What is the most cost effective way to process card payments online?
I'm looking into setting up an online shop and although I'm well versed in the technologies etc. I've less experience (and not for some time) of the banking and payment service providers. Does one still need a payment service provider and a merchant account or can you trade online and take major credit cards just through a single provider and a standard bank account? What sort of fees should I be looking paying?
Clarification added March 27, 2008:
just to clarify - I understand that the expected transactions after the 1st years are about 1500 per month with an average value of £20 inc VAT.
Clarification added March 28, 2008:
The market is to be the UK only at first and then EU after that.
Answers (19)
Michael P
CTO and Partner, Digital Edge
Best Answers in: Quality Management and Standards (1), Web Development (1)
it really depens on transaction volume. Let me know how many transactions a day.
Have you considered PayPal as an option? With PayPal, you will be able to accept Visa, MasterCard, American Express, and Discover, along with PayPal payments.
It's as easy as adding a PayPal button to your site, or taking advantage of more advanced payment integration options for your site's shopping experience. Many popular shopping cart platforms already support PayPal, but you can also develop your own custom integration via PayPal's APIs.
I believe you only incur transaction fees around 1.9-2.9% + $0.30 per transaction.
Links:
Damon B
Director, Customer Evangelism
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I would recommend PayPal. I am somewhat biased because I used to work there.
Some reasons: You don't have to worry about storing customer credit cards numbers.
The rates are generally much lower than merchant accounts.
Already widely accepted across the web, including such large sites as Itunes, Dell, etc.
Typically to process payments online, you have to have a merchant account, a payment gateway, and an SSL certificate.
A merchant account is a bank account that allows businesses to accept credit cards, whether they be at physical locations or online. Just about everything that happens with this account has some type of fee tied to it. The payment gateway is what checks with the credit card companies to ensure the card is legit. And your SSL just keeps users' information from falling into the wrong hands when it's sent between them and your server, and between your server and the payment gateway. SSLs have to be purchased and installed on your web server.
There's a wide range of pricing options available, and lots of people offer packaged deals. Check out Authorize.net, or Verisign.com. And you can always read more about payment gateways, merchant accounts and secure servers on Wikipedia.
Like everyone else has mentioned, PayPal is a good alternative because it's easier and cheaper to set up. You might also look at 2Checkout.com and iKobo.com. But PayPal's reputation and large user base make it favorable.
PayPay API, fast, secured and reliable. Takes all mayor credit cards. Complete setup takes just a day or two.
Links:
Hi:
Your info is not enough to give you detailed help. It depends on the number of transactions and the volume of them, and it depends on the country or countries you will sell to (I suppose USA). Not all payment platforms operate on all countries and not all accept the same number of transactions.
From your side there are two kind of payment providers. On some of them you have an account with them and money transfers from users to that account. Then, you can transfer from that account to wherever you want. The second type is the platform that lets you have a bank account on any bank, so they transfer the money to that account.
I've been Payment Integration Manager on the company I work (USA and UK gaming business), and we usually have merchant accounts because they transfer money to us immediatly. Those platfoms are easy to integrate, usually based on SOAP and web services. They must be very well integrated because of security and revert transactions: those platforms don't let you have too many reverted transactions.
If your bussiness is new and you don't know how much successful it will be or you don't know enough about web services and SOAP, I recommend you to begin with something very simple and worldwide as PayPal. My cousin is not a programmer and has integrated PayPal himself.
About fees, I have integrated the platforms but not contracted them, so I can't help. I add some links of the people we work with, so you can take a look at them and see. They have good documantation and support service. Usually they give you JSP, PHP or .NET sample code. If not, you can ask for it.
Ops! Now I see your company is British! Then take a look at the last link: UKash: they work very well. Wirecard and Neteller operate in UK too (in fact I think Wirecard is British, and is now buying many USA payment companies, but I'm not sure about this).
Hope this helps,
Enrique
Links:
Clarification added March 27, 2008:
I see many answers say the best is PayPal... It depends on your business, but let me say that those platforms are NOT INCOMPATIBLE. You can have PayPal and another payment platform. Why? Simple...
PayPal has many adventages, but the main disadventage is that users need a PayPal account. It's true that many e-commerce sites accept PayPal, but all of them accept other direct credit card platforms too.
I think the best you can do is to integrate PayPal first and, if you see it works and your e-commerce solution grows, integrate another one, giving your customers a new option. If your business is already large enough just do the oposite and integrate a direct VISA/MASTERCARD solution first (with UKash or Wirecard, for example), BUT only if you're sure you'll be able to integrate it well.
Yep... That's what I would do...
Kind regards,
Enrique
Having a full service payments provider, such as Cybersource and WorldPay, will save you time and money.
Your costs depend on
1) transaction volume
2) your 'risk' as a merchant
3) complexity of payments requirements
Transaction Volume
----------------------------
Transaction fees are normally a fee based on transaction value plus a flat fee.
Flat fees are as little as 3-4 cents and as high as 30c.
Very high volume merchants you have a lot more negotiating power.
Your Risk Profile
------------------------
The more risky you are perceived in terms of your likely or actual charge-back ratio the higher your fees will be.
