What’s the Best Way to Accept Payments Online? How to Choose a Payment Gateway

With the variety of options at hand to a business looking to make their products and services available to the online masses, this may be the first question you find yourself asking: What’s the best way to accept payments online? Subsequent questions might follow: What method will best suit my business and my customers? How much will it cost? Is it worth it? Each and every business owner may answer the first three questions differently, but for any business, the question of, “is it worth it?” can be answered with a resounding YES. No matter what business you’re in, there are ways to increase your revenue online, making your storefront available 24/7 to a world market. You’re not limiting yourself to local customers; you have the potential to expand your target market horizon indiscriminately. In this article, we’ll discuss the top two payment acceptance picks for retailers when they first make the decision to engage in e-commerce.

Recently, many brick-and-mortar-based companies have closed their doors due to the persistence of this country’s poor economy. Storefront locations carry with them the burden of high overhead and the absolute need to draw in sales or face closure. Smart retailers have been able to absorb some of this loss by shifting their focus from selling face -to-face to selling online. They’ve also been attracting lots of new, loyal customers to their online storefronts, picking up previously unavailable customers due to the presence of their now-extinct competitors. People are not only shopping online from the comfort of their own homes these days. Seeing as how we live in an “I want it NOW” society, the market is shifting even more towards mobile e-commerce sites. A potential customer might be stuck in traffic and remember they need to order a tail light for their truck. The company that gets this business is the company that extends itself to the customer in need on the spot. Just thinking about the potential situations where a buyer would make use of your online shopping platform could spawn a list consisting of hundreds of examples, but none of this means anything if you’re not ready to accept online payments in a safe, secure environment.

Let’s first look at what is most commonly recommended as the “newbie’s” go-to option for accepting online payments: PayPal. Known worldwide for its integration with (and as a property of) eBay and its ease-of-use, PayPal ends up being the choice of a majority of new merchants’ online payment gateways. A payment gateway is defined as an e-commerce application service provider that authorizes payments for businesses online. PayPal might be a good fit for your business at first and help you get the hang of selling and processing payments online, but in the e-commerce world, it’s not seen as a desired permanent solution. One of the major pluses of using PayPal is that they don’t charge a monthly account maintenance fee. This may be important to you if you’re just starting out in e-commerce and are unsure of how much online processing you’ll really be doing and whether it’s worth investing in a more professional payment processing option. If you intend to sell your wares on eBay, you definitely need a PayPal account to accept payments through the auction site. If you have submitted payments through PayPal in the past, it’s quite simple to transition your account to be able to accept payments, as well.

Now for the bad stuff: yes, PayPal is easy to set up and to understand, but on your customer’s side, a merchant relying on PayPal to accept payments is viewed as a less trustworthy, less established, potentially unprofessional business. Your customers’ checkout process is interrupted. Upon checkout, your customer is taken to PayPal’s external website to complete the transaction, forcing the customer to sign up for a PayPal account if he/she doesn’t already have one. The major downside of this is that your customer may not want to sign up with PayPal. This plausible reaction will result in lost sales. We’re not going to review transaction fees here because they are constantly changing, but in general, PayPal takes a noticeably large portion of each sale. PayPal does not visually integrate with your website’s storefront, meaning that you can’t customize colors, fonts, headings or maintain a look consistent with your brand’s image. One last downside of relying on PayPal to process customer payments online is that after the checkout process is complete, you don’t have access to vital customer data. You haven’t learned anything about the person that just purchased from you: where do they live? How did they hear about your company? Did they find your site easy to navigate? All that relationship building information is lost to you. If you realize how important this information is to the growth of your business, you’ll want to move on to a different payment gateway as soon as possible.

Let’s say you’ve gotten a PayPal merchant account set up but are looking to purvey a more professional image of your company online. You can keep PayPal around on your website as a payment option available to your customers that may prefer to pay through them. It’s important to offer whatever’s most convenient to your market. You may want to wait and see what kind of credit card processing volume you conduct through both PayPal and our second payment gateway option, Authorize.Net, and then decide whether to keep one or both payment options present on your site. Authorize.Net is able to seamlessly allow your buyers to enter their payment information right on your site. It doesn’t force your customers to sign up for a third-party account and keeps your site’s appearance consistent. By accepting payments directly on your site, you project a more professional image to potential customers. When a purchase is made, those funds are deposited directly into your business’s bank account. Alas, there’s always a downside: Authorize.Net charges you a monthly service fee. Like PayPal, there is a fixed transaction fee accompanying each purchase. You need to set up a merchant account (a merchant account allows your business to accept credit cards) with one of Authorize.Net’s resellers, but that’s not necessarily a negative as any business will find having a merchant account essential to business survival, especially if they also have a brick-and-mortar location. PayPal is not an option when conducting transactions face-to-face.

In answering this article’s primary question, “what’s the best way to accept payments online,” it’s really up to you and your business’s situation. Do you want to test the waters to see if an e-commerce solution is something that would build your bottom line? Go with PayPal for a few months and see how you fare. Are you a larger business making hundreds or thousands of sales each day? I wouldn’t hesitate to make an immediate jump into Authorize.Net; you’ll end up saving more money and receiving your payments in such a way that negates any thought of a monthly service fee being viewed as an encumbrance.

© 2010 Lorraine Wolfe