Traditionally online payment was only considered by ecommerce operators, but more and more business owners are providing simple online payment options for their customers. Customers now expect to be able to pay online for everything from utility bills to automobiles. It has become a norm. More importantly in a world where consumers demand choice, they now expect to pay with their preferred method.
If you have payment options on your website or are thinking about offering them then you will be looking to partner with payment processors. This blog gives you a little insight into the types of processors as well as some pros and cons for each.
Let’s talk about the two broad categories for payment processors:
Dependant processors are providers that require a separate Merchant bank account to receive funds from credit card transactions. This is separate to your standard business bank account.
All major banks provide merchant account services. Setting up a merchant bank account can be time consuming and the bank will apply its own charges over and above the payment processor charges. Typically, they will charge between 1-2% commission on your transactions and may have a minimum administration fee if your transaction volume is low. These additional charges should be factored in when selecting a provider.
Dependant processors will also apply standard monthly fees for processing. Normally starting around €25 per month (as at August 2018) This covers you for a set volume of transactions with additional costs for transactions over the limit.
Two of the more popular processors are Global Payments (formerly Realex) & Sage Pay Both have very high standards of customer support and have a proven track record for stability in card processing.
If your business happens to use Sage accounting software Sage Pay offers options for automatically integrating with your accounts.
If you are selecting this type payment processor then you should be aware of the tendency for many of these to be white label version of other processors. This won’t impact on the day to day management but if technical issues arise during the website integration it can cause delays as you do not have direct access to the processor technicians.
Aggregated processors provide both payment processing and merchant services. They do not need a separate account. This makes it a lot easier for start up business to manage. Their charging is usually commission based and can range from 3-5% based on volume. The aggregated providers tend to be web based with low levels of human contact for troubleshooting. The logic being that their system is so easy you don’t need hand holding.
Two of the more popular aggregated providers are PayPal or more recently Stripe. With both providers you are required to provide the normal personal information for creating a bank account (proof of identity, etc.)
PayPal has a distinct advantage of both processing transactions and giving you the ability to pay out with the same account either from funds received or via linked credit cards. Speaking of linked cards lets have a quick chat about digital wallets.
A quick note on Apple Pay & Google
You can be forgiven for thinking that these providers fit into the categories above, however they offer a digital wallet facility for storing your real-world card details rather than a payment processor. Your card details are secured, and transaction details passed to the vendors processor. While you should offer the ability to your website visitors to pay using these methods you will still need a valid processor to link these to.
Watch out for charge back
For any real-world retailer the concept of chargeback may be all too familiar but if credit card management is new to you then you need to watch out for this. All payment processors and card vendors insure the card holder against fraud. This gives them the ability to dispute any card transaction within a six-month period. Online purchases are particularly susceptible to this as it can be very difficult to prove the card owner was the recipient of the goods. In short if a customer disputes, they can order the payment processor or merchant bank to withdraw funds from your account for the customer disputing the payment. There is very little come back for the retailer in this scenario and they are rarely able to recover funds. Unless…
This is a scheme offered by most merchant bank accounts (not aggregated payment options) that allows the retailer to shift the liability for the charge backs from themselves to their bank. I have seen this save tens of thousands for online retailers and it is seriously worth considering. The down side is to qualify for 3D secure your checkout needs to allow your payment processor to bring your customer through additional security checks. This can have a big impact on your conversion rate and you need to weigh up pros and cons carefully.
The short version
Hopefully the breakdown above will illuminate which option is right for you but if you are the type to skip to the end of the book let me give you a very quick summary.
Aggregated payment processors (like Stripe) are great for beginners or start-ups. Fast and cheap to get going. They get more expensive as you grow.
Dependent processors (like Realex) are more expensive but for large volumes of transactions they work out more competitive. They also offer greater fraud protection. If you have built a regular volume of orders on your site then dependent processor is the option for you.