How
to accept credit cards on your website
Accepting
credit cards on a website is absolutely necessary for the success of any online
sales efforts. While there are several other available payment methods for
websites, credit cards surpass every other one because of their wide use and
convenience. There are two types of companies that can enable a website to accept
credit cards. The first is a 3rd party processor, and the second is a merchant
service provider (called an MSP, or ISO). The primary differences between 3rd
party processors and MSPs are the way a website integrates with their service,
the liability that the website owner has over the transactions that they
process, and the price that a they will pay for the ability to accept credit
cards. 3rd party processors include companies like Paypal.com,
Google Checkout, 2checkout.com,
CCnow, Clickbank.com, and many more.
THE
DIFFERENCE BETWEEN MSP’S AND 3RD PARTY PROCESSORS:
MSP’s
· The
business apply’s for a merchant account directly with a MSP.
·
Business is personally liable for everything that they process.
·
Customer’s credit card statements have the business name on them.
· Use
with a Payment Gateway (Seamless integration available).
· Some
fixed monthly fees in addition to processing costs.
·
Possible setup fee.
·
Possible long term contract requirement.
3RD
PARTY PROCESSORS
·
Business processes under the name of the 3rd party processor.
·
Customer’s credit card statement has 3rd party processors name on it.
· Any
dispute is made through the 3rd party processor and not the processing bank.
·
Business and customer have limited protection from being ripped off.
· Must
use 3rd party processors checkout system (Paypal has one exception).
· No
fixed monthly fees.
· Some
have setup fees.
· Most
have high processing costs (Paypal and Google Checkout don’t).
· No
contracts.
·
Business is partially liable for the transactions that they process.
WHICH
SHOULD A BUSINESS USE?
Assuming
that you are based in the US, this depends mainly on how much business you do,
the type of products you sell, how you want to integrate payments into your
website, and whether you sell on eBay or not. For businesses in the US, Paypal
is pretty much going to be the lowest cost method of accepting payments that
you will find. As much as I personally hate to admit it, it will be very hard
to find a company that can beat the cost of PayPal. However, PayPal has many
negative attributes which often make it a poor solution for serious ecommerce
websites. Personally, I think PayPal makes an excellent supplementary payment
method, as there is a fair number of online shoppers that prefer to use it.
HOW MUCH YOU BUSINESS YOU DO: Merchant
accounts have fixed monthly fees associated with them. If you are only
processing a few dollars a day, it is simply a waste of money to use a merchant
account. 3rd party processors don’t have fixed monthly fees, and will be a more
cost-effective solution for low volume businesses or an individual. If you do a
lot of business, then a merchant account will give you better control over the
funds that you process, and how your payment method integrates into your
website. Many people consider the threshold of switching from a 3rd party processor
to a MSP at about $1000 per month in processing. Personally, I would switch to
a merchant account at about $500 per month, so that I could provider a cleaner
experience for my customers. But either way, these aren’t huge volumes of
processing before a merchant account may be warranted.
THE TYPE OF PRODUCTS YOU SELL: Many
product types are considered high risk. High risk refers to products or
services that carry an increased risk of being charged back, or being obtained
by or sold to fraudulent buyers. A few examples of high risk businesses include
anything adult related, travel related, online pharmacy, and download-able
products. Online in general is much higher risk than retail. On a personal
note, I think that most online businesses will experience some sort of fraud in
their online ventures. Neither 3rd party processors nor MSP’s like
providing services to high risk businesses. In these cases a business will have
to contact everyone to find a company that can provide service to them. In some
cases they may have to process through an offshore merchant account provider.
HOW YOU WANT TO INTEGRATE PAYMENTS
INTO YOUR WEBSITE: If you want a completely seamless system where your customer never
leaves your website, then you are going to need a merchant account and a
payment gateway. Payment gateways generally have two integration methods, but I
only recommend using an API method of integration. 3rd party processors require
your customers to fill out their information on a website owned by the 3rd
party processor. A seamless integration method is considered by many to be fundamental
in providing a smooth and efficient shopping experience. Paypal does provide a
system called payments pro, which is a step in the seamless direction, but it
is difficult to integrate into a website, and still creates some usability
barriers. If you look on any major ecommerce website, you will find that they
are all using a seamless integration with their payment processing method. 3rd
party processors may be an alternative payment method, but they are rarely the
primary method for a serious company.
