StartupCafe

For those of you getting money off customers (or preparing to), we hope you find this helpful… By Lucy Langdon.

So you’ve got a business, a website and some customers. What next?

The decision to accept credit card payments on your site shouldn’t be taken lightly. Here are a few questions you should ask yourself before you even look up what a ‘payment gateway’ is:

• Will it improve my bottom line? For most businesses, being able to complete a sale over the Internet will make them more money. It will allow you to capitalise on impulse buys and increase cross-selling and up-selling opportunities. However, if, for example, your business just sells one service (eg. you as a consultant), setting up a full payment process for your website might not be the best option.
• Will my customers appreciate it? Almost certainly, but not definitely. In a world of instant gratification, allowing customers to buy at their leisure with the click of a mouse is definitely a plus. However, if, for example, your expertise is the thing on sale, a more personal exchange might be more what your customers are looking for.
• Is it worth the risk? Setting up a payment process is a lot more complicated than simply designing an attractive ‘Buy Now’ button. It costs money and time, which, if the setup is executed poorly or isn’t right for your business, will be wasted. Balance this risk against your potential gains and you’ll have your answer.

If you’ve made it through the above gauntlet and are still set on allowing your website to accept credit card payments, it’s important you start with a basic idea of how the payment process usually works. There are three steps:

1. Your customer chooses what they want to purchase and clicks the ‘Buy Now’ button. Shopping cart software will make this process easier and more fruitful for you.
2. The customer is then taken to a secure page (with an SSL Certificate) where they’ll enter their card details. These will then get sent to a Payment Gateway, a sort of mediator between the different parties involved.
3. The Payment Gateway will query the customer’s bank and your merchant account to check the payment can go ahead. That information is then relayed back to your website and, if all is well, the money will ‘change hands’ and you’ll be able to proceed with delivering the purchased item.

How Much Will It Cost?

It varies massively. The shopping cart software, the payment gateway and the merchant account will all cost money. You’ll either have to pay up front (most likely with the software), through ongoing transaction fees or when you want to improve or downsize your setup. Beware of anything that looks free; it almost certainly isn’t and you’ll end up paying hidden charges or fines.

The exception to that rule are Paypal and Google Checkout (they merges the payment gateway and the merchant account and offer various shopping cart tools). They are free to setup in their simplest form (and there are no hidden charges), but you’ll pay a higher transaction fee and might struggle with scaling.

The Bottom Line

If your business is right for online card payments, start by doing a few hours research. If time and upfront costs are an issue, Paypal or Google Checkout are probably your best bet, but don’t just settle for them; make sure you look for any alternatives once you have time/money. If time and money aren’t such a problem, spend a day or two looking at your options. It might take a while to apply for a Merchant Account, so that’s probably the best place to start. Make sure to read independent reviews of all of the features you want to use and don’t be afraid to ask questions!

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Lucy Langdon works for Merchant Account Forum, a website that helps visitors find the right merchant account for their business, including UK merchants & international merchants.