| Most people who regularly use the World Wide Web have purchased a product or service on-line. Electronic commerce on the Internet continues to be one of the primary reasons both consumers and businesses surf the information superhighway. For consumers, buying on-line is fairly easy (depends on how complicated or simple the Web site has been designed) and provides twenty-four hour a day shopping – even the malls don’t offer that!
As we discussed in E-Commerce 101, e-commerce for businesses allows an enterprise to reach audiences in places and at times they could not otherwise afford. Taking payment on-line is immediate, requires no additional staff overhead, and, for many businesses, represents a significant additional income stream.
For businesses to take on-line payments, however, there are several steps that have to be taken. Fortunately, the industry has matured to a point where the process is straightforward. Only a few short years ago, securing the tools and integrating them into an e-commerce Web site was often frustrating and prone to error. Today there are both simple, immediate ways of taking on-line payments, and systems that provide comprehensive payment options.
Many small on-line retailers use PayPal (www.paypal.com) as a payment “gateway.” By filling out some fairly simple on-line forms regarding your bank account, payment options you wish to offer, etc., you can within a couple of days (PayPal has to certify your bank account) be able to offer customers the option of paying for your products or services using their own existing PayPal account.
PayPal was created to provide for consumers a secure means of paying for goods and services without having to submit credit card information directly to the vendor. Vendors who use PayPal don’t have to set up merchant accounts (read on) or build and support their own secure on-line payment mechanism. PayPal has been particularly useful for individuals selling and buying on auction sites, such as eBay (www.ebay.com). In fact, PayPal became so synonymous with eBay, it was acquired by the auction giant.
The downside to using PayPal is that your customers must already have set up an account with PayPal, or be willing to go to PayPal and set one up in order to buy from you. If you only have a small on-line offering and don’t have the budget to build your own e-commerce storefront, this is a viable alternative. However, businesses that offer PayPal also carry an impression of being a small firm, unable and unwilling to afford the added convenience of selling to non-PayPal subscribers. PayPal fees to vendors are also generally higher than for those who have their own merchant accounts. And, as a recent phenomenon, scam artists are continually e-mailing notices that look as though they’re from PayPal, but in fact lure unsuspecting recipients to bogus Web sites asking the user to “verify your PayPal information by entering your bank and credit card information below.” Once completed, the user soon finds their credit cards maxed out and their bank accounts drained. It’s not PayPal’s fault, of course, but this misuse of their name has to cast some level of mistrust.
The better solution – in order to accommodate more customers – is to obtain your own merchant account and have a Web engineer construct an e-commerce site for your business. While this will incur more initial costs, you will have the ability to grow beyond that of an on-line hobbyist. As a rule of thumb, I advise clients that if their customers are outside of eBay and if they are planning on selling more than $500 each month, they should invest in a custom e-commerce solution.
While we discussed various advantages in E-Commerce 101, now we discuss the additional tools you will need: a merchant account and a gateway processor. A merchant account allows you to take credit card payments for goods and services. You may already have one in your current business. Call your bank or merchant account provider to find out if they will allow your account to be used for on-line transactions. A few restrict on-line commerce, but that is becoming more rare. If you don’t have a merchant account, check with your Web engineer. There are thousands of agents who can secure a merchant account for you. But be careful! When we first needed a merchant account for our own business, we contacted an agent who had, via direct mail, stated he could secure the lowest rates possible. When we got the account information, we found he had forged our signatures on the merchant application, misstated key information, and got us a rate well above his quoted percentage. He was soon arrested for fraud. The good news is that as a result of our working with the merchant account provider (the actual company, not an agent), we became an agent and use that relationship to make sure our clients don’t get a bum deal.
The merchant account provider serves as a clearinghouse for your transactions. When you take a credit card payment, someone has to get the money from VISA, MasterCard or American Express and put that money in your bank account. It’s not unusual for a clearinghouse to charge 2-4% of the transaction for this service. The percentage is based on your company’s financial profile. But getting the lowest rate, as we’ve shown, is not always the best deal.
For on-line commerce to work, you need another piece, which is the “payment gateway.” One of the largest is Authorize Net (www.authorize.net). Authorize Net gives your Web engineer or programmer the ability to send credit card information captured on your site to the merchant account clearinghouse and return the status of the transaction (e.g., approved, declined) back to your Web site so you can communicate with your customers. The process of programming for a gateway is well beyond the scope of this column, but it is an important piece of the e-commerce puzzle. Gateways generally charge from 10 to 25 cents per transaction for their service.
In addition to credit cards, modern systems now allow you to take on-line checks, which can be a great convenience to many customers.
If you’re eager to take part in the on-line commerce explosion, careful consideration of payment options, methods and technologies is a key part of your game plan. Have your Web engineer provide you with clear options, prices and benefits.
|