DO YOU SELL ON EBAY? If you
sell on eBay, you should accept Paypal. Paypal integrates seamlessly with the
eBay checkout system, and the majority of eBay users expect to be able
to use Paypal to complete their purchase. Merchant accounts are difficult to
integrate with eBay and must always rely on multiple independent systems for
them to work smoothly and automatically. Businesses that sell a lot on eBay
will probably look into one of these checkout management systems at some point,
but Paypal is the perfect solution for the majority of smaller eBay businesses.
NOW THAT YOU HAVE YOUR PROCESSING
METHOD:
I am
making the assumption that you already have a shopping cart in place on your
website. This can either be a custom designed system, or can be a pre-made cart
system like oscommerce, zen cart, and many of the other popular carts. If you
went the merchant account direction, you will also need a payment gateway. It
is easiest to get a payment gateway from the same company you are getting a
merchant account through. If you already know what payment gateway you want,
make sure that the merchant account provider can set this up for you. If you
don’t know what payment gateway you want, Authorize.net is always a safe bet.
There are many payment gateways available, with the most common being
Authorize.net, and Verisign. You will want to use a payment gateway that has an
API (Application Programming Interface) method of integration. The API is what
allows your website to transparently integrate with the payment gateway.
REQUIREMENTS
TO PROCESS ON YOUR WEBSITE:
1. A
SSL (Secure Socket Layer) Certificate (needed if you use a payment gateway
API).
2. A
shopping cart system (This can be custom made or you can use readymade
shopping cart software).
3.
Integration of your payment gateway or 3rd party checkout system.
4.
Merchant account providers also have a list of requirements to setup an
ecommerce merchant account. I recommend making sure that as many as
possible are met before applying for a merchant account. Depending
on whether you have a custom designed or a generic shopping cart system, it can
be as easy as pressing a button, or as hard as writing a complex
integration script, to integrate your website with the
payment gateway. Most shopping carts that are widely used will have a module or
plug-in to integrate with most of the popular payment gateways. Custom carts
will need a custom payment module, which should be coded by the person who
designed the cart or another competent programmer. For a
guide visit http://www.merchant-account-services.org/article/authorize-net-php-integration using
php5. Also, if you are interested in purchasing a Authorize.net
integration script, authnetscripts.com has scripts for PHP, ASP,
PERL, and Cold Fusion. I have used their scripts myself
and highly recommend them. The price of one of these scripts is far less than
hiring a programmer to write one for you. Integration tutorials for most
payment gateways are available in just about every
programming language, but again these should be programmed by a professional.
If you need to hire someone to do the integration for you, I recommend services like getafreelancer.com
and rentacoder.com. Make sure to pick a service provider
with positive feedback, and make price a secondary factor. Here is a brief guide
on how to use freelance marketplaces. If you
do use a payment gateway, make sure you are not storing credit card numbers or
other sensitive information unless you know exactly what you are doing,
how to properly encrypt the data that is being stored,
your server is PCI compliant, and your website does not have security
vulnerabilities.
ONCE
YOU’RE INTEGRATED:
Once
your website is integrated with your payment gateway or 3rd party processor,
you are ready to start accepting payments. This whole process is not really as
complicated as it seems, and should be takes in steps to prevent problems.
QUICK
OVERVIEW:
Merchant
Account / Payment Gateway Flow -is the order of setting
things up that I recommend for the least amount of potential problems.
1.
Setup Website
2.
Setup Merchant Account and Payment Gateway
3.
Purchase and Install SSL Certificate
4.
Integrate Website with Payment Gateway
5.
Test Integration, and Run A Real Transaction
6. Go
Live!
3RD
PARTY PROCESSOR INTEGRATION - requires less structured planning,
but some ordering will make a difference.
1.
Setup 3rd Party Processor Account
2.
Setup Website
3.
Integrate Website with 3rd Party Processor
4.
Test and Run A Real Transaction
5. Go
Live!
For a
better comparison of merchant account and 3rd party processors checkout this
website
Hopefully
this whole process goes smoothly for you. Once everything is complete, you can
focus on the marketing and promotion of your ecommerce business.
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