Accepting Online Payments

Here’s a quick overview of the two main options you have when considering payments online.  As someone that spent time on the board of directors of an e-commerce focused credit card processor, I’ve seen lots of options come and go in this industry.  While shopping carts are common on websites and many come bundled with web hosting accounts, the methods to accept payment for bills are a bit rarer and can be trickier to implement.  Your two primary options are to use a full service payment processor such as Google Checkout or PayPal, or to create your own solution that uses your own merchant account and a payment gateway you integrate with your website.

Here are the pros and cons of the two main options you have:

  • PayPal/Google Checkout:
    • These are both widely used online payment processors, so your clients are likely to have used them for making purchases from online stores or making online payments.
    • Security is outsourced to their servers, meaning you don’t need to worry about safeguards and regulations that require you to protect credit card and bank account information.
    • The fee structure is simple, and normally winds up costing less at low transaction volumes (less than a few hundred transactions per month)
    • Simple technical implementation- you are often able to get these up and running much faster than a system where you send transactions directly to a credit card processor from your website.
  • Merchant Account/Payment Gateway:
    • You typically need to have a few things to make this happen- a merchant account to process credit cards, an ACH account or instant fund transfer account to process checks, a payment gateway account (such as that links the aforementioned accounts to your website, as well as taking security measures on your web server. 
    • Each of these items have their own fees that can be annual, one time setup fees, monthly, or per transaction (some may incur fees that fall into more than one of those categories).  Most of them also have minimum fees that you would need to pay even if you didn’t process any transactions.  It is not uncommon for the minimum fees to add up to about $100/month, to have setup fees for these accounts that are a few hundred dollars, and to incur lease payments on some of these items.  The per transaction fees are normally far less, so if you process a few hundred transactions per month these accounts can be less expensive.
    • Check processing directly through a bank can often be done faster than through PayPal (since PayPal adds an additional step to the process)- credit cards take about the same amount of time regardless of which system you use.
    • The technical implementation is much more complicated for these setups, and generally requires greater ongoing troubleshooting and support.  At high transaction volumes this becomes worth it due to savings on fees.

If you’re just looking to allow customers to pay invoices online (not selling products), in most cases its best to start with PayPal or Google Checkout, since it is an easy way to get stated and judge the interest from your customers in making payments online.  If it is a big success and hundreds of invoices are paid online each month, then it justifies migrating to a setup with your own merchant account.

Posted in Technology Applications, Uncategorized.

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