Ecommerce is now a vital part of daily life for businesses and customers. As the years go by, more retailers have virtual storefronts, and online marketplaces are becoming the first port of call for buyers and sellers. With B2C and B2B both going online, the trend points toward more online buying and selling in the days to come. If you are a seller and collecting payments through cash or checks, you are missing out on something as important as online payments, which provide a number of advantages as follows:
Faster Payments
You no longer have to wait for the check to arrive or for it to clear. With online payments, transactions are completed in a matter of seconds, making them undoubtedly much faster than manual payments. Online payments provide almost immediate confirmation of transactions and improve cash flow for your organization.
Satisfying Customers
Customers are more comfortable with online transactions today than they were a few years ago. They no longer prefer to wait to buy or sell a product; they want to do it quickly and easily. Websites supporting online transactions are more successful in attracting customers and improving sales.
Removes Hassles
Online payments save you from the trouble of depositing checks or recording payments manually. Online payments set up for your website are automated and require no manual intervention. You do not have to manage customer debit/credit card information, as all updates to records occur automatically.
Profit versus Cost
Obviously, anything of value comes with a cost, and the same is true for online transactions, as your payment provider will charge you a fee per transaction and other setup or monthly fees. But it is a win-win situation for you and the payment provider, as online payments give you more than they take from you. They help grow your customer base multifold while charging just a slice out of the larger revenue you earn through them.
Be it big or small, businesses are encouraged to jump onto the internet bandwagon as more and more customers are ready to pay for products and services online. But it is harder than you may imagine to make your website capable of handling online transactions, as there is a lot of complexity involved. Consider a scenario where your customer has an American Express card to use while your merchant account handles only Visa or MasterCard. All you need to do is mention the cards accepted, as your shopping cart software may not be compatible with your payment processor. For better and faster transactions, it is always good to have your own credit card processing software, but the cost of having one might be impractical for small and medium-sized businesses.
However, to understand online payments, it is important to understand the following terminologies involved.
Payment Gateway is the online equivalent of a brick-and-mortar point-of-sale system that allows for secure transactions between merchants and customers.
Payment Processors enable merchants to receive debit or credit card payments online by providing a connection to a bank. It is a service that validates debit/credit card details and checks for sufficient funds to cover the payments. Once validated, the transaction is authorized, and the funds are transferred from the buyer’s account. The status of the transaction is then communicated back to the payment gateway, which in turn sends a status message to the website.
Payment Provider is the company that operates payment gateway or payment processor services. Payment systems, on the other hand, are services offered by payment providers; each payment system differs from the other in terms of features and/or pricing.
Every payment made with a debit or credit card involves the transfer of funds to a Merchant Account, which a merchant holds directly with a bank. To accept online payments, the seller needs to set up a merchant account with a payment provider. Upon successful completion of an online transaction, funds are transferred from the buyer’s account to the merchant account. It is a type of account used exclusively to hold funds from card transactions; funds accumulating in the merchant account are transferred to the respective organization’s bank account on a regular basis.
PCI Compliance is adherence to a set of security standards developed solely to protect card information during and after a financial transaction and reduce fraud. It comes into prominence when a merchant or payment gateway sets up their payment environment in a way that meets the Payment Card Industry Data Security Standard (PCI DSS).
Ecommerce players process payments online to cater to their huge customer base. A secure payment gateway allows businesses to list merchandise or services online and automatically process debit and credit cards or other forms of payment. Online business has always been vulnerable to fraud, but modern payment processing services include security measures that verify card numbers and capture potential criminal attempts before a transaction takes place. Moreover, the inclusion of trust symbols such as Verisign, McAfee Secure, TRUSTe, etc., instills confidence among online customers.
Top 6 most widely used online Payment Gateways are as follows:
Authorize.Net
One of the most widely used Payment Gateways has a user base of more than 300,000 merchants. Prominent ecommerce platforms such as Magento, Volusion, and X-Cart are designed to accept payments through Authorize.Net easily.
Pricing: Setup fee ($99), costs ($20/month), and charges ($0.10/transaction fee). For more details, please refer to Authorize.Net pricing.
PayPal
One of the most widely used payment acquirers had over 156.9 million active accounts worldwide in the third quarter of 2014.
Pricing: No setup fees or monthly fees are necessary. PayPal charges according to the scale of your business. Kindly refer to PayPal merchant fees for detailed pricing.
Amazon Payments
Users use the Amazon Payments API to receive money and ACH to send out money.
Pricing: Amazon Payments has a standard rate (excluding Amazon Flexible Payments Services and Amazon Local Register) of 2.9% + $0.30 per transaction. For more details, please refer to Amazon Payments fees.
Stripe
A brilliant payment solution that allows web developers to easily integrate a payment system into projects via Stripe’s robust API. It circumvents the tedious sign-up process and instead acts as a merchant account for its providers, handling PCI compliance and merchant approvals.
Pricing: No monthly fees, hidden costs, or setup fees are necessary. Stripe charges 2.9% + $0.30 per transaction. Kindly refer to Stripe Pricing for more details.
Google Checkout
Google Checkout allows users to pay for products and services through an account connected to their Google profile.
Pricing: Refer to Google Checkout fees.
Dwolla
One of the promising newcomers in the third-party payments space, Dwolla is considered to be a direct competitor to PayPal.
Pricing: No fees are required for transactions less than $10. For transactions over $10, Dwolla charges $0.25 per transaction. Refer to Dwolla fees for more details.
