Accepting Payments Online

For many businesses selling online is a necessity - be it as the sole means of trading, or as an addition to a mail order business or 'brick and mortar' shop.

 

Payment Options Online

Whilst it is easy to just accept cheques, or invoice customers for online sales and process payments in the usual way this is not an ideal way of trading online. Customers often use the internet for a fast service, with most sales being paid for instantly with credit / debit cards or via other online payment accounts.

To accept credit / debit cards online additional arrangements would have to be put in place over and above those already in use with traditional business banking. There two main types of payment processor for online payments - Payment Service Providers (those which require a bank merchant account) and the all-in-one full service (no merchant account required).
 

Setting up a merchant account for online payments

Most high street banks can provide merchant accounts, these are often referred to as acquiring banks. Customers will make payments into your merchant account and the funds will usually be available after three or four working days. A per transaction charge is applied as a percentage of the sales value (charges vary from bank to bank so it can be worth shopping around), debit cards often have a fixed charge.

Most merchant accounts act 'behind the scenes' - your customers card details are collected over the internet through a third party Payment Service Provider. There are a couple of exceptions that we are familiar with - HSBC ePayments and Barclays ePDQ.

In order to accept credit / debit card payments online in this way you will have to set up a merchant account, even if you already have an existing merchant account you will usually need to upgrade this to allow for online transactions.

Aquiring banks do have strict requirements for Internet merchant accounts, a thorough credit check will be carried out (which can take up to 8 weeks in some instances) and it is possible that even the bank you use for your current business transactions could initially refuse to grant you one. In these instances one of the All-in-One providers (such as those listed below) are well worth investigating, even as a temporary measure to gain an online trading history which would support an application for a bank merchant account.

 

Payment Service Providers (PSPs)

These providers collect the card information from your customers and pass it through to your bank for processing, this allows transactions to be processed in 'real time' without the need for you to collate card information and manually input information (though this facilitiy is provided with some PSPs). A merchant account is required (see above) and a monthly and/or per transaction charge is applied by your chosen provider.

 

Protx - www.protx.com

Protx offer a range of payment processing solutions to suit the shopping cart of your choice and the type of web hosting in use by your business. There are no setup fees, and the monthly fee of £20 includes 1,000 transactions per quarter (if more transactions are being made then the fee structure is 10p per transaction instead of the fixed rate).

As standard they provide an online terminal for processing of card payments should a customer not feel comfortable inputting their details themselves.

In general we have found Protx to be an excellent solution for small businesses with merchant facilities, however if you operate on a Mac we would not recommend this as the administration panel has many flaws for Mac users (this is purely for account administration not from a customer point of view).

 

SecPay - www.secpay.com

SecPay have standard setup fee of £50, they then apply a sliding scale for charges depending upon your monthly level of transactions or your order values, from £10 monthly charge with a 39p per transaction fee, to £225 monthly charge with a 8p transaction charge. As an alternative to the fixed transaction fee they also offer a percentage transaction charge - with a minimum cost of 10p per transaction applied. This is perfect for those who have many lower cost transactions each month.

An online terminal is provided at no additional cost for processing payments, as well as carrying out administrative tasks such as refunds. A variety of different ways to integrate SecPay are available dependant upon your requirements.

 

SecureTrading - www.securetrading.com

SecureTrading charging structure varies dependant upon your turnover. Average costings works out around £200 per year fixed cost, plus a 1.5% transaction cost.

They have an online administrative area that allows you to manage your transactions, process refunds and also acts as a virtual terminal for processing card payments if required.

 

HSBC Secure ePayments - www.hsbc.co.uk

HSBC ePayments is slightly different to the other PSPs in that they are both an aquiring bank and the payment service provider in one which means you only get one set of fees. Other PSPs have both their fees and those of the bank to take into account.

It is a requirement for HSBC ePayments that your hosting has an SSL (secure server) certificate.

The setup fee is around £200 for HSBC and there is also a monthly charge and transaction fee dependant upon your sales values applied.

 

All in One Providers

In order to sell online traditionally you would have to establish a merchant account with your bank as well as a Payment Service Provider (to connect with your bank), with a payment service provider. Both these services normally require a set-up fee and an ongoing monthly charge.

