It’s hard to beat the convenience of selling products over the internet.Â Not only do you not have to worry about paying the overhead costs of a brick and mortar store (unless you want to), but you can sell to customers that live far from your local market.
If your experience taking electronic payments has been limited to swapping cash with friends via Venmo, you’ve probably got a lot of questions about how to get started. In truth, it’s probably both more and less complicated than you think.
So let’s dive in and try to teach you everything you need to know about eCommerce payments.
1. There’s No One-Size-Fits-All Solution
First, some disappointing news. There isn’t one single “correct” way to handle eCommerce. The right payment processing solution will depend upon a number of factors. Take a business website, for example. Do you currently have one that you’d like to start selling products through? Or are you content to use a premade shopping cart template? If you’re a relatively technical person, you can integrate solutions into your site with software APIs or plugins. If you’re not, you’ll probably want to consider a service that provides that functionality upfront. While you can potentially save money doing it yourself, you’ll need to make sure that you’re keeping your customer’s information secure and reducing your own liability.
You’ll also want to consider the nature of the payments you’ll be accepting. Are your customers just buying a product one-off, or are they subscribing to a service that will require recurring monthly payments?
And of course, you’ll need to take stock of your budget and figure out how much you’re willing and able to spend on payment processing and any additional software services.
2. You Need A Payment Processor And A Gateway
A common point of confusion for people new to eCommerce is that there are actually two components to taking payments online. You need both a payment processor and a gateway. These services may be offered together as a package (PayPal, Square, and Stripe, for example) or separately. If you do end up going with a payment processor that doesn’t include gateway access, you’ll need to get it from a separate service like Authorize.net.
A payment processorprovides an account that allows your business to accept credit cards and receive credit card payments. It’s also used to deduct fees and processing charges associated with the transaction. After the payment gateway successfully processes a transaction, your payment processor receives the information.
AÂ payment gatewayÂ stands in for what would be your point of sale (POS) interface in a brick-and-mortar transaction. It allows you to securely process payments online by relaying the transaction information from your site to the processor, which then requests the payment from the customer’s bank before releasing funds to you. A payment gateway is also responsible for most of the security features associated with online payments as well as offering services like recurring payments and a credit card vault.
Types Of Payment Processors
Because nothing is ever simple in the world of payment processing, you won’t just need to think about getting a payment processor, but what type of payment processor you need.
The safest option is to go with the tried-and-true merchant account. Think of your merchant account as a holding area where all the busy work of receiving a credit card payment happens. Unlike, say, a business checking account, you don’t have direct access to your merchant account or the ability to directly make deposits and withdrawals to it. Instead, it automatically transfers payments to your business bank account, typically a day or two after receiving the transaction.
Merchant accounts are generally stable and you’re unlike to encounter holds, freezes, or terminations unless you have a sudden spike in chargebacks. Because of the underwriting process, merchant accounts are somewhat slow to establish–you’re probably looking at three days or so to get it up and running, though if you are negotiating or your business is particularly complex, it could take longer. The biggest drawback is that they often have minimum credit card transaction thresholds you have to meet; $5,000/month is typical but some expect you to handle at least $10,000/month in credit card sales. Pricing models with merchant accounts vary, and not all of them are great. We recommend interchange-plus pricing because it’s the most transparent and easiest to compare.
So what do you do if your new business isn’t doing that kind of sales volume?
You can turn to a third-party processor (aka payment services provider). Instead of having your own, unique merchant account, a third-party processor puts you in a pooled account with other merchants, from which fees are deducted in a similar manner to the merchant account. Signing up for a third-party processor is typically faster and easier than for a merchant account (you can start accepting payments the same day), but puts you at greater risk of account holds and terminations. Still, they provide an entry point for new businesses, or established ones that want more predictable pricing. Most third-party processors use a flat-rate pricing model where you’ll pay the same fee regardless of the card type; for eCommerce, that rate is commonly 2.9% + $0.30.
3. You Can Accept More Than Just Credit Card Payments
While credit and debit cards will probably make up the bulk of your eCommerce transactions, they aren’t the only way to make payments online.
It seems like every few years a new tech company rolls out their own digitalÂ wallet. We’re talking about services like Apple Pay, Google Wallet, PayPal, Venmo, and Cash App that allow you to link one or more payment sources to a single app account. In person, mobile wallets (a type of digital wallet that lives on your phone) allow you to make near field communication (NFC) purchases at terminals that allow tap-to-pay. In most cases, mobile wallets directly debit a linked credit or debit card while other digital wallets tend to store a balance, which can be used to make payments or be deposited into a bank account.
Many of these services can be used to make payments online as well. If your payment gateway doesn’t support mobile payments out of the box, it probably won’t be that big a deal since the customer can still just pay with the card attached to their mobile wallet. But if you want to go ahead and support mobile payments, you may have to add some code to your store.
The other type of payment you may want to think about isn’t cutting edge. In fact, it’s been around since the 70s: the automated clearing house (ACH). ACH transactions cut out the credit card company middleman and instead establish direct transfers between bank accounts. ACH payments can be one-time transactions, but if you’re using them in a retail context, you’re probably more interested in using them for recurring payments.
ACH is a bit more laborious to use at the point of sale than credit/debit cards, but it is a much less expensive way to process transactions and less prone to fraud and chargebacks. Most payment processors don’t offer ACH support by default, but a number do offer it as an add-on. Failing that, you may need a supplemental service.
Do You Want To Sell Globally? Prepare To Pay More
The internet is a miracle of the modern age, connecting people together and granting you easy access to markets abroad! Right?
While it’s true that you canÂ theoretically sell anywhere in the world, it introduces some additional complexities. For starters, there’s the matter of different currencies. Someone’s got to turn those euros into dollars! Some service providers, like Stripe, will handle currency conversions for you. Keep in mind that this service will usually come at a premium; in the case of Stripe, you’re looking at an additional 2% charge on your transaction.
And of course, you might want to convey the price of your goods to customers in their local currency. This feature usually goes hand-in-hand with automatic currency conversion, but you might need to enable this feature if you want to attract global buyers.
You’ll also need to take local taxes, customs, and duties into account, which means familiarizing yourself with foreign concepts like the value-added tax (VAT), which is used in Europe, Canada, South America, and Africa, as well as China and India. Here again, there are services that can take care of most of this complexity for you, but be prepared to pay for the privilege.
4. You Need To Be PCI Compliant
If you’re doing eCommerce, you’re going to be handling people’s money, and that means security concerns. And yes, yet another acronym.
The Payment Card Industry (PCI) has established a set of guidelines called the PCI Data Security Standard (PCI DSS) designed to minimize the risk of data being compromised by bad actors. So far so good, but PCI compliance is complicated by the fact that it’s actually a set of four different standards. The standard that applies to you is based on the number of debit and credit card transactions you process annually. Risk level four is considered the lowest risk, while risk level one is considered the highest. The fewer transactions you process, the lower risk you are unless there’s a data breach, at which point you’ll probably be considered risk level one regardless of your volume.
It gets a bit complicated, but what this means in practical terms for you is that you want to make sure your payment processor is PCI compliant and that you’re following the guidelines laid out by your PCI-compliant payment processor.
Payment Security Is Important
It can be a headache, but payment security will ultimately help protect your business and save you from costly chargebacks and account freezes. EMV chips have helped to reduce in-person credit card fraud, but unfortunately, that means online transactions are the new low-hanging fruit for fraud.
In addition to maintaining PCI compliance, security features like AVS (Address Verification Service) and CVV (Card Verification Value, that short number you’re asked for sometimes) provide extra layers of verification would-be fraudsters have to work through. Programs like Visa’s 3D Secure are also constantly evolving to make the changing payment security landscape.
How To Find An eCommerce Payment Provider
Got all that? eCommerce payment processing has a lot of moving parts that can confound even the tech-savvy. Having a sense of the functionality you need in advance will make it much easier to select a payment processor and gateway that can handle the transactions your business depends on. But you should also keep in mind how much of a budget you have for the monthly services required to keep your eCommerce setup running, what you can expect to pay for payment processing, and whether you’re going to need some technical assistance in building out your system.
If you’re ready to get started, we recommend checking out our list of the best online credit card processors. This will give you the rundown on some of the best options in the industry. If you want to learn a bit more about online payments before you get started, our article How To Choose An eCommerce Merchant Account is another great resource.
The post Everything You Need To Know About eCommerce Payments appeared first on Merchant Maverick.
So you’re looking to take advantage of everything that online commerce has to offer and enter the world of ecommerce? Good for you! Of course, this will require you to be able to accept online credit card payments. To do this, you’ll need an internet merchant account.
Sounds simple enough, right? If only! Not all merchant accounts are created equal. When choosing an internet merchant account for your ecommerce business, you’ll need to understand how a merchant account interacts with the other elements necessary for selling online, like payment gateways, payment processors, and shopping carts (not the kind you push around). Some services combine one or more of these elements, but it’s still important to distinguish these elements from one another.
Confused yet? Don’t worry — we’ll spell it all out for you!
What Is A Merchant Account?
A merchant account is a specific type of business account into which your customers’ money is deposited after they use their credit or debit card to make a purchase from you. After these payments are verified, the money is transferred to your own business bank account, which is entirely separate from your merchant account. You have no control over the merchant account — it is merely the middleman between your customers’ money and your business bank account.
So, why include this middleman at all? Wouldn’t it be easier to simply accept credit and debit card payments directly and get the funds deposited directly into your business bank account?
Unfortunately, credit card processing doesn’t work that way. When your customer pays you, the transaction ultimately still involves two other major parties: the issuing bank (which grants the customer cards and is responsible for collecting any payments from the customer) and the acquiring bank (which requests and then collects payments from the issuing bank and then releases them to the merchant). Because the payment process is so complicated — the acquiring bank has to ask for the funds from the issuing bank, which has to verify that the customer has those funds available and then transfer them — the merchant account essentially functions as a holding space or even as a sort of line of credit.
Merchant Account VS Third-Party Processor
When selecting a service to process your customers’ card payments, you’ll be choosing from between two different categories of services: direct processors (the providers of merchant accounts like the kind described above) and third-party processors (also called aggregators) like PayPal, Stripe, and Square.
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Setting up an account with a third-party processor is simpler and less time-consuming than setting up a merchant account. This is because third party processors don’t set you up with your own unique merchant account. Instead, the third-party processor aggregates all of its merchants into one enormous merchant account.
What do these differences mean for you, the merchant? For starters, the merchant accounts offered by direct processors typically provide you with a higher level of account stability. This is due to the extensive underwriting and risk assessment you have to undergo to get your merchant account. With third party processors, you are subjected to very little underwriting beforehand. Therefore, the processor scrutinizes your activities much more intensely, making it more likely that you’ll experience an account hold or termination.
