Taking Payments Through Your Website
Taking payments for products or services through your website gives you and your customers convenience, but what is actually involved in doing this and what will it cost?
To take payments online you need an E-commerce merchant bank account and a payment gateway.
This is the online software that processes card payments. It’s the bit at the end of your online checkout process that actually takes the money. Often a web developer will need to integrate this with your website. The payment gateway company usually charge you a monthly fee and could have a minimum 12 month contract.
Ecommerce Merchant Bank Account
This is a special kind of bank account that links with your payment gateway. You will need to make sure that the two are compatible. Some types of card (including American Express and Diners Club) require you to open separate merchant accounts with each card company directly, so you may find that to be able to accept a wide range of cards you need several merchant accounts. The fees you pay to your merchant bank vary depending on the type of card being used, so you won’t know the exact cost upfront. Fees are typically a percentage of the transaction value, but watch out for minimum monthly charges and any other hidden monthly fees too.
What about PayPal?
PayPal is a common option for smaller businesses as it much easier to set up. You don’t need a separate merchant account and payment gateway, since they provide an all-in-one solution. The calculation of fees are usually a lot more straightforward too. There are a few drawbacks to this convenience though; PayPal fees are higher and they also have the power to freeze your account or take money back from you if a customer disputes any payment – even if it is a bogus complaint. PayPal do not automatically transfer funds to your bank account – so there can be a bit more overhead in managing your funds. It’s worth considering that PayPal are not a UK bank and are not regulated by the Financial Services Authority – if things go wrong you will be on your own.
If you are considering setting up your website for taking payments, then I hope this has given you an interesting insight into what’s involved. The biggest deciding factor is likely to be your expected volume of transactions – if it’s low, you will probably opt for PayPal. Remember you can always upgrade later.