|
Below, you'll find extensive information on leading
transforming debt into wealth articles and products to help you on your way
to success.
Understanding Online Payments
By Robert Levings, Sat Dec 10th
UNDERSTANDING ONLINE PAYMENTS By Robert Levings, President,EasyPay123 Internet Payment Options There has been much talk about how the Internet is becoming animportant channel for buying and selling products and services.Companies are looking to exploit the Internet in a variety ofways to increase sales to both existing customers and tocustomers in new markets.
To make these initiatives work in practice requires theapplication of a range of technologies, from servers tosoftware. An increasingly-critical piece of the e-commerceequation is the ability to pay for goods and services usingInternet-based applications. Internet-based payments offer the benefit of convenience tocustomers who can pay for their products or services and receiveimmediate feedback on the status of their payment. Wellthought-out payment interfaces will address the payment needs ofthe bulk of your customers, and offer them valuable featuressuch as electronic receipts, recurring billing options and more.For merchants, online payments can mean that bad debts arereduced and cash flow is improved, improving the bottom line ofyour business. The type of payment that you choose will be dependent on yourcustomers’ needs and the type of business that you operate. E-Commerce Payment Types Many types of payments can be used in online transactions (herewe refer to those transactions that use the Internet as thecommunications channel). The major types include: EFT: Electronic Funds Transfer (EFT) is a system of transferringmoney from one bank account directly to another without anypaper money changing hands. It provides a means of transferringfunds to and from customers and business partners. Electroniccheques: Different types of electronic cheque services areavailable, but all essentially provide a mechanism for payingover the Internet by enabling purchasers to use their existingchequing accounts to transfer funds to another party. A secureinfrastructure ensures that confidential information is notcompromised in transit. Debit cards: Wildly popular for “bricks and mortar” purchases,they have not caught on as a mechanism for Internet purchasesbecause the banks and payment processors have only certified alimited number of devices for transmitting the PIN Numberassociated with a debit card over the internet. Limited pilotsare underway using wireless debit card devices for applicationssuch as pizza deliveries and taxis. Credit cards: Still the dominant online payment type, it ispopular because of its ubiquity and the familiarity thatcustomers have in using them in a variety of settings. Internet banking: Some businesses (typically large ones such astelephone companies) enable customers to transfer funds fromtheir bank account to pay bills. Online bill payments areusually facilitated by the major banks where you can log on andpay your bills at your convenience. Alternative payment types: A large number of niche payment typeshave arisen over the past few years (typically with minimal orno success). These include stored value cards, Internet(digital) cash, pseudo-currencies (e.g. Flooz) and others. Nodoubt at some point one or more of these payment types will gaina foothold, but none have sufficient critical mass at this timeto be a viable alternative for most merchants. For the purposes of the rest of this article, we will focus oncredit card payments, which represent a substantial amount(95%+) of the payments being processed over the Internet today. Getting Started with Credit Card Processing If you are a merchant that is looking to accept credit cardpayments, there are a few steps that you should follow to ensurea successful implementation. None of them are difficult, butsome can take time to complete. It is recommended that youfollow each of the steps in sequence to avoid compatibilityissues between your application and the financial network. Let’s examine each step in order: 1. Determine the Right Payment Interface The payment interface is the application that you are going touse to process credit card payments. There are many optionsavailable to you, and the right choice will be dictated by thetype of business you have and the requirements of yourcustomers. Some of the more popular interface options include: Shopping cart _______ Useful When …Your customers may be purchasing multiple itemsfrom you in a single purchase Make Sure That … You understandthe features that you need and that you purchase from areputable vendor ________ A shopping cart enables merchants to accept payment for multipleitems in a single transaction. Most online retailers that offera variety of products use some type of shopping cartapplication. Shopping carts typically provide customers with anumber of convenient features, such as an electronic “shoppingbasket” to “hold” their goods until purchase. Shopping carts offer a wide range of possible advantages tomerchants as well, such as automated shipping and taxcalculation; “back-office” tools for payment and inventorymanagement; reporting tools; coupons and discount functions andcontrol over individual and store-wide sales. Shopping cart software can be purchased and “hosted” by themerchant on a server of their choice, but most merchants chooseto use the services of a shopping cart service provider. Coststypically include set-up fees and monthly fees, in addition toyour payment gateway fees. Many shopping cart providers offerdifferent levels of feature packages, with fees based on thechosen feature level. Before you invest in a shopping cartapplication, understand what features are important to you andto your customers. Make sure that the service provider isreputable and is going to be around for a while. Switchingservice providers can be expensive, time consuming andfrustrating. Your research will pay off in the long run. “Buy Button” ___________ Useful When … You only have a few products to sell or yourcustomers only purchase one product or service at a time MakeSure That … The customer buying experience is “seamless” andsecure ___________ A “buy button” is similar to a shopping cart, but typicallyfacilitates the purchase of only one product (or service). Itgenerally consists of simple html code that you insert into yoursite that displays an order form with associated productinformation. Customers click on the buy button, and an orderform appears with the relevant order information in it.Customers enter their shipping and credit card information inthe form, press “submit”, and their order is processed. Be aware that some buy button applications force customers to be“transported” to another page that has a different look and feelfrom your site. Some customers are uncomfortable with this, andmay abandon the sale if this happens. Again, shop around. Talkto your payment gateway provider. It will pay off. Virtual Point of Sale (VPOS) ___________ Useful When … You are processing payments that are coming