The flip side of this is the cost advantage of third party processors. These services typically feature flat-rate pricing and pay-as-you-go agreements. There are few (if any) monthly or annual fees to pay, and you don’t need to meet a monthly minimum in card transactions, making it easy to start taking credit card payments with no established business history.
With direct processors, you’ll be paying monthly and potentially annual fees, you’ll need to be processing at least $5,000 to $10,000 per month in card transactions, and the pricing is not normally flat-rate — your rates may vary depending on the nature of your business model and your industry. Many merchant accounts still require you to sign a multi-year contract. (That said, many of the best processors in the industry have done away with these 3-year contracts and early termination fees in favor of month-to-month agreements, and we recommend that you not settle for a multi-year contract until you’ve explored all your options.) Still, above that $10,000/month mark, merchant accounts do offer cost savings and as your volume increases you’ll qualify for even more discounts.
For more on third-party processors and how they stack up against traditional merchant accounts, check out these articles:
The Best Online Credit Card Processing Companies
The Truth About Third-Party Payment Processing
What’s A Payment Gateway?
We’ve established what a merchant account is, so let’s move on to payment gateways.
While a merchant account is the account into which your payment processor sends your customers’ payments before they are transferred to your business bank account, a payment gateway connects your online store to your payment processor, facilitating your customers’ online transactions.
Payment gateways enable online transactions like so: the gateway integrates with your ecommerce store to securely capture the payment details for customer transactions. The gateway then routes that information to your payment processor or acquiring bank, which assumes control of the payment process. The gateway will then send an approval or decline message back to the merchant based on whether or not the processor/acquiring bank accepts the payment.
When you use a third-party processor, a payment gateway is typically included in the service. With direct merchant accounts, a gateway service may or may not be included for an additional fee. Some processors do offer gateways as part of their services, at no additional cost. Ultimately you’ll need to check with the processor to find out.
PCI Compliance With Online Merchant Accounts
What is PCI compliance, and how do you achieve it?
PCI compliance refers to a set of safety practices established by a council (the Payment Card Industry, or PCI) sponsored by the major credit card companies to ensure that a consumer’s payment information is secure when making a purchase using a credit or debit card. These standards, which apply to all businesses that accept credit and/or debit cards, are meant to standardize the securing, processing, and transmission of cardholder data.
If your merchant account provider deems you to be PCI non-compliant, you’ll be subject to a PCI non-compliance fee of around $30 per month until your account is compliant. What’s more, if your non-compliance results in a data breach, you can be fined anywhere from $5,000 to $500,000!
You’ve probably gathered by now that it’s a good idea for your business to be PCI compliant. For most small businesses, that means being Level 4 PCI compliant. Level 4 is the PCI standard that applies to businesses up to a certain size — it’s essentially the lowest bar to clear. Larger businesses must comply with higher PCI standards, with Level 1 standards applying to both the largest businesses and businesses that have suffered a data breach.
When choosing a payment processor, you’ll want to make sure your provider offers features such as PCI compliant processing hardware and software, quarterly network vulnerability scans, and assistance with completing and filing a Self-Assessment Questionnaire (SAQ).
Most third-party processors handle the entire process of PCI compliance for you, but with a merchant account, you should be expected at minimum to have to complete the SAQ.
If you’re running a brick-and-mortar business with no ecommerce component, you might think PCI compliance has nothing to do with you. However, if your business accepts credit cards, it almost certainly utilizes the internet to do so at some point in the process, so you’ll still need to be PCI compliant. It’s easier for physical-only businesses to establish PCI compliance than it is for online businesses, though.
Some PCI best practices are no-brainers. For instance, you don’t want to store your customers’ card data on your own hard drive or server, you should never use default passwords, and you’ll need to use a firewall on your network and computers. There’s more to PCI compliance than these obvious measures, however. For a detailed explanation of what PCI compliance means for your business, I highly recommend reading our comprehensive article on the subject, The Quick Guide To PCI Compliance For Small Businesses.
How Much Does An Internet Merchant Account Cost?
When choosing a merchant account, it’s important to know the different pricing models offered by payment processors:
Flat-Rate Pricing: This pricing model has the advantage of being predictable. You’ll pay a fixed rate for each transaction, making it easier to predict your processing costs. While you’ll usually pay more on a per-transaction basis than with other pricing models (and you donât know how much the processor is making off a transaction), you probably won’t have to pay monthly fees or other types of fees charged by processors offering other pricing models. Third-party processors like PayPal, Square, and Stripe use this pricing model. To learn more about flat-rate pricing, check out our flat-rate credit card processing explainer.
Interchange-Plus Pricing: Also known as cost-plus pricing, interchange-plus pricing is the pricing model preferred by Merchant Maverick. Why? Because it’s the most transparent model and it makes rate comparisons between processors easy. With interchange pricing, the processor passes on the interchange fees (fees charged to the merchant’s bank account and paid to the bank that issued the card) and assessments (fees paid directly to Visa or Mastercard etc.) while charging a small markup above that (often a percentage and a flat fee). Check out this article for more on how interchange-plus pricing works and why we prefer it.
Membership Pricing: This is the pricing model used by subscription-based payment processors like Fattmerchant and Payment Depot. Under this pricing model, you’re charged a single monthly subscription fee instead of the assortment of fees other pricing models feature. You’ll also likely pay a flat fee of between $0.08 and $0.15 per transaction as well as interchange fees. Higher-volume businesses can find themselves saving money under this pricing scheme.
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Tiered Pricing: Tiered pricing is an older pricing model not commonly used by modern businesses. We don’t recommend it. All transactions are grouped into two or three tiers of transactions, ranging from the lowest-priced transactions to the highest-priced transactions. Essentially, the problem with tiered pricing is that processors can categorize transactions assumed to be in a lower-priced tier as higher-priced transactions, thus charging you more and leaving you little recourse. You should avoid tiered pricing arrangements.
For most small businesses, using a third-party processor with flat-rate pricing like Square or PayPal may be more affordable than using a full-service merchant account. Of course, this entails a much greater risk of having your account frozen or terminated, which is, in itself, a very costly thing to happen to any business.
One thing that affects what your internet merchant account will charge you is the fact that CNP (card not present) transactions, including online purchases, cost more to process than do in-person transactions. This is due to the fact that the chance of chargebacks and fraud is higher with transactions where the card is not present, and this is factored into the cost of processing the payment.
Other fees you may (or may not) have to pay include PCI compliance fees, payment gateway fees, and fees for ACH acceptance if you want to offer customers the ability to pay with their bank accounts in addition to cards. To learn more about the complex and relatively opaque world of internet merchant account pricing, read through our Complete Guide To Credit Card Processing Rates & Fees.
Features To Look For In An Internet Merchant Account
Let’s go through some of the features that may be included in your internet merchant account package.
One benefit of third-party processors like Square is that a payment gateway is included as part of the service so you won’t have to go looking for one yourself. Of course, third party processors have their drawbacks as well, so you’ll be glad to know that some direct processors include a payment gateway in their services as well.
Remember, if you plan to do business online, whether it be through selling goods, offering SaaS, or what have you, you’ll need to be able to accept online credit card payments. To do that, a payment gateway is an absolute requirement.
Multiple Payment Methods
We’ve established that you’ll want to be able to accept credit and debit cards. However, there are other payment methods your customers may want to use, and you want to be able to accommodate them. From mobile wallets like Apple Pay on the web to ACH payments, the more payment methods your payment gateway (and payment processor) supports, the better.
Global Payment Support
With some merchant accounts, you can only accept payments in USD. If you expect to be able to attract any international business, that’s obviously not going to be good enough. Thankfully, many merchant account providers can set you up with a multi-currency ecommerce merchant account so you can expand your global reach. Just be aware that you’ll likely pay currency conversion fees (if they aren’t passed to your customers). PayPal and Stripe do very well in this regard, and Stripe actually supports many localized payment methods across Europe and Asia.
As an added note — some processors offer a feature usually referred to as dynamic currency conversion or localized currency displays. This means that your website will automatically convert the price from USD (or your default currency) to whatever currency is most common in the customer’s region. This can improve the shopping experience for international customers and potentially increase your sales.
Included Shopping Cart (Or Other Software)
An online shopping cart integrates with your website to facilitate ecommerce. The shopping cart enables your customers to look through your available products, select different options for each product (size, color, etc.), select the quantity of the products they want to order, and more.
Most merchant accounts can be integrated with major shopping carts, but if you can find one that includes a good shopping cart already, that’s even better, as you’ll be saving money.
Other handy features to look for include a customer credit card vault that allows you to securely store your customers’ card information while keeping it off your own equipment and subscription tools that let you create and manage customer subscriptions. Stripe is an example of a processor with built-in subscription tools and a card vault. However, you can also opt for a third-party provider to get recurring billing functions.
Processors with integrated developer tools, like Stripe, allow developers to use APIs (application programming interfaces) to integrate the payment platform using a variety of different programming languages. For the business with developer talent, integrated developer tools can help you build custom solutions for your ecommerce outfit.
Good customer service and availability is critical in an internet merchant account. Your ability to do business is reliant on all your systems working correctly 24/7, so reliability and quick response times are crucial. Do some research on merchant account providers to weigh the experiences of other merchants when dealing with any issues that pop up, and make sure that the available support channels jibe with your preferences.
How To Choose The Right Provider For You
That was a lot to take in, wasn’t it? If you’re feeling overwhelmed, don’t worry! Merchant accounts are Merchant Maverick’s original specialty, and we’re here to help you delve into the nitty-gritty of merchant account pricing, features, and provider options.
Here are some links to help you learn more about merchant account options, features, and more:
The Best Online Credit Card Payment Processing Companies
How To Choose An eCommerce Merchant Account
The Complete Guide To Online Credit Card Processing With A Payment Gateway
How To Accept Credit Cards Online
The post The Complete Guide To Finding An Internet Merchant Account appeared first on Merchant Maverick.
So you’ve realized you want to start selling online. Good for you! The ecommerce market is certainly booming. But before you can start raking in the money, you probably have a few questions, like “how do I make a website?” and “how do I accept credit cards online?” Here’s the good news: There are plenty of software options and payment processors to choose from! The bad news? There are plenty of software options and payment processors to choose from. So how do you choose?
As always, there’s no one perfect solution for everyone. You need to know your business (and where you want to go with it) and have a rough idea of what you need. If you have no idea where to start, never fear! In this article, we’ll cover some of the basic considerations about accepting credit card payments online, as well as types of payment processors and how to accept credit card payments online with and without a website. We’ll also discuss some of our favorite solutions for ecommerce and provide resources to help you learn more.
