adminThere are literally dozens of services all promising to make taking payments on your website easy, but from the outside it can all sound a bit complicated. There are of course, always some people only too willing to share horror stories of stolen credit card details online, but if done properly, the chances of this are very minimal.
In fact only a small percentage of credit card fraud takes place online. Let’s face it, it is a lot easier for a fraudster to copy your credit card details when you hand it over in a restaurant, than it is to extract them from an encrypted website.
Taking credit card payments online basically boils down to three options:
Use a hosted service such as PayPal
This is the easiest way to take payments online, and also the scenario which gives you least responsibility. When someone wants to pay you for something online, you simply redirect them to a hosted service (a website outside of your own such as PayPal) and they take care of the rest. PayPal (there are others) will take the card details, take care of all of the security and deposit the funds into your PayPal account, which you can later transfer into your main bank account.
In this scenario you are not actually taking the payment, you are simply transfering the customer to a trusted third party which takes the payment on your behalf.
PayPal takes a small percentage (typically 2-3%) as a commission. There are no recurring fees.
Use a hosted service but take the payment yourself
This is where you still use a hosted service such as PayPal but you actually take the credit card details yourself. You then securely pass these details to PayPal who then process the payment.
You are probably wondering why you would ever do this when you could get someone else to do all of the hard work?
However there is an advantage to this, the customer never has to leave your website. In the previous example the customer had to be redirected to PayPal who took the payment. Customers can get a bit nervous when doing this, and from a marketing perspective this introduces an extra step in the process, which can turn people off.
In this scenario you can gather the card details, pass them to PayPal for processing in the background and keep the visitor on your website.
Sounds great, but this does introduce some security issues. The main issue being that you have to securely pass the credit card details to PayPal, i.e. you have to properly encrypt them. You will need a professional to set this up properly for you.
PayPal (and others) will usually charge a small monthly fee for this service, as well as the standard 2-3% commission. Generally this is recommended for growing websites, which want to appear a little more professional and may want to have complete control of the sales process.
Open a merchant account
This is how the big boys do it. Most banks will offer long term businesses (those with atleast 3 years trading history) a merchant account. Basically a merchant account allows you to take credit card payments.
You have a merchant account, but you still need a third party such as WorldPay to use it. Your website talks to WorldPay which then in turn talks to your merchant account.
The process is seamless and the most professional of the solutions. However it is also the most timely and costly to set-up and maintain. There are the set-up costs and then recurring fees from both the bank and the third party!
Like the previous example there are security issues which need to be dealt with and banks are very choosy about who they give merchant accounts to. Generally speaking 90% of websites will use one of the first two solutions.
Summary
If you are a new website starting out, the first option is probably the one for you. Everything is taken care of and the work to set this up is minimal. For the websites which are looking to take things to the next level, the second option is probably the most effective.
If your online store is an aspiring Amazon, then a merchant account is the way forward, although it will not come cheap. You may wish to hire a web developement company on a retainer based contract here to actively keep on top of the system.