The All-in-One providers listed below are 'total online payment services' without the need for both the above - so only one set of charges are applied (or in some cases none).

 

WorldPay - www.worldpay.com

Typical costs are a setup fee of £100, plus an annual fee of around £160. A per transaction cost of 4.5% (of sales value) is applied - though this can vary depending upon your level of transactions and turnover. There are additional fees for multiple currencies and if there is a chargeback applied to your account there is a £10 service charge.

Extra fees apply are charged for protection from online fraud, and if you wished to collect recurring payments e.g. subscriptions or a monthly coaching fee, the facility incurrs a setup fee of £100. Virtual terminals are available at a set up fee of £100, no annual fee.

The setup time before being able to use the facilities is around 7-10 days.

As you can see the charges are higher with worldpay, but you do not have the additional cost of a merchant account - this is also useful for companies who for whatever reason are unable to get a merchant account for their business.

The main downside we have found for small businesses is that the money takes up to 30 days to reach your bank account! This can be a cash flow nightmare for many businesses and is worth taking into consideration before joining up with this provider. WorldPay will enter into negotiations over fees and processing times, some of our clients have been successful in getting the per transaction charges and processing times lowered at the end of their first year of trading so this is worth bearing in mind.

Worldpay can also act as a Payment Service Provider - see above for more information on PSPs.

 

PayPal - www.paypal.co.uk

Paypal started out as a means of transferring money between members, so you had to deposit money into your account before using that to pay others. However it has evolved over the years (it is now owned by eBay) and is now an effective, low cost provider - so long as you are aware of the drawbacks.

Paypal has no set up fees, no monthly charges - per transaction charges are; Standard Rate: 3.4% (of sales value) plus 20p; Merchant Rates (dependant upon monthly sales volume) vary from 1.4% - 2.9% of sales value, plus the fixed 20p. If you require multiple currencies then a 2.5% charge is applied for currency conversion on foreign currency transactions.

Paypal is only available for online transactions - there is no 'virtual terminal' for use with telephone or retail transactions. One of the main downsides that clients using paypal have experienced is the level of protection as a seller, with PayPal generally coming down in favour of the buyer.

Case Study:
One company experiencing postal delays had several customers place a chargeback for their money from PayPal. PayPal contacted the company requesting proof that the goods were on its way - which was provided in the form of delivery tracking numbers - with full explanation of the situation.
 
Despite this PayPal continued to refund the customers and take the money back from the company, the next day the parcels were delivered and the money not returned nor obtainable from the customers.

PayPal is becoming more mainstream as more people recognise the name (from dealing with eBay or other online businesses whom support it), so offering PayPal as an option (even if it is not the only payment method) could open up your customer base.

 

Nochex - www.nochex.co.uk

Similar to PayPal in that it started out as a member - member scheme, Nochex also now offers various levels of service - the two of most interest to business users are the 'Seller Account' and 'Merchant Account'.

The Nochex Seller Account allows you to accept UK credit/debit card transactions of up to £100 per customer without requiring them to sign up to an account (£300 to those with a Nochex account). There are no fixed set up charges or any fixed monthly fees, a per transaction charge of 2.9% (of sales value) plus 20p is applied.

The Nochex Merchant Account is aimed at businesses likely to turn over £1000 (or more) per month, or for those who require to be able to accept international payments, or transactions totalling more than £100 for whom the seller account is not suitable. There is a one-off setup charge of £50, and the transaction charges are the same as the seller account above (2.9% + 20p), with a sliding scale for businesses with higher turnover. In addition to this Nochex retains a balance on the account to offset in case of chargebacks - the amount of this is negotiable and depends upon average transaction values (standard balance held is 1.5-2 times your average value transaction, or 15% of average monthly earnings).

The Nochex Merchant Account is a relatively new addition to their offerings and as such we do not have as much experience as with PayPal, but to date there have not been the same problems with chargebacks - full cover for chargebacks is in place for transactions from Nochex account holders, and Nochex advertise that they will assist in defending against chargebacks should they occur.

 


About the Author

This article is part of a series written by Sadie Knight of Glassraven web design, Coventry. The full series of articles is available on the Glassraven website.

Glassraven, established in February 2002, are specialists in web design, ecommerce web design and bespoke web development.

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