5 Questions To Ask Before You Start
It’s really important, before you dive headlong into any kind of financial investment in your business, to sit down and make sure that you know what you want and what you need. I say that a lot, but with selling online it’s especially important to look before you leap because if you get any component of your setup wrong, redoing it will cost time and money.
So before anything, here are some questions to consider:
How technologically savvy are you?Â Simply put,Â are you even able to build and maintain your website yourself? If you’re not exactly a technological wizard, your priority should be finding an easy-to-manage solution. You can also outsource tasks you can’t handle yourself, such as design or even data entry for the creation of products. Of course, if you have an ambitious idea and no ready-made solution exists, or you need a lot of customization, you might need a developer who can work with software APIs to create what you need. You can find freelance developers to help out as you go, but the more high-tech you go, obviously, the more you should consider having a full-time developer.
Do you already have a website?Â If yes, do you like your website? Would you rather abandon it for a better site with more features? If you already have a site and don’t want to go through the effort of creating a new site to sell a handful of products, payment buttons or plug-ins are better options. If you don’t have a site or you don’t mind nixing your current site in favor of something better, shopping cart software might meet the brief nicely. But of course, you don’t need a website to accept payments online. We’ll talk about all of these options more below.
What’s your budget?Â When it comes to numbers, you need to look at both upfront costs and monthly (or yearly) costs. How much can you spend at the outset, and how much do you expect to be able to afford on a monthly or annual basis? Keep in mind the more technically advanced your website, the more you can expect to pay to build and maintain it. Likewise, the busier your site — the more products you have and the more sales you make — the more you can expect to pay. Don’t forget the tangential costs, such as hiring a designer or a developer, or data entry, and of course, the costs of payment processing itself!
What are you selling?Â Whether you’re offering digital goods, subscriptions/services, or retail products, look for service providers that cater to your industry so you don’t have to find creative workarounds. Many solutions are generalized for a broad array of merchants, but with add-ons and integrations to make them more tailored. You can also find payment processors and software that offer ready-made specialized solutions and service plans, such as micropayments for merchants who sell low-priced digital goods.
How comfortable are you with handling security features? If you want to sell online, you have to make sure your website is secure. That means ensuring your site is PCI compliant. The more involved you are in the payments process and the more sensitive information your website handles, the more of a burden you are taking upon yourself. Fortunately, many payment processors and other software providers offer solutions to keep your customers’ information secure and reduce your PCI burden — in some cases, you may not need to do anything at all.
Once you’ve got the answers to these questions and a list of the features you need and want, it’s time to actually start looking at your options. One of your primary considerations should be finding a payment processor. However, depending on your business model, you might want to first look at what kind of ecommerce options work for you and then select a payment processor from the available options.
We’ll begin by talking about payment processors and go on to look at what other software or platforms you should explore.
Types Of Payment Processors
No matter how you go about finding a payment processor — choosing a standalone, going with the default processor included with your shopping cart, or choosing a recommended partner from a software provider — you need to consider what kind of business model the processor uses. If you’ve been here before and read any of my other articles, you know that I am talking about the difference between third-party payment processors versus traditional merchant accounts.
Traditional merchant accounts are very stable. It would take a clear violation of either your contract or card network rules in order to trigger an account termination, and you’re unlikely to encounter a hold on funds unless you’ve had a series of issues with chargebacks or fraudulent transactions. However, most merchant account providers expect you to have an established business and a monthly volume of $10,000 in credit card transactions. Plus, setting up a merchant account will typically take a few days. It could take longer depending on how many processors are on your short list and how much negotiation is required.
Third-party processors are not quite as stable as merchant accounts. That’s because instead of issuing separate accounts for each of their merchants, everything is lumped together in one giant, communal merchant account. It takes very little effort to apply for an account with one of these processors, and you can often get approved and set up to accept credit cards online within a day. Factor in no monthly minimum volume requirements and third-party processors provide a great way for new businesses to take payments. However, the trade-off is that you’ll face greater scrutiny and a higher risk for account holds or terminations, often with no warning. Check out our article on how toÂ prevent merchant account hold and freezes to learn how to reduce your risk.
While third-party processors are riskier than merchant accounts, they are a great option for new businesses who don’t know what sort of volume they can expect and don’t have an established history. Even for established businesses, there are some advantages: namely, third-party processors offer predictable, flat-rate pricing, so you know exactly how much you’ll pay. The best merchant account providers typically offer interchange-plus pricing, which, while clear and transparent, doesn’t make it easy to accurately estimate processing because interchange rates vary.
It’s up to you to decide which type of processor is right for your business. I do want to point out that some software companies (ecommerce shopping carts, point of sale solutions, invoice platforms, and more) often build white-label payments into their solutions. These solutions can take the form of third-party processors or merchant accounts, so make sure you investigate before just going with the default processor. In addition to their native payment processing services, most ecommerce software providers support integrations with an assortment of merchant accounts and third-party payment processors.
SquareÂ is our top-pick for third-party payment processor. In addition to predictable, flat-rate pricing with no monthly fees or contracts, Square offers a whole suite of seamlessly integrated apps to address in-person and online sales at no charge at all. eCommerce transactions process at 2.9% + $0.30 each.
For merchant accounts, we recommend CDGcommerce, which offers flat-rate pricing and an interchange-plus option depending on the merchant’s payment volume. There are no monthly minimums and no contracts, just a $10 monthly fee. Low-volume merchants will pay 1.95% + $0.30 for most transactions, or 2.95% + $0.30 for premium, corporate, or international cards. Merchants who process more than $10,000/month are eligible for interchange-plus pricing with a 0.30% + $0.10 markup.
Does Your Payment Processor Include a Gateway?
If you want to accept credit card payments online, it’s not enough to find a credit card processor. You also need a gateway. As the name suggests, a gateway is an intermediary software program that transfers the payment data from your website to the customer’s bank to be approved or declined (and then routes the money to your merchant account).
Many payment processors offer gateways as part of their services. For example, PayPal, Square, and Stripe all offer gateways bundled with the rest of their services at no additional cost. CDGcommerce offers its Quantum gateway as part of its services for online merchants.
However, some processors will charge you a setup fee and/or a monthly fee for use of the gateway. While it’s fair and legitimate to charge for this service (especially if you’re being offered other discounts or freebies in exchange), there’s no reason for you to overpay, either. Make sure you know how much a gateway service will cost if it’s not offered for free.
While it’s rare to find a processor that doesn’t include some sort of gateway access, they do exist. In the event that you find yourself leaning toward one of these processors, you can find your own gateway. Authorize.netÂ is nearly universally compatible and reasonably priced, which makes it a good option for most merchants. (Worth noting: CDGcommerce’s gateway, Quantum, also includes an Authorize.net emulation mode to maximize compatibility.)
Want to know more about how payment gateways figure into your ecommerce setup? Check out our article, The Complete Guide to Online Credit Card Processing With a Payment Gateway,Â for more information.
How To Accept Online Payments With A Website
A website is a pretty integral part of selling online (but it’s not 100% necessary — we’ll look at some alternatives in the next section). As mentioned above, the first question to consider is: Do I already have a website? Then ask yourself: Do I like that website, or would I rather start over completely? Fortunately, there are solutions for both of these scenarios. For existing sites, you can implement payment buttons or seek out a plug-in or extension that supports ecommerce.
Adding Payments To An Existing Site
If you’ve used a site builder such as WordPress, Weebly, Wix, or Squarespace, it’s fairly simple to implement online payments. Simply check out the sitebuilder’s available third-party apps, extensions, and plugins. If you already know which payment processor you want to use, you can search directly for an available add-on. Otherwise, you can browse and see what options are ready-made for you. These add-ons will allow you to securely collect payment information from your customers as well as manage the order fulfillment process. Do your research and go with solutions from your site builder rather than third parties, if possible. Check reviews of any plugins or extensions you add and make sure they are well supported and any glitches are fixed in a timely manner.
If you run a WordPress site, WooCommerce or Ecwid could be good starter options.Â WooCommerceÂ is actually a free plug-in to add to your site, with a basic theme and your choice of payment processors. It’s a very modular setup, so you can choose from a mix of free and paid extensions that allow you to customize WooCommerce to your needs. That includes payment processors, subscription tools, the ability to create add-ons (such as gift wrap for products), and more. Most WooCommerce add-ons are charged on an annual basis, which could require more of an up-front investment than a monthly subscription, so be aware of this fact.
EcwidÂ is another plug-in designed for WordPress. However, it also works on an assortment of other website-building platforms, including Wix and Weebly, Ecwid does offer a free plan for businesses with 10 or fewer products, but for higher-tiered plans you’ll pay a monthly subscription fee. Ecwid supports a wide assortment of integrations, including payment gateways. With higher plan tiers, you also get access to expanded sales channels.
Wix and Weebly’s website builders can be used for blogging, personal portfolios,Â and any other purposes. They both offer online store modules. Online stores fromÂ WixÂ start at $20/month with no transaction fees and your choice of processors. Upgrading to an eCommerce plan is fairly simple from within the Wix dashboard and won’t require any substantial reworking. Simply add the “My Store” module to your dashboard, make the upgrade, and start creating products.
Finally, there’s Weebly. Square actually bought Weebly in the spring of 2018, so it’s possible we could see Weebly start to favor Square pretty heavily in the future. For now, though, Weebly’s online store plans start at $8/month (on a yearly plan), with a 3% transaction fee on top of your processing costs. The transaction fee drops off with higher-tier plans, leaving just the monthly fee.
The other way to add payments to an existing site is to look for a payment processor that supports customizable payment buttons. A good payment button creator will give you power over the appearance of the buttons as well as the settings for transactions.Â The obvious, go-to solution for many is PayPal, which offers a pretty powerful array of tools. PayPal’s buttons are a good option whether you are selling a single product or multiple ones. You can set up payment buttons to allow products to be added to a cart or to go directly to checkout. PayPal even allows nonprofits to create a “Donate” button for their site, which can be configured for one-time and recurring donations.
An alternative to PayPal is Shopify Lite, an entry-level solution. For $9/month plus transaction costs (2.9% + $0.30), you can accept payments on your website by adding payment buttons. The plan also includes access to Shopify’s mPOS app and the ability to sell on Facebook (we’ll talk about that option in the next section, too.) And it’s worth mentioning that Ecwid also supports the creation of custom buy buttons.
