Setting up shop online: Taking Payments
Tuesday, 29 November 2011 00:00
In the fifth of his series about setting up an online shop, Actinic MD Nick Kington looks at how you take payments through your ecommerce website.
Nowadays, the vast majority of online purchases are paid for by credit or debit card and this article covers how online businesses can get setup to accept card payments through an ecommerce website.
What is a payment service provider?
In order to take card payments you will need a payment service provider (PSP) or payment gateway. The PSP acts as an intermediary between you and the banks and provides you with a ‘virtual’ till or terminal that collects card details over the internet, passes them to the bank for authorisation and then transfers funds to your business.
The PSP provides a highly secure facility for processing credit card details and also ensures compliance with anti-fraud and security regulations such as PCI-DSS, 3D Secure and CV2.
There are two main types of PSP service and the suitability to your business is dependent on whether you have a merchant account or not:
1. Bureau service. If you are starting a new business then it may be difficult to obtain a merchant account. In which case the best way to accept credit and debit card payments is by using a bureau service such as PayPal. These services essentially combine the merchant account and payment processing into one package. They are reasonably priced, easy to set up and ideal for start-up and small online businesses. You will usually pay a fixed per transaction or monthly fee plus a percentage of the transaction value.
2. Merchant account. If your business is established with a trading record, or you already have the facility to accept card payments offline e.g. in a shop, the best route is to apply for your own internet merchant account. This is available from all of the major banks, and they will charge a percentage of each credit card payment, and normally a fixed charge per debit transaction. Obtaining an internet merchant account should be straightforward if you already have card-processing facilities set up. You then use a PSP to link your website, the online buyers and your merchant account. PSPs offering this service include SagePay, WorldPay, Actinic Payments and many others.
Choosing a payment service provider
Your choice of PSP should be based on cost and compatibility with your chosen ecommerce software solution. The key is that your ecommerce software is designed to work seamlessly in co-operation with your PSP so that the software you use can instruct the provider to make charges against the card, refund payments and so on. Not only does this integration make your life considerably easier, it also guarantees a safe transaction. Most ecommerce software packages offer a range of integrated PSPs. Do your research and shop around to assess which one offers the best value for your business.
Written by Nick Kington, Managing Director of ecommerce supplier, Actinic. Originally published on Enterprise Nation.