Payment Processing Basics
© 2004, John Calder http://www.TheEzine.net
If you want to sell your own products online, you will need to
choose a means for your customers to pay you. Otherwise, you
won’t be in business very long! If you have regular office hours
and employees, or want to hire a service, you can offer to let
your customers phone in their orders and/or credit card number.
But most marketers want total automation of their ordering and
payment process. They understand that without automation, they
can’t have the time freedom that the Internet marketing
lifestyle can bring. And many of today’s Internet shoppers are
used to ordering online, without having to phone anyone. They
expect to be able to add their items to a shopping cart, then
complete the checkout process smoothly. If you don’t offer that
to them, they may choose to shop at another site that does.
For automated payment systems, there are just two basic choices.
You can either get your own merchant account and do all the
payment processing from your site, or you can choose a
third-party processing service. It really is that simple -
everything else is detail. Of course, the devil’s in the
details, so let’s take a look at each.
For high volume or high dollar sales, having a merchant account
is almost always the best option. There’s a certain break even
cost point where it makes sense to pay the monthly fees and
processing charges of a standard merchant account. Not so long
ago, it was difficult for online merchants to even get an
account, because of the extra risk associated with Internet
payment processing. And when you could find a bank willing to
offer you an Internet merchant account, the monthly fees were
much higher than for standard accounts, enough to make them out
of the financial reach of many small businesses.
Today, it’s relatively easy to get approval for an Internet
merchant account. In fact, it’s a very competitive field in the
search engines, and search results are often filled with a
mixture of legitimate offers, spammy sites, ripoffs, and
outright fraud. So if you choose to go this route, be very
careful in giving out any of your financial information. Try to
get referrals from fellow marketers if you can, and investigate
any companies and their offers thoroughly. One caution on having
your own merchant account - if you get too many consumer
chargebacks, your account could be canceled, and you may find it
difficult to get another one.
If you want to process your own payments, you will need to hook
your shopping cart software up to a payment gateway and
authorization processor. Unless you’re using an all-in-one
service, or are very familiar with web site technology, you will
likely need to hire technical assistance for this.
As an alternative, even for some merchants with larger volumes,
there are third party services who will process credit card and
e-check payments for you. These firms typically charge a much
higher percentage of the sale, plus a per-transaction charge,
for their service. However, for beginning marketers, it often
makes sense to process payments through one of these firms. They
are especially good during a testing and business-building
phase, when sales volumes and product longevity are unknown.
Some firms, such as Clickbank, process payments only for
products that are delivered digitally. Others process for only
physically shipped goods, and others not only process payments
for both, but offer recurring subscription payment processing as
well. The most well known of these firms is Paypal, which is
owned by, and heavily linked to, eBay. You can also consider
2CheckOut.com, Propay.com, Ibill.com, CCNow.com, and
Payloadz.com, depending on your product.