While adding payments to an existing site is incredibly convenient and often requires little work, you won’t get quite as many tools as you would with a hosted ecommerce software solution. Which brings us to the best solution if you would rather build a new site or have no website to start with:
Building A New Site With Shopping Cart Software
eCommerce software apps, sometimes also called shopping carts or shopping cart software, are hosted, all-in-one solutions to online sales. Adding an ecommerce feature to an existing website requires you to choose a platform, buy the domain, and pay for hosting, but with shopping carts, you’ll get everything in a single package: online sales and product management, hosting, and sometimes even the ability to buy a domain name directly. Typically, shopping carts will also help you centralize control of sales across multiple channels, so that if you sell on social media, on eBay, or through another channel, you can handle order fulfillment through a single platform. That even includes buying postage (at a discounted rate) and printing the shipping labels. Some shopping carts will offer marketing tools or integrations with marketing platforms, as well as integrations with point of sale systems.
As far as payment processing goes, some shopping carts have opted to include their own white-label payments as a default part of their services. One such cart is Shopify, which offers its own Shopify Payments service (read our review). However, this is just a white-label version of Stripe. Be aware that choosing a payment processor other than the default can incur additional fees.
Generally speaking, even if a shopping cart doesn’t offer all of the features you want, you can search the app market for available extensions and integrations to get what you need. It’s worth researching the available add-ons as well as the native software features.
There’s a lot to consider and compare with a shopping cart. Obviously, you can use a sitebuilder such as Weebly or Wix, which both offer eCommerce modules. Then there areÂ ecommerce-exclusive platforms, including Shopify and BigCommerce, which make it easy to build your site and customize the design (and even offer blogging so you can centralize control of your website).
If you want a whole lot of freedom and have coding knowledge, an open-source platform such as Magento might be more to your liking. Open-source platforms tend to be chock-full of specialized features (particularly if they have attracted active user communities) and you have almost limitless control of your site. A closed-source, SaaS platform is certainly a lot easier and more convenient for business owners who are just starting out and want to go the DIY route.
If you aren’t sure what you want, we recommend you start by checking out Shopify and BigCommerce, both of which are affordably priced for new businesses and offer extensive customer support resources. They also both offer multi-channel sales manage so you can sell through your own site and through other platforms but manage all of your orders from a single portal.
If you’re still curious about what makes a great ecommerce platform, check out some of our other resources!
The Beginner’s Guide to Starting an Online Store (eBook)
Shopping Cart Flowchart: Choose the Right eCommerce Software for Your Business (Infographic)
Shopping Carts 101: How to Choose a Shopping Cart for Your Business (Article)
Questions to Ask Before You Commit to a Shopping Cart (Article)
Managing Services, Subscriptions & Other Recurring Charges
A lot of merchants,Â from accountants and other professional service provideres to lawn care and cleaning services, could benefit from being able to automate recurring charges. And of course, the ability to automate charges is essential for SaaS providers and subscription-box sellers.
Generally speaking, the ability to accept recurring payments — for monthly services or subscriptions — isn’t a default option for payment processors or shopping carts, which tend to be retail-focused.Â However, you can find plenty of solutions that will work with your existing eCommerce setup. For example, Stripe and Braintree both offer extensive subscription management tools along with their payment gateway and processing services. Add-on services such as Chargify, Recurly,Â and ChargeBee work with a variety of processors. Zoho Subscriptions and FreshbooksÂ also offer recurring billing tools. PayPal offers recurring billing tools for its merchants; Square offers “recurring invoices” but not a lot of advanced customization for subscription billing.
Proper research will be very important when selecting a provider that offers all of the features you need, whether you require metered billing for usage-based online services, the ability for customers to upgrade to a higher tiered plan mid-billing cycle, the ability to offer free trial periods and extend them, or a way to calculate taxes. Tools that automatically update expired cards can also help reduce failed charges and therefore improve revenues and reduce customer loss.
Accepting Online Payments Without A Website
Most people equate taking payments online with having a website. That is the most common option, but you don’t actually need your own website. Let’s talk about a few of the alternatives for how to accept credit cards online.
Creating Online Invoices
You could create your own invoices in Microsoft Office and send them out via email, but then you’ve got to keep track of which invoices have been sent and which have been paid — and you’ve still got to deal with waiting for the check in the mail. Online invoicing solutions can eliminate every single one of these hassles.
Generally speaking, invoicing software is cloud-based, so you can access it anywhere. You can customize invoices and send them via email (or generate a shareable link to the invoice). But unlike old-fashioned invoicing, these invoices include a link to pay directly in the invoice. Your customers follow the link, enter their payment details, and bam! You get paid much quicker.
Depending on which invoicing software you choose, you can get some powerful features. For example, PayPal allows you to enable partial payments on an invoice if you are willing to accept installment payments. Square’s invoicing links up with the platform’s customer database, allowing you to send recurring invoices and even store customer cards on file to make getting paid even easier. Zoho Invoice, which starts at $0/month, also allows for a customer database, as well as project management (so you can generate an invoice based on the number of hours worked). Shopify offers invoice creation within its platform at no additional charge as well — and this feature is even available on the Lite plan.
For most merchants, SquareÂ InvoicesÂ may be the most appealing, as it’s available with a Square account at no additional charge. However, Shopify’s built-in invoicing will work for merchants who want to sell with or without a website. Merchants who need project management as part of their invoicing should look at Zoho Invoice.
Using Online Form Builders
So you don’t have a website, but you still need to collect user information and accept payment. Online form builders offer an easy way to do both. Plus, you can post links to forms on social media or send them out via email.
Off the top of your head, you might think of Google Forms, which is free to use and quite advanced for a freemium software. However, it doesn’t integrate seamlessly with payment processors. Your best option,Â in this case, would be to use PayPal’s embeddable buy buttons and include the button in the form’s submission confirmation page as a second step. However, you’ll have to manually reconcile the payment records versus form submissions.
Subscription-based form builders will cost you money but offer far more capabilities than Google Forms, including direct integrations with payment processors/gateways such as PayPal, Stripe, Square, and Authorize.net. Subscriptions generally work on annual or monthly plans, but one option, Cognito Forms, offers an entry-level plan that charges 1% of the transaction amount instead. (Note, that’s in addition to any processing fees.) Other form solutions worth looking into are Zoho Forms and Jotform. Zoho Forms starts at $10/monthÂ and includes unlimited forms and up to 10,000 submissions. It integrates with both PayPal and Stripe. Jotform’s paid plans start at $19/month and are limited to 1,000 submissions, but include integrations for quite a few payment processors, including PayPal, Stripe, Square, and even Dwolla. Cognito Forms’ paid plans start at $10/month plus 1% of the transactions and include up to 2,000 form submissions. Integrations include PayPal and Stripe.
And we haven’t even talked about event registration sites. There are a lot of them, but the one many people are likely familiar with is EventBrite. EventBrite allows you to put all the details of your event online and sell tickets — including setting multiple tiers of admission and promotion cards, automatically setting price changes for registration deadlines, and so on. You can even collect marketing data about your patrons, from their zip codes to how they heard about the event. Your event is searchable from within the EventBrite platform, allowing people searching for something to do to discover your event as well. EventBrite does charge fees on top of processing costs, but these can actually be passed onto event registrees, saving you some money at least.
Selling On Social Media
It wasn’t all that long ago that the idea of being able to buy products directly through social media channels was novel and experimental, but nowadays you can create your own online shop through Facebook, or sell on Instagram or even Pinterest.
With Facebook, you just need a Facebook business page to get started. You can choose your payment processor (PayPal or Stripe) and start manually uploading products, all of which have to be reviewed by Facebook before they can go live. An easier option is to link your Facebook shop to an online store builder such as BigCommerce, Ecwid, or Shopify.
Shopify is actually an interesting solution because, while its core offering is an online shopping cart, it offers a “Lite” plan for $9/month that includes access to its mPOS app, buy buttons for a website, and a Facebook store with automated tools to make the process easier. You wouldn’t necessarily have to go through the hassle of building a website with Shopify just to sell on Facebook, but you still get more tools than you would by going through Facebook directly. Check out our Shopify Lite review for an in-depth look at the plan and all its features.
Selling on Instagram requires you to have a Facebook shop (because Facebook owns Instagram) to create what it calls “Shoppable posts.” That shop can be managed directly via Facebook itself, or via Shopify or BigCommerce as one of multiple sales channels. I’d like to point out that Instagram isn’t available as a sales channel with the Lite plan; you’ll need to upgrade to Shopify Basic at $29/month to be able to manage sales via Instagram.
Lastly, Pinterest allows merchants with a business account to create “Buyable pins,” so you can sell from your Pinterest page. Unlike Facebook, where you can manage the buyable pins from the platform, to sell through Pinterest you will need to go through either Shopify or BigCommerce and actually apply for approval before you can start selling.
Shopify Lite is an ideal option if you want to start with Facebook and maybe add buy buttons to a website. You can upgrade to Shopify Basic ($29/month) to get your own site, plus access to Instagram and Pinterest if that appeals to you.
Selling In Marketplaces
Online marketplaces are a good alternative to having your own website if you’re selling retail goods. You don’t have to pay for hosting or invest anything in web design. You simply create your product listings using the tools provided and publish them. Marketplaces allow you to get your products in front of a large audience without you having to build a stream of traffic yourself. However, the trade-offs are that you generally pay more in fees (listing fees, seller’s fees, and payment processing) than you would with your own website, and you have zero control over the design of the site or even how your products are displayed. Generally speaking, you are limited to using whatever payment processing the marketplace offers as well.
A few popular marketplaces include:
Jet (owned by Walmart)
Accepting Payments Through Virtual TerminalsÂ
The final alternative is a bit of a stretch, I’ll admit, but it can be a powerful tool for some merchants. A virtual terminal is a web portal where you can manually enter credit card information to process a transaction. (There’s the stretch: VTs require an internet connection, so they’re technically online payments.)Â Virtual terminals are a necessity for merchants who want to accept payments over the phone (or even by mail).
Some payment processors offer a virtual terminal as part of their software package, others as an add-on. These providers include PayPal, Payline Mobile, Square, and Fattmerchant. However, if you want the best value for a virtual terminal, we recommend Square. You pay only the payment processing costs (3.5% + $0.15) and it is interoperable with the rest of Square’s platform.
Beyond Credit Cards: Alternative Online Payment Methods
Credit cards are the go-to for accepting payments online, but they aren’t the only options. For starters, there are ACH bank transfers, which are generally less expensive for merchants to process. They’re often preferred in B2B environments, but some consumers favor them too.
