recommend, but you do not have to choose to use these – if you want to set up your payment gateway yourself, just provide your merchant account info to the PSP of your choice.

IMPORTANT: Some PSPs only support particular accounts, so make sure you check your PSP and your online merchant account marry up. Lloyds Cardnet, Barclays Merchant Services, HSBC, Natwest Streamline Merchant Services, Bank of Scotland and American Express are compatible with the majority of big PSPs.

What is a payment service provider (PSP)?

This is an intermediary between your online business and your bank (online merchant account). It takes your customers’ payment details, confirms them with your bank and delivers the results back to you with an authorisation or a rejection – this will tell you whether or not to continue with the order that has been made. It will also handle the final payment of successful transactions, getting the money to your account.

Which should I choose?

SagePay Online, SECpay (PayPoint), Datacash, Netbanx and Worldpay Bank Direct are five of the biggest PSPs which, because of their size, are compatible with a wide range of online merchant accounts.

PSPs charge in a variety of ways. Some take payment annually, some per transaction – some take a combination of the two. It all depends on the quantity you’ll be selling and how big your business is. Secpay and SagePay offer different businesses for small businesses and bigger eCommerce businesses to suit, other PSPs like Datacash and HSBC Secure EPayments CPO insist on individual negotiation. Worldpay will provide you with a bank account and a PSP too, whilst the most expensive offering at Netbanx will charge different fees depending on the volume of transactions you see.

What this all means is that you need to look carefully at your options. There are lots of comparison tools for these services out there, but many of the services are just too different to be comparable. We recommend talking to account providers and PSPs individually (so you can negotiate) and keeping a list of pros and cons before making a decision which could significantly impact your income.

If you’re working with a Shopify platform, you can find a full list of integrated PSPs here.

But what about PayPal?

All of these services can be used as alternatives to PayPal. If you’re new to all this, PayPal may be the only name which you’re familiar with – but it is not a merchant account. If you’re dealing in small quantities with low sales, PayPal might be a more cost-effective option, but it’s important to remember the differences..

With an online merchant account, the minute the money makes it though your PSP to your account, the money is yours. With PayPal, the money your customers pay is theirs, until you demand it. It’s pretty much an academic difference which doesn’t have too much of an impact. However, should you breach PayPal’s T&Cs (or find yourself in any kind of conflict with PayPal) – they’re running the show and could close your account, taking “their” money with them. Making regular transfers from your PayPal account is the best option for small eCommerce businesses.

How can web developers help?

If you’re looking to integrate your merchant account with your shopping cart, or link all of your services up together behind the scenes, a web developer can offer great, long-term value. Creating a smooth, streamlined and highly functional system which hooks up your PSP, accountancy software, order fulfilment services and alternative services, is a one-off investment which can save you a lot of money in time and manpower. To learn more, just give us a call or drop us a line today, we love to talk about your new projects!

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