Payment Processors

If you have created your website and have a product to sell, then you will need to find a way to accept payments from your customers. When the internet was in its infancy most people sent cheques by post, but now customers expect much more. They want to have a choice of payment options, and most will want to pay by credit or debit card. Studies have shown that if your site does not accept credit cards then you are missing out on 90-95% of sales.

Therefore you will need to utilise a payment processor that is capable of handling credit and debit card transactions. You can do this through either having your own merchant account or using a third-party payment processor.

Let's start by discussing merchant accounts. These are essentially bank accounts set up with a merchant bank that allow you to accept payments from credit card users. The money flows directly into your personal or business' bank account, in a very short period of time, often about three business days. In the past, merchant accounts have only been available to large well-established businesses, but they are slowly becoming more accessible to smaller businesses, and are becoming less stringent in their criteria and credit checks.

Third-party payment processors, such as Paypal, 2CO and Clickbank (all of which I can recommend) are very good for small sites, such as those that sell only one item, or sites that have just launched, and are also ideal for those people who cannot get a merchant account. However, you should note that with some payment processors you will have to wait sometimes thirty days or more to get paid the sum total of your latest batch of sales. This could potentially be a big problem, particularly if it's a lesser-known payment processor that subsequently goes out of business, because you may never get the money owed to you. Even if this wasn't the case, you still have to wait a long time to reinvest this money into your business and marketing efforts. 

You should also remember that whereas with merchant accounts you own all your customer data, with third-party payment processors they store all this information. This means that they could potentially use this information for their own purposes.

Another point to consider is how your choice of payment processor will be perceived by your potential customers. For example, a merchant account provides credibility to your website, and appears very professional. It indicates that you have a secure and reliable way of accepting payments, which is an important factor for potential buyers. If you just have a third-party payment processor, visitors to your site may question whether you are just a small amateurish home-based business, for example, or may think that for some reason you couldn't qualify for a merchant account, or you lost your merchant account. Therefore this could potentially put them off buying from you. 

I would say if you can get a merchant account, but third-party payment processors will serve a purpose particularly if you are just starting out selling online, or your business is at an early stage of development. Whichever one you choose, there are a few things you should also consider:

- Set-up fees - This varies from company to company. Some have no set-up fees, while others can be very expensive to set up an account.

- Transaction fees - Most are quite low, 2-5%, but any higher than this and they can really eat into your profits.

- Types of products accepted - For example, don't assume that your payment processor or merchant account will automatically accept transactions for your particular product.

- Frequency of payments - As I mentioned above, check how often you receive payments from any sales made.

- Hidden charges - Read all the small-print and make sure there are no additional fees, such as annual fees, for example, that you may have to pay.

- Customer support - You obviously want a merchant account that responds quickly to any customer enquiries.