Offering ACH processing as an additional option, especially if you’re in the B2B space, could win you more customers. According to aÂ 2017 Payment Benchmarks Survey by the Credit Research Foundation and the National Automated Clearing House Association (NACHA), ACH transfers currently account for 32 percent of B2B transactions, lagging behind checks, which took the no. 1 spot at 50 percent. Credit cards account for just 11 percent of B2B transactions. By 2020, the survey estimates that ACH will take the top spot and account for 45 percent of B2B transactions.
Despite this, most merchant accounts or even third-party processors don’t offer ACH by default. Some offer it as an add-on plan, others may require you to look for a supplemental option for ACH acceptance.
ACH is far from the only option as far as “alternative” payment processing now, too. Mobile wallets are bridging the gap between in-person and online payments, and card networks have implemented their own online checkout options for cardholders. The major advantage to accepting these options is that they offer an extra layer of security for consumers. For example, Apple Pay on the web still requires biometric authentication before approval.
Some of these alternative payment methods include:
Apple Pay on the Web
Amex Express checkout
Apple Pay and Google Pay are fairly widely supported, but you may not see the other options on this list everywhere.
Two noteworthy providers that offer ACH,Â as well as other alternative payment options, are Stripe and Braintree. However, both are developer-focused platforms, so you’ll need someone with the technical know-how to implement them. Merchant accounts that specialize in eCommerce and provide a solid gateway might offer these options too.
We recommend Stripe because of its extensive developer tools, customizable checkout, and resources for recurring billing. The company also offers round-the-clock customer support (an admittedly recent addition to its feature set). Plus, Stripe is great for international merchants who want to be able to accept localized currencies in Europe and Asia.
Begin Accepting Payments Online
Starting an online store and learning how to accept credit cards online can seem like a daunting task! There are so many factors to consider, but I hope I’ve been able to shed some light on the process and point you in the direction of some good options. A merchant account can give you security and stability, but it may not be the most cost-effective option for low-volume merchants. A third-party processor can get you set up quickly with predictable pricing that often favors low-volume merchants, but the trade-off is account stability. And of course there’s the matter of compatibility: You need to make sure that whatever payment processor you choose offers a gateway compatible with the software (and sales channels) you want to use.
But you also need to have a good idea of what you can afford to spend up front and on a monthly basisÂ and understand your limitations when it comes to technology and software. If you want to go the DIY route, you’ll need to be fairly tech-savvy. Otherwise, be prepared to outsource tasks to designers, developers, and even admin assistants. Some software solutions make it incredibly easy to do everything yourself, others will require lots of hands-on effort to make them work.
If you’re still not sure where to go from here, we recommend you check out our article: The Best Online Credit Card Payment Processing Companies. You can also view our merchant account comparison chart for a quick look at our favorite providers.
Have questions? We’re always happy to hear from our readers, so please leave us a comment!
The post How To Accept Credit Cards Online appeared first on Merchant Maverick.
We donât typically think about what happens in the moments after we swipe our debit and/or credit cards. More often than not, we simply run or insert our card into the credit card machine and hope that the cashier doesnât use the next few moments to initiate small talk. The number in our checking account decreases or the number on our credit card bill increases, and that’s all we care about.
But, to the business owner, credit card processing is exceptionally important and it can play a huge role in your bottom line. Thereâs a lot of information to take in if youâre a novice when it comes to credit card processing, and youâll need to decide what elements are most important to your business. Do you need mobility when accepting payments? Will you be accepting transactions online or over the phone? What security measures should you be taking to protect both your business and your customers? What companies are highly rated or come heavily recommended?
Weâll try and answer the bulk of your questions about credit card machines and terminals below.
Credit Card Machines
Credit card technology has evolved rapidly over the years. It doesnât seem like that long ago when the process involved a terminal with just the option for credit. Then came debit cards. As the internet became the worldâs go to for conducting business, the processing game had to change as well. Now, merchants can take payments with readers connected to their phones or tablets — they can even accept payments remotely without the physical card present. This has created a need for increased security which has led to encryption technology and the relatively recent advent of the EMV chip card.
Before we get into that, however, letâs start with some basics about credit card transactions. You have, no doubt, used hundreds of different types of card readers throughout your illustrious tenure as a consumer. But what happens once your cardâs magnetic strip has been read? In simple terms, there are three phases involved in actual processing:
Authorization:Â Once your card is scanned, its information is sent over with a request to be processed. The processing request is then sent to the company of the cardholder (VISA, Mastercard etcâ¦). The company sends the request on to the issuing bank. If there are enough funds in the account, and if the card is registered as valid, the purchase is approved. All of this takes place in a matter of seconds, generally speaking.
Settling:Â After a transaction has been approved, it is forwarded on to be cleared via an interchange. When the request is received, a credit is given to the merchant for the amount of the sale. The bank will then issue a statement to the customer in that amount which the customer must then pay off.
Funding:Â So far in the transaction, no actual money has changed hands. After the card has been authorized and the credit is issued, the payment company then makes a deposit into the merchantâs checking account. These funds can generally be accessed in just a few days.
In order to accept these forms of payment, you will need some type of card reader. Your options here have also evolved rapidly in the past couple of decades. The most common type of credit card machine is still the stationary card terminal. This is a machine that needs a physical connection either to a phone line or to the internet in order to process physical cards.
The next type of machine, and one that is rapidly gaining in popularity, is the wireless processor. These often look very similar to a stationary device, using a magnetic strip or chip reader to take a customerâs card information. However, these devices only require a wireless connection, making them far more versatile and mobile for merchants (albeit with slightly higher security concerns).
Finally, you can also accept payments via a virtual terminal, something we’ll get into more thoroughly a little bit later. In short, virtual terminals allow you to take a customerâs card information without that card being physically present.
Of course, within these different machines, youâll have some other hardware choices to make. One item you may want to look into is a PIN pad. With this device, customers can manually type in their debit card password to process a payment. Debit cards with either a VISA or Mastercard logo can be processed almost identically to credit cards. However, with a PIN pad, aÂ transaction that is specifically run as debit usually costs the merchant a smaller fee. This ends up saving you a lot of money in the long run, particularly on large transactions.
Some point of sale systems have this technology built-in, allowing customers to enter their PIN numbers on a touchscreen. PIN pads encrypt a customerâs information, giving an inherent level of security on those transactions. As previously mentioned, you donât need a PIN pad to run these types of transactions. A signature debit card is processed just like a credit card, but the money comes directly from a customerâs checking account. However, in most instances, the merchant is still charged the same rate as if the transaction was run as credit.
One of the more recent changes in the world of credit card processing has been the introduction of the chip card. EMV (which stands for Europay, Mastercard, VISA) is a method of payment based on a standard for cards and machines that is meant to dramatically reduce the possibility for fraud when it comes to credit card payments. EMV cards store data in a chip within the card that is scanned when it is âdippedâ or inserted into a card reader or payment machine. Companies have been steadily trying to meet EMV standards and the majority of processors and point of sale companies are now EMV compliant or claim to be in the process of becoming compliant in the near future. VISA and Mastercard have also issued standards for card-not-present transactions as a way to increase security measures in the world of eCommerce.
Itâs difficult to predict what the future will look like when it comes to payment processing, but one trend that seems like a near sure bet is that consumers will continue to seek out convenience. This means that services like Apple and Android Pay will probably continue to spike in popularity. Given society’s increased dependence on iPhones for everything from communication to driving directions, the ability to pay with oneâs phone is something all companies will want to make sure they can handle — sooner rather than later.
Looking for a credit card machine for your business? Buy, don’t lease!Â
What is a virtual terminal? Let’s delve in deeper to get a sense of whether or not itâs a solution your business needs. Virtual terminals are online applications that allow customers to input credit card information directly online to then be processed electronically. These terminals allow for transactions to be processed evenÂ when a credit card is not physically present. This can be an ideal solution for any business that is highly mobile or conducting transactions remotely with clients.
Many companies,Â including PayPal and Helcim, offer the ability to use a virtual terminal for payments. The implementation process is exceedingly simple. Generally, for a small, monthly fee, your processor can give you the ability to enter payment information from pretty much anywhere with an internet connection. Most companies will offer a percentage rate and a flat fee for virtual terminal transactions. This fee is often slightly higher than it would be for a typical transaction as card-not-present transactions have a slightly higher risk of fraud.
With PayPal, for example, all you need is a phone, tablet or computer and you can quickly log in to your account and go to the virtual terminal setting. This leads you to a screen similar to one you would see if you were entering your own information online for a purchase. Once the information is entered, youâll receive confirmation.Â
This simplicity and flexibility has made the virtual terminal an increasingly popular way for businesses of all types — not just mail order or eCommerce businesses — to accept payments. An increasing number of companies are now also offering USB card readers that connect directly to your terminal. These automatically take the card information and run it through your virtual terminal, keeping your transactions in the same location but charging you a lower rate since the card is present at the time. Some of these same companies offer pads which can collect customer signatures in the same way. Even with an external card reader, virtual terminals are usually not designed to accept advanced payment types, like contactless payments, from mobile wallets such as ApplePay. If you want to accept contactless payments, you’re better off getting a standard NFC-enabled credit card machine or credit card reader.
Virtual terminals can also take automated clearinghouse (ACH) payments for one-time or recurring transactions. These payments are processed in bunches, meaning the payment is usually received a little later. However, you arenât subject to interchange fees for these payments.
Obviously, when making or accepting payments where credit card information is simply entered online, security is going to be of the utmost importance. It is highly recommended that you choose a payment provider that encrypts credit card data; this both reduces the risk of theft and the scope of the Payment Card Industry (PCI) compliance.
From there, you will generally have two options.
You can choose a non-validated solution which can cut down the risk of having data stolen. This is an affordable option that is offered by most processing companies, though these solutions are not defined as secure by the PCI. In other words, there is an increased chance that hackers could gain access to encryption keys which could eventually lead to a data breach.
The other option is a PCI point-to-point (P2PE) provider which meets all of the PCI standards and includes secure hardware. Processors that provide this level of protection must accept Merchant P2PE Implementation Responsibilities. Because of this added security, a much smaller number of processors offer this service (although that list is growing). If you are set on providing increased security, you will need to make sure you have hardware that meets these standards — you will also have to submit to regular security check-ups.
When we talk about merchant services, what exactly do we mean? In simple terms, ‘merchant services’ is a broad term to describe the hardware and software products that make it possible to accept credit and debit card transactions. TheseÂ companies and services help to connect the issuing bank (the bank that gave your customers their credit cards) and the merchant bank (the bank that is behind your merchant account). In the last couple of decades, this term has expanded to include much more than just your standard terminal scanner. The internet has opened the door for payments to be made online and those purchases can be tracked and managed from your computer or mobile device.