Having a handle on your fraud and charge-back management processes can pay off handsomely for you.
Complexity of Payments Requirements
--------------------------------------------------------
A good example of this is whether you wish to accept domestic or international payments.
For example, paypal may charge between 1.9-2.9% for domestic transactions but go as high as 3.9% for international payments. Nearly 5% of your hard-earned revenue, and my guess is a large chunk of your profits.
For most online payment providers you need a merchant acquirer account - i.e. an account that gives you the ability to process credit cards. You could use PayPal though, which doesn’t require this and can process both PayPal and credit card payments. Not sure about the fees, but think they are generally a small percentage of each transaction – for example 2-3%
Actually if you offer Paypal the customer does not need a Paypal account if they wish to pay via Credit or Debit cards. Paypal is the easiest way to offer multiple means of payment and Paypal itself is increasingly being offered by organisations such as Amazon.
If you're lookign at putting £30,000 worth of sales a month through the account then I would avoid some of these "easy setup" solutions as they often don't have the lowest transaction fees and to some can look unprofessional.
I would try to negotiate a good rate with your bank and then use a properly integrated solution such as Datacash or Protx Direct. That way the user never has to leave your site to make payment and you'll probably get better rates on the transaction fees.
Even a 1% saving adds up to £3600 in the first year when you're putting that volume through.
Laura S
Secretary, IAEM Europa. Business Continuity and QA at EUROCONTROL. St John Ambulance volunteer.
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Dear Malcolm,
As a potential client, I advise you to stay away from Paypal, or at the very least ensure you have a direct payment option.
New Paypal accounts take at least 5 days to set up. Once existing, it can still take a week or more for a transaction to be completed. This is completely unacceptable when direct credit/debit card transactions are instant.
Yours,
Laura
You also have to consider if you want the user to "exit" your site for the payment process or you want it embedded in yours. Not all providers do both or provide APIs.
Another important aspect is what country you're in and the currencies you are planning to bill in. Each provider supports only certain currencies.
Roy A
On-Site Support Technician at Quartet Service Corporation
Best Answers in: Planning (1), Philanthropy (1), Computer Networking (1), Web Development (1)
Interesting that no one has mentioned Google Checkout or Worldpay.
The Paypal Pro service option allows you to accept credit cards (ie. customers don't have to have a paypal account) - it's easier to setup than a merchant account but my clients have said that transaction fees are higher.
Rob S
Digital Media Director, Blueleaf
Best Answers in: Computers and Software (1), Web Development (1)
A lot of good information provided by other answers above.
To answer your questions directly:
One route is a payment service provider (PSP) and an Internet Merchant Account (IMA). However there are now other options that combine these elements including Worldpay and Paypal's Website Payments Pro.
Your all in one solutions generally charge higher fees mainly due to the fact that their fee is the equivalent of your Bank's merchant account fee plus the payment provider's fee.
I have included below links to Worldpay and Paypal's Website Payments Pro (UK) for you all in one solutions. I have also linked to Protx - our preferred supplier for a payment provider if you have a merchant account.
Links:
I've worked with PayPal's Website Payments Pro API in PHP and found it to be easy to work with. Especially since you don't have merchant and gateway fees (they combine them into one). In addition, if you're utilizing a shopping cart package such as MIVA it will allow you to connect to PayPal very easily.
I can see everyone here seems to be saying Paypal. Paypal is easy and everyone knows the name, although the fee's will kill you in the long run. I would highly recommend the following:
- 2Checkout.com
- Google Checkout
- Authorize.net
- Paysimple.com
All will give you much better rates than PayPal will. Google Checkout is very similiar to Paypal with lower rates and much easier to use for both buyer and seller.
Alan G
Director / Consultant at Brand UK Ltd
Best Answers in: Internet Marketing (2), Writing and Editing (1)
Hi Malcolm. If the service you're offering is global, no question Paypal is the biggest brand and simplest to set up, although the fees are steep. Worldpay has a great name in the UK as part of RBS, and is well regarded for transactional services to the financial services sector, so if your service is UK focussed I would opt for Worldpay. Neither are particularly cheap, but while there may be cheaper payment processing platforms out there, peace of mind with a respected and known brand will be a significant factor to your customers when they make payment, and should be considered when making your decision.
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Paypal, is cheap but it goes down too often for serious e-commerce sites.
I see others like it, but I would avoid.
I'n not familiar with the EU so I would first talk to your bank...ultimatly the cash needs to go there. Start with getting your online merchant account and ask the bank if they have a deal with an online processor. Typically that can save you setup and other recurring fees, including the visa, mc, and amex charges.
PS. negociate those down. (yes it can be done)
Mark M
Owner, Gamma Media Ltd, Web Design, E-Commerce, Audio Visual Production, Business Development, Entrepreneur
You really have a few options, but I would tend to go to someone like Worldpay, a merchant account will be required. A fee of about £200-300 a year is also required. I used worldpay for 3 years with no problems and great service. Avoid Paypal, it is a pretty flaky service. Also don't be tempted by free processing like with CBill as they charge up to 30% commision.