in byphone, fax or email Make Sure That … You have a mechanism toreconcile VPOS payments to bank deposits ___________ A virtual point of sale application (VPOS) is a replacement fortraditional hardware-based POS terminals that you may befamiliar with at restaurants, bars and other places where creditcards are accepted. The application is either installed on yourPC, or is accessed through a secure web connection (much like anonline order form). VPOS lets you authorize, settle, credit anddelete transactions, and may perform other functions such asreporting. VPOS is used by businesses that want to process payments thatarrive by phone, fax or email, such as call centres and mailorder businesses. Wireless ___________ Useful When …You are processing payments in remote locations(e.g. pizza delivery, flea markets, etc.) Make Sure That … Yourdata transmission is secure. The wireless connection should bedigital to protect data. ___________ Many wireless devices are emerging now to satisfy the needs ofmobile workers. Digital cell phones, Personal Digital Assistants(PDA’s, such as Palm Pilots) and specialized hardware can now beused as mobile payment devices. With a “WAP-enabled” cell phoneor browser-based PDA, you can enter the basic informationrequired to process a transaction. Wireless payment processing is useful in situations wheretraditional or PC-based point of sale devices cannot be used. Swipe Card ___________ Useful When …The customer is present and when you need to givethe customer a signed receipt for their payment Make Sure That …Your merchant account is configured to take advantage of thelower discount rate (i.e. credit card fee) ___________ Swipe card applications are ones where the credit card can be“swiped” through a card reader, and the customer can sign thereceipt. The swipe device can typically be connected to a PC, orspecialized devices are available for use (such as traditionalPOS terminals). The merchant account fees for swiped (“card present”)transactions are lower than “card not present” transactions. 2. Get a merchant account A merchant account gives merchants the right to accept creditcards for payment. A merchant account is required for eachcredit card you wish to accept. This step can be the mosttime-consuming and frustrating for merchants, and it will alsobe the component that most influences your costs of doingbusiness online. Researching your merchant account options,understanding the merchant account process, knowing how merchantaccount providers assess merchants, and “shopping around”, willpay off dramatically. Merchant accounts have several fees associated with them,including a set-up fee ($200-$500), monthly statement fees($5-$10), a monthly minimum fee ($20-$30) and a discount rate.The discount rate is a percentage of your sales revenue that thebanks levy, and it varies by how “risky” your business isperceived to be (many factors enter into this, such as yourcredit history, the type of products you sell, your salesvolume, average order size, etc.). When enquiring about merchant accounts, start with your bankfirst. Then shop around. Fees vary significantly frominstitution to institution. In fact, they sometimes vary withinan institution, depending upon the merchant accountrepresentative you speak with. Depending upon your sales volume,shopping around can save you a lot of money over time. If you wish, EasyPay123 has relationships with several merchantaccount providers, some of which have online applications thatare available online on EasyPay123’s website. We’d also be happyto advise as you work through the process of obtaining amerchant account. For more information, see EasyPay123’s article entitled “Gettinga Merchant Account” available by sending us a request throughour online contact form at www.easypay123.com. 3. Select a payment gateway The payment gateway is the service that connects your paymentinterface to the financial network. Gateways take the paymentinformation from the application, ensure that the data is valid,format it appropriately, and send it on to the financial networkfor authorization, settlement, etc. Gateways typically alsooffer advanced features such as reporting and transactionmanagement. When you select a gateway, make sure that they can connect toyour interface of choice (some gateways may also offer their ownpayment applications that you can take advantage of). Also makesure that they can connect to your merchant bank (so that fundscan be deposited to your account). Finally, determine what otherfeatures you are looking for in a payment gateway, such asrecurring payments, ability to process in multiple currencies,email notification of orders, fraud screening, etc. Shop aroundand ask lots of questions. Once you connect to a specificgateway, switching can be expensive and time consuming. 4. Payment-enable your application Once your gateway has been selected, someone needs to connect itto your payment interface and customize it to meet your needs(if it is customizable). This is typically the job of yourdeveloper. Make sure that the developer has done this kind ofwork before, and will be around if you need changes in thefuture. Be explicit about your requirements and document them sothat they are unambiguous. 5. Test and Launch Since it’s your money that is being processed, be meticulousabout testing the application. Use a real credit card (for eachcredit card type your are accepting) and process a smalltransaction (e.g. $1.00) to make sure that the payment isauthorized properly and that it settles to your bank account.Once you launch, problems are difficult to fix without affectingyour customers. Summary Offering convenient payment options to your customers is a goodway to secure their loyalty and reduce your operational costs. Avariety of payment methods are available, and various interfacescan be used depending upon the needs of your customers and yourbusiness. When evaluating payment processing options start withyour customers’ needs and document all of the features that youwish to have in your payment solution. Take the time to shoparound, and make sure that the service providers that you chooseare ones that you will be happy with in the long run. About EasyPay123 EasyPay123 is a leading supplier of payment processing solutionsto businesses across North America. Offering world-classsolutions at affordable prices, EasyPay123 helps merchantssimplify the process of acquiring, launching and using paymentapplications to improve the way they do business. Visit us atwww.EasyPay123.com. For a description of some of the e-commerce terms used in thisarticle, please visit our online glossary at www.EasyPay123.com. © 2003 EasyPay123 All Rights Reserved. This article may not becopied, reprinted, published, translated, hosted, or otherwisedistributed by any means without explicit written permissionfrom EasyPay123. About the author:Robert Levings is President of EasyPay123, a leading provider ofonline payment solutions to companies across North America.
|