Merchant services providers are any businesses which accept payments (aside from just cash and checks). These can include credit and debit card processors, point of sale terminals, analytic software etc.Â There are a handful of different kinds of merchant services providers, including:
Merchant Account Providers:Â These providers can set you up with a merchant account and services that allow you to collect your money following a debit or credit card transaction. Some larger companies also come with direct processing services.
Payment Service Providers:Â Even though itâs advisable, itâs not essential to have a merchant account to process payments. Payment service providers, like the ubiquitous PayPal, donât give you an ID number and are popular because they generally do not come with account fees or long-term contracts. These accounts can be frozen, sometimes without notice, and customer service can be sketchy. However, for smaller or seasonal businesses, payment service providers are a popular choice.
Payment Gateway Providers:Â Payment gateway providers represent a service provider that has emerged with increased popularity of eCommerce. These providers may or may not come with a merchant account. Some give you a choice of using their own merchant account or using a gateway with an existing account. Others only offer a gateway service, meaning youâll have to have a merchant account from a third party.
When youâre looking at various card processors, there are a few things that you should keep an eye on. Perhaps most importantly youâll want to research the companyâs reputation. Processing payments is a crucial aspect of your business and an unreliable company can give you a lot of headaches (and affect your bottom line).
Youâll also want to compare the costs and potential fees that various processors implement. Square, for example, charges no monthly fee, which is yet another appeal for smaller or mid-sized companies. However, they also implement a 2.75% fee on transactions — if your business takes off and youâre suddenly processing a high number of transactions, those fees will add up and quickly wipe out any savings youâre receiving from not paying a monthly fee.
Youâll also want to doublecheck the compatibility of your processor. If, for instance, youâve found a point of sale system that you are comfortable with, youâll want to make sure that the processor integrates seamlessly without additional costs. If youâre forced to set up an aforementioned gateway, you could end up paying a large monthly fee.
To enable transactions, merchants will have to fill out an application. If youâre opening a merchant account, this process can take a little longer than going through a third-party processor. One of the reasons smaller and mid-sized merchants lean towards a third-processing account like Square is that you can be up and ready to take payments almost immediately. The price for that instant gratification, however, is an increased likelihood for potential account freezes later on.
When youâre in the process of picking out a processor, youâll also want to pay close attention to transaction fees. The best merchant account providers usually offer what is referred to as interchange-plus pricing. This means that the provider takes the wholesale cost of the transaction and tacks on a small, standardized markup. This ensures an affordable and transparent pricing plan. It also means a slightly higher rate for transactions when a card isnât physically present since those transactions have a higher frequency of fraud. Third-party processors sometimes provide a flat rate for all transactions — this is convenient and offers a simple way to quickly figure out your fees. However, it may not be the most cost-efficient in the grand scheme of things. A company like Square, which offers a flat rate for swiped and dipped transactions, also charges a slightly higher rate for key-in and eCommerce transactions.
There are a few other things youâll want to watch out for when finalizing your decision about a merchant accounts provider. Along with the potential for account freezes or funding holds, keep an eye on how businesses handle chargebacks (where customers dispute a charge) and fraudulent charges in general. There are ways to mitigate these dangers, of course. You can use fraud management tools, including things like address verification services. Using a chip card terminal also dramatically cuts back on fraudulent charges.
Here are a few of our most highly recommended processing companies:
Fattmerchant:Â Fattmerchant is one of the best companies for eCommerce transactions. Its pricing is transparent without undisclosed fees. There is also a 0% markup, meaning you pay only the wholesale cost plus the monthly fee and a small authorization fee. Fattmerchant also has terrific customer service.
Dharma:Â Dharma provides a full array of processing services and also has a simple, affordable pricing structure without hidden fees. They exclusively use the interchange-plus format and are a particularly good choice for non-profits, as they offer a discount to those companies.
Helcim:Â For slightly large companies, Helcim is a very strong option. While offering a wide range of services, they have extremely competitive rates for companies that process more than $2500 a month. They also have very strong customer service and their fee structure is transparent and easy to understand.
Square:Â For companies that donât provide a full-service merchant account, Square is the standard bearer. There is no monthly account fee and they offer free or low-cost readers. Square also doesnât force you to sign up for a long-term contract or charge you for early termination.
Your POS System
Another way to process payments is through your POS or point of sale system. Point of sale systems have come a long way, especially in the past decade. Today, you can virtually run your entire business from one, simple device. With the influx of cloud-based systems, you can make snap decisions and check the status of your operation from anywhere with a wireless connection.
With so many options available, and with point of sale systems offering more and more features all the time, choosing the correct system to meet your needs is an important decision. The first thing youâll need to decide is whether you want a system that is cloud-based or locally installed. Most companies have been moving toward cloud-based options for numerous reasons. First and foremost, itâs incredibly convenient. All of your data is automatically stored off-premise, so if something happens to your store or to your system, all of your payment, customer, and inventory information is still accessible. These systems are often extremely user-friendly as well, designed to be intuitive with very little training time needed. They tend to be sleek, modern, and visually appealing both to your customers and employees.
Many cloud-based systems also perform routine updates automatically, fixing bugs and adding new features so that you always have the most current software at your fingertips. Along these same lines, the best POS systems sync seamlessly to any number of integrations that can help your business in ways you may not have even considered before.
When youâre looking at purchasing a POS system, there are a number of factors to keep in mind. First and foremost, itâs likely that the cost of the POS hardware and software is going to play a large role. Some systems allow you to purchase your system and all necessary hardware upfront for a flat rate, allowing you to own the software. But if dropping a few thousand dollars isnât something youâre comfortable with, the majority of point of sale companies offer monthly rates. A few companies, such as Square, offer a free version of their software that is generally suited for small operations, though most other POS software systems run anywhere from $39 to $99 a month for basic services while often offering advanced packages with additional features.
Letâs talk about some features you can expect to find in pretty much any good, modern point of sale system:
Inventory Management:Â Not only can you view all of your stock on hand, you can set your POS to alert you when certain products are running low or, even more conveniently, you can set the system to automatically reorder products when they hit a certain level. This can be an enormous time saver and, in most systems, inventory management can be accessed remotely. You can set up quick transfers across multiple locations and, in many cases, create and print your own purchase orders.
Employee Management:Â Likewise, your staff is easy to track and manage from your centralized POS station. You can set permissions and create alerts for suspicious transactions to cut down on fraud. Employees can be given unique codes when they log into the system and can view their hours and current schedules.
Customer Management:Â Many point of sale systems come with their own built-in loyalty programs or integrate with other companies for a small monthly fee. But these days, your POS can help with so much more when it comes to analytics and marketing. Most systems allow for customer data to be stored and easily searched. Customers can look up their own loyalty points and control their own profiles in some cases. More useful for business owners, however, is the ability for the system to analyze what items are being purchased by certain customers, assessing buying habits and creating personalized marketing campaigns that can be implemented with ease, helping to maximize profits. The same can be done with coupons, targeting customers to boost repeat business.
You will also want to do your research to see what systems specifically cater to your particular business. For example, if youâre opening a pizza shop, you may want to look for a system with built-in features that makes online ordering simple, or functions that allows customers to create a custom order which is then automatically sent to the kitchen, freeing up your employees. There are also niche POS systems for specific types of businesses. Quetzal, one of our highest-rated systems here at Merchant Maverick, is built for the retail industry with a significant bent towards shoe stores.
Many POS software systems have their own app store, like Clover, or integrate with scores of apps that might help your business out tremendously. If youâre technically savvy, most POS providers also give you access to an open API, meaning that you or a developer can create your own apps within the software.
When youâre doing your research there are a number of other features youâll want to keep an eye on. Definitely check to see what features come in the form of add-ons which will increase your monthly fee. You will also want to make sure you have appropriate, compatible POS hardware. Several companies offer hardware packages that can be purchased directly through their websites.
A robust reporting feature should be available in most highly-rated systems and many offer their own eCommerce platforms, making it easy to set up your own website and sell online, all from your POS device.
Another key factor to research is what credit card processors are compatible with your system. While some offer a wide range of choices, integrating with most major companies, others lock you into a limited number of options or offer their own processing services for credit card payments, for better or worse.
Youâll also want to see what your system has in terms of an offline mode. Most point of sale systems have evolved to now offer at least some offline functionality, but what you can actually do in the case of an outage can vary. Many systems still function as normal, allowing you to process credit cards, encrypt transactions, and store the data to be run once the internet is restored.
Itâs difficult to make a decision, but at Merchant Maverick, weâve come across a number of point of sale systems that we would happily recommend depending on your business.
Shopkeep:Â Shopkeep is routinely on the top of our lists. This simple and reasonably priced system features everything you would expect in a point of sale system. Itâs well suited for small to mid-sized retail shops and restaurants with a sleek design, excellent reporting and management tools, and terrific customer service.
Revel:Â For slightly larger restaurants or retail establishments, we often recommend Revel, a product that can manage multiple locations and large amounts of inventory with ease. Revel is intuitive and extremely robust with a top-notch kiosk function and Kitchen Display System.
Lightspeed:Â Lightspeed is another highly rated company and offers both a Retail and Restaurant product. Lightspeed has great customer service and is easy to set up while also providing intuitive front end and back end features. It also has an excellent and simple to use eCommerce platform.
ERPLY:Â ERPLY is one of the top retail point of sale systems that we’ve reviewed. One of its biggest features is the ability to integrate with most major credit card processors. It also has terrific shipping integrations and excellent customer management tools, particularly when it comes to loyalty.
There is obviously a lot to process when it comes toâ¦ wellâ¦ credit card terminals andÂ payment processing. If youâve made it this far, hopefully youâre feeling a little more confident about your knowledge of credit card processing machines, virtual terminals, merchant services, point of sale systems, and what you should be looking for from the various companies that provide this technology. Make sure you have a good grasp on what each company charges for different transactions and what might be the best option for your type and size of business. Also donât overlook things like a companyâs customer service reputation. Itâs a competitive market and you have the ability to make sure you end up with a credit card terminal and processing system that can best help your business thrive.
Interested in learning more? Download our free Beginner’s Guide To Payment Processing.
The post Complete Guide To Credit Card Machines And Terminals appeared first on Merchant Maverick.
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If you’ve spent any time on our blog, you know that Shopify (read our review) is one of our favorite shopping cart solutions, primarily because they provide an all-inclusive solution to a wide range of merchants. One monthly rate gives you access to Shopify’s hosting, security, administrative abilities, customer service features, inventory management features, web design tools, and more.
With the addition of Shopify Payments, an integrated payment processor, you can even access built-in payment processing features. Shopify Payments allows you to quickly begin accepting orders on your online store. You won’t have to worry about integrating a third-party processor, and Shopify will waive their shopping cart transaction fees.
However, despite its convenience, Shopify Payments is not a perfect solution. Customers often complain that they do not qualify to use the service. Others say that Shopify Payments has frozen their account or is holding payments.
Keep reading to learn if you qualify for Shopify Payments and if it’s right for your business.
In this article, we’ll be discussing payment service providers (PSPs). If you’re new to the world of payment processing, we’d love to help get you oriented. Download our free ebook, The Beginner’s Guide to Payment Processing, to get started.
Table of Contents
What Is Shopify Payments?
Shopify Payments is a payment processor that allows you to accept customers’ money securely on your account. Shopify is responsible for these transactions, although they are effectively processed through Stripe and Wells Fargo.
Shopify Payments is already integrated into your Shopify account, so it requires very little setup. There is no need to integrate a third-party processor or coordinate payments with a separate company. All you have to do is select Shopify Payments in your admin and add your banking information. Read Shopify’s setup instructions.
What’s more, Shopify Payments comes with a few additional features, including chargeback management and fraud prevention.
When you use Shopify Payments, Shopify will waive their usual shopping cart transaction fees. The only transaction fees you’ll need to pay are those associated with payment processing.
What Are The Rates?
Every PSP comes with its own processing rates and fees. Shopify Payments bases their rates on users’ subscription level. Users on higher Shopify plans benefit from lower rates. Take a look at the screenshot below for a breakdown of those rates.
Shopify states that they do not charge any monthly fees, hidden fees, or setup fees on their payments service.
Who Can Use Shopify Payments?
Perhaps the most obvious requirement is that you must be a Shopify customer to use Shopify Payments.
Shopify Payments is only available to merchants in the US, Canada, the UK, Ireland, Australia, New Zealand, and Singapore. Shopify Payments is not available to US territories, with the exception of Puerto Rico.
You must follow Shopify’s Acceptable Use Policy. Take a look at the extensive list of products and services Shopify does not support below:
If you do not comply with Shopify Payments’ Terms of Service, you will not be approved or the service may be revoked.
When Do I Get Paid?
Payday is on everyone’s mind. One of the most frequently-asked questions regarding Shopify Payments is how long you’ll have to wait to receive your customers’ payments.
This period — the time between when a customer places an order and when those funds are sent to your bank account — is called a pay period. You should keep in mind that this pay period does not include the amount of time it takes for your bank to process that deposit after it’s sent (typically between 24-72 hours).
Your pay period with Shopify Payments will depend on the country in which your company is based. You can view the full breakdown of pay periods in Shopify’s knowledgebase, or you can see my summary below:
US:2 business days. Funds from Friday, Saturday, and Sunday are grouped and sent together as one payment.
Canada:3 business days. Funds from Friday, Saturday, and Sunday are grouped and sent together as one payment.
Australia:3 business days. Funds from Saturday, Sunday, and Monday are grouped and sent together as one payment.
New Zealand:3 business days. Funds from Saturday, Sunday, and Monday are grouped and sent together as one payment.
UK & Ireland:4 business days. Funds from Saturday, Sunday, and Monday are grouped and sent together as one payment.
Make sure you keep in mind this delay in payments as you plan your business. It might be worth setting up a business credit card so you always have funds on hand.
Pros & Positive Reviews
Customers choose Shopify Payments for a number of reasons. Here are the primary benefits of using Shopify Payments:
No Shopify Transaction Fees:While there will always be processing fees, when you use Shopify Payments, you’ll no longer have to pay that 1%-2% transaction fee associated with your Shopify plan. I assume Shopify instead takes their money from your payment processing. Either way, it’s savings for you.
Potentially Lower Processing Fees:As I’ve said before, higher-level Shopify merchants benefit from lower rates. You may find that Shopify’s rates are competitive with those of other major processors.
Already Integrated:You won’t need any developers to connect with Shopify Payments.
Integrated Fraud Prevention: Shopify Payments helps you reduce fraudulent transactions. You can choose to enable an address verification system and a card verification value upon checkout to ensure customers are real cardholders. Read more about fraud analysis.
Shopify Payments is a great solution if you meet the requirements and are looking for a processor that’s easy to integrate.
Cons & Complaints
While Shopify Payments is great for convenience, I’ve seen numerous reports blaming the service for being unreliable and difficult to contact. Here are a few of the most common complaints and disadvantages of using Shopify Payments:
Ineligibility:Shopify users often complain that they are not eligible for Shopify Payments. For some, this is because Shopify Payments is not available in their country. In some cases, Shopify has actually revoked payment services because, for one reason or another, their business was deemed “high-risk.” Shopify’s Terms of Service states: “We reserve the right to modify or terminate the Service for any reason, without notice at any time.”
Shopify Holds Funds:Merchants frequently complain of their funds being withheld for an extended period of time. Here’s what Shopify Payments’ Terms Of Service says about that: “Stripe, on behalf of Shopify and/or Wells Fargo reserves the right to change the Payout Schedule or suspend payouts to your Bank Account should we determine it is necessary due to pending disputes, excessive Chargebacks or refunds, or other suspicious activity associated with your use of the Service or it required by law or court order.”
Difficulties With Chargebacks:Chargebacks are an unfortunate and inevitable part of running an online business. If customers file too many chargebacks against you, Shopify may withhold your funds, further complicating the issue.
Make sure you read the Terms of Service for every solution you sign up with, including Shopify and Shopify Payments. It could save you a world of pain.
I’ve seen enough negative reports about Shopify Payments to be skeptical of the service. Many merchants have been denied payments or had the service revoked entirely.
However, without the specifics, it’s difficult to determine whether Shopify was justified or not in these actions. If merchants were not complying with Shopify Payments’ Terms of Service, Shopify was within their rights to cancel the service.
As you make your decision, read every word of Shopify Payments’ Terms of Service to ensure your business qualifies. There are some great benefits to integrated payments, and if your store follows all the rules, Shopify Payments could be the best choice for your store.
But, don’t stop your research there. Take a look at our complete review of Shopify (and the real customer comments below) to learn more about the software, and be sure to read up on Shopify Payments in their knowledgebase. Best of luck!
Liz is a recent college graduate living in Washington state. As of late, she can often be found haunting eCommerce forums and waiting on hold with customer service representatives. When she’s free, Liz loves to rock climb, watch Spanish dramas, and read poorly-written young adult novels.
Setting up an eCommerce business involves making a lot of choices, but one important decision you might have overlooked is choosing the best payment gateway to allow your customers to actually make purchases on your site. Pick a good gateway, and youâll be able to accept just about any payment method imaginable, interface with the online shopping cart of your choice, and, perhaps most importantly, easily be able to migrate your customer payment data to a different system if you later decide to change gateway providers. If you pick a not-so-great gateway, you may someday find yourself with a product that no longer meets the needs of your business â and no easy way to switch to a better one.
If youâre new to eCommerce, your first question might be âJust what the heck is a payment gateway, anyway?â Admittedly, payment gateways are something of a nebulous subject. Merchants are often unsure about what they do, and why they might need one in the first place. Theyâre also often confused with merchant accounts, which is a related (but separate) merchant service that youâll also need to accept credit cards and other forms of payment.
Weâll try to keep it as simple as possible. A payment gateway is a software application that establishes a communication link between your eCommerce website and your merchant account providerâs payment processing system. Much like your computerâs BIOS and other operating system functions, payment gateways run in the background, and your customers wonât have to interface with them directly. The primary purpose of a payment gateway is to allow your customers to make purchases on your site using the payment method of their choice. While almost every gateway will support credit card purchases, the better ones will also allow customers to pay using eChecks, debit cards, their PayPal account, and even contactless payment methods such as Apple Pay. Most gateways also maintain a secure database of your customersâ payment method data, shipping and billing addresses, and other information. With this database, returning customers wonât have to re-enter their payment method information every time they make a purchase. This feature naturally translates to increased sales due to the convenience it offers your customers. For more details about payment gateways and how they work, see our article The Complete Guide to Online Credit Card Processing With a Payment Gateway.
Merchant accounts, on the other hand, process payment transactions and disburse the funds to you after a customer makes a purchase. Both retail and eCommerce businesses need a merchant account to accept credit card payments, although today payment service providers (PSPs) such as Square and Stripe can offer basic credit card processing without the need for a full-service merchant account. If your business is strictly retail and you donât make any sales online, you can stop reading now. You wonât need a payment gateway. eCommerce merchants, on the other hand, will usually need both a payment gateway and a merchant account. This is because their transactions will all be in a card-not-present environment where they wonât be able to verify their customerâs identity or have access to the magstripe or EMV-chip data that helps to prevent fraud in the traditional card-present environment of a retail location.
With so many different choices of merchant account and payment gateway providers on the market, you might wonder what the best way is to set your business up with both of these services. There are two methods you can use: an integrated approach, or a non-integrated approach. Under the integrated approach, youâll use the same provider for both services. For example, an account with a payment service provider (PSP) like Stripe includes both payment gateway functions and transaction processing services. The non-integrated approach, on the other hand, requires you to sign up for each service separately. The easiest way to do this is to use the payment gateway offered by your merchant account provider. Often this will be a proprietary product, such as the Quantum Gateway provided by CDGcommerce. While most providers will charge you additional fees for a payment gateway, CDGcommerce will let you use their gateway for free. Many providers also offer access to third-party gateways, which may be a better option if you need more advanced features than what the proprietary gateways have to offer or simply want to have more flexibility to change your merchant account provider at some point in the future. The majority of merchant account providers (including CDGcommerce) offer Authorize.Net as one of their payment gateway options. Signing up for the Authorize.Net gateway through your merchant account provider is often less expensive than going with the company directly, as providers can negotiate discounted rates and fees for their customers.
Another way to take the non-integrated approach is to sign up for your merchant account and payment gateway separately. For example, letâs say youâve found a great merchant account provider that offers significantly lower processing rates than youâve been able to find elsewhere. Unfortunately, they donât offer a gateway that includes all the features you need for your business. You can always sign up for a third-party gateway and integrate it into your merchant account. While this may be the best option for some merchants, be aware that there are two disadvantages to this approach. For one thing, youâll have to make absolutely sure that the two services are fully compatible with each other before you sign up. Also, you will almost always end up paying more money with this approach. Watch out for gateway setup fees and additional per-transaction charges for using a third-party gateway.
So, which approach is right for your business? Thereâs simply no clear-cut answer to this question, unfortunately. As a general rule, however, smaller businesses will usually save money by signing up with a payment service provider (PSP) that doesnât charge monthly fees for either transaction processing or the use of their payment gateway. The trade-off, of course, is that you will pay higher per-transaction processing costs, as most PSPs only offer flat-rate pricing. Upgrading to a full-service merchant account and adding in a payment gateway will cost you more in monthly fees, but youâll usually save money on processing charges â at least if your provider offers interchange-plus pricing. Larger businesses that have a higher monthly processing volume can more easily afford the extra fees and will save money overall because of the lower processing rates available from full-service merchant account providers. Because of the number of variables involved, there is no easy way to determine what your processing volume needs to be for a full-service merchant account plus a gateway to be more cost-effective than simply going with a PSP. We recommend that you take a close look at the total percentage of your transactions each month that goes to paying for merchant services and compare this to what you would pay under a different provider.
How We Chose:
While all payment gateways offer the basic function of processing transactions over the internet, thereâs a lot of variability beyond that. The best gateways on the market offer a combination of fair pricing and a robust feature set that will meet the needs of most eCommerce merchants. In evaluating how well each gateway stood up against the competition, we used the following criteria:
Pricing: While everyone wants to save money, we firmly believe that pricing should be evaluated in terms of overall value rather than simply trying to find the cheapest option available. Trying to save a few dollars can easily result in being stuck with a product that doesnât fully meet your needs. Nonetheless, there are some things to look out for. Many gateway providers, for example, charge a gateway setup fee when you first open your account. While this is a one-time charge, itâs mostly a junk fee that you should avoid paying. Youâre more likely to get hit with a setup fee if you sign up directly with a gateway provider. Merchant account providers often waive this fee if you get your gateway through them. Monthly gateway fees (usually around $15.00 – $25.00 per month), on the other hand, are very hard to avoid. Unless you sign up with a company like CDGcommerce, which doesnât charge a monthly fee for their gateway, you can expect to pay this on top of whatever monthly fee you have to pay for your merchant account. Gateway processing charges (typically $0.05 per transaction) are another thing to look out for. Some companies will charge you separately for this, while others will include it in their processing rates. You might also have to pay PCI compliance fees, particularly if youâve signed up directly with a gateway provider. Usually, however, these fees are included in your merchant account pricing.
Contracts: Most payment gateway providers will bill you on a month-to-month basis, with no long-term contract and no early termination fee (ETF) if you close your account. However, your merchant account provider might include both of these provisions, so read all your contract documents very carefully before signing up. It wonât do you much good to be able to drop your payment gateway whenever you want if youâre stuck in a three-year contract for your merchant account.
Features: Obviously, youâll want a gateway that includes the features youâll need to run your business. Confirming that a gateway will meet your needs, however, isnât always as easy as it should be. Companies naturally tend to play up the unique features of their services, but in most cases, they wonât disclose the limitations or shortcomings of those services. For starters, youâll want to confirm that the gateway supports all the payment methods your customers use. For example, almost every gateway on the market will support Visa and MasterCard credit card purchases. Support for less-common cards isnât as easy to find. If your customers use Diners Club (as unusual as that may be), youâll want a gateway that supports it. Support for multiple currencies is also important for some merchants, and youâll obviously need a gateway that supports the specific currencies your customers use. If you prefer a particular online shopping cart for your site, youâll need a gateway that is certified to integrate with it. If you need to customize the integration between your site and your gateway, access to an API that allows you to do that will be essential. Finally, we recommend that you choose a gateway that allows for easy and convenient data portability in case you need to switch to a different gateway.
Security: No eCommerce merchant ever wants to have their site hacked and their customerâs sensitive payment data exposed in a data breach. Your gateway provider doesnât want this to happen, either, which is why every gateway on the market comes with a number of security and encryption features to keep your account safe. Some of these features, however, are more effective than others. Look for point-to-point encryption (P2PE) and a gateway that meets Level 1 PCI compliance standards. Other features, such as data breach insurance, are also useful to have.
Customer support: Like any other software product, payment gateways are prone to occasional hiccups and glitches â often at the most inconvenient times. The eCommerce world runs around the clock and isnât limited to just regular business hours. For this reason, youâll want a gateway thatâs backed up by 24/7 customer support. While options like email and online chat are nice to have, you really should be able to talk to a customer service representative via telephone when a problem arises.
Before we dive into our specific recommendations, letâs be clear about one thing: there really isnât a perfect gateway out there that will meet the needs of every merchant. Even the best gateways fall short of perfection in one aspect or another. Nonetheless, there are several gateways that provide a significantly better combination of features and services than others. Here are our recommendations:
Originally founded in 1996, Authorize.Net is one of the oldest and most experienced payment gateway providers in the industry. Thanks to partnerships with a host of merchant account providers, theyâve also cornered the lionâs share of the market for payment gateways. Thereâs a good chance that your merchant account provider offers Authorize.Net as their payment gateway.
But, does being the biggest gateway provider also make them the best? Well, maybe. With over twenty years in business to perfect their product, theyâve definitely managed to add a lot of bells and whistles to their core product. Their gateway can accept all major credit cards (yes, even Dinerâs Club), debit cards, eCheck payments, and even digital payment methods such as PayPal and Apple Pay. They can accept international transactions from just about any country in the world, although your business must be based in the United States, Canada, the United Kingdom, Europe, or Australia. Their Advanced Fraud Detection Suite (AFDS) can protect your site from card-not-present fraud â a common issue with eCommerce. Best of all, their gateway seamlessly integrates with a huge number of third-party eCommerce platforms.
Sounds great, doesnât it? Well, there are a few things to watch out for. Pricing can be on the high side if you sign up directly with Authorize.Net, with a $49.00 gateway setup fee, a $25.00 monthly gateway fee, and a $25.00 fee for chargebacks. If you already have a merchant account, youâll still pay an additional $0.10 per transaction for the use of their gateway. International transactions also pay an additional 1.5% for processing. If you donât have a merchant account, Authorize.Net will set you up with one, but it uses a flat-rate pricing plan of 2.9% + $0.30 per transaction. While this is the same as what youâd pay for PayPal or most other payment service providers (PSPs), you can get lower rates by signing up with a merchant account provider that offers interchange-plus pricing.
The good news is that you can usually get a better deal on the Authorize.Net gateway by signing up with a partner merchant account provider. Most providers will waive the setup fee, and theyâll often charge a lower monthly gateway fee and per-transaction processing fee (typically $0.05 per transaction). However, Authorize.Net does have one major weakness: data portability. Or, rather, the lack of it. Their Customer Information Manager (CIM) is a powerful feature that allows you to store customer data, including credit card numbers, securely. Unfortunately, itâs difficult and very expensive to download that data and take it with you if you ever decide to switch to a competing payment gateway. This is a serious limitation, especially considering that other providers (such as Braintree) offer you the freedom to take your customer data with you if you want to. Youâll want to very carefully evaluate whether Authorize.Net will be able to meet the long-term needs of your business before you sign up.
Broad support for multiple payment methods and currencies
Strong security and fraud prevention features
Month-to-month billing with no long-term contracts
Pricing is expensive for merchants who sign up with the company directly
High flat-rate pricing for optional merchant account
Data portability is unusually difficult and expensive
For a more in-depth look at Authorize.Net, check out our full review.
Braintree Payment Solutions:
Founded in 2010, Braintree Payments Solutions is now a PayPal company. They offer an integrated approach to eCommerce, with each account including both a payment gateway and a full-service merchant account. Itâs available in 44 countries, including the United States, Canada, Australia, and most of Europe. Payments can be accepted in over 130 currencies, including Bitcoin if youâre particularly adventurous.
Standard accounts at Braintree follow a pay-as-you-go pricing model, with no account setup fees, monthly fees, or even gateway fees. All transactions are processed at a flat rate of 2.9% + $0.30 per transaction. Billing is on a month-to-month basis, with no long-term contracts or early termination fees. While the flat-rate pricing is not particularly cost-effective for larger businesses, the lack of monthly fees makes it a great deal for smaller companies. Braintree addresses this limitation by offering enterprise pricing for larger businesses (presumably with interchange-plus rates), but youâll have to process over $80,000 per month to qualify for it.
Braintreeâs gateway includes some excellent standard features, including its Drop-In UI for customer checkouts and support for recurring billing. Itâs also compatible with a huge variety of third-party integrations, including shopping carts, accounting software, and analytics. Developers can further customize the gateway using Braintreeâs client and server SDKs. Perhaps the best feature Braintree has to offer is that they provide complete data portability for free. If your needs change and you want to switch to a different provider, youâre free to take your customer data with you.
While Braintree offers an excellent service at a fair price, itâs not for everyone. If you already have a separate merchant account (particularly if youâre stuck in a long-term contract), their gateway-only option is quite expensive at $49.00 per month and $0.10 per transaction processed over the gateway. Thereâs also almost no support for card-present (i.e., retail) transactions, although they do support a handful of third-party mPOS solutions.
Pay-as-you-go pricing with no monthly fees
Simple flat-rate pricing for standard accounts
Free, unrestricted data portability
No support for eCheck (ACH) payments
Gateway-only option is expensive
Check out our full review of Braintree for more information.
You might not think of PayPal as a payment gateway provider, but their Payflow Payment Gateway is actually a very capable product. In fact, PayPal offers a host of merchant services for eCommerce businesses, and you can integrate most of them with the merchant account, shopping cart, or another service youâre already using.
Offering PayPal as an additional payment method is the simplest option, as itâs free to set up and there are no monthly fees or long-term contracts. Pricing is pay-as-you-go and based on a flat rate of 2.9% + $0.30 per transaction (4.4% + $0.30 per transaction for international transactions). While this is certainly the least expensive option, realize that as a payment service provider (PSP), PayPal is not giving you a full merchant account. Instead, your account is aggregated with those of other sellers so that you wonât have a unique merchant ID number for your business. The downsides to this arrangement, of course, are that your account wonât be nearly as stable as a merchant account, plus account freezes and holds on your funds are more common. PayPal is rather notorious for withholding sellerâs funds at the slightest suspicion of fraud, so itâs better to use them as a backup payment method rather than relying on them entirely for your transaction processing needs.
If you already have a merchant account through a different provider, the Payflow Payment Gateway is designed to integrate with it and expand your payment options. There are two pricing plans for the Payflow gateway: Payflow Link and Payflow Pro. Payflow Link (the best choice for most merchants) is practically free. There are no gateway setup or monthly fees. You pay an extra $0.10 per transaction, and thatâs it. You can use a PayPal-hosted payment page or a template embedded on your website. Payflow Pro, on the other hand, offers full customization and additional PCI compliance features. However, itâs rather expensive, with a $99.00 setup fee and a $25.00 monthly fee after that. Youâll also still pay $0.10 per transaction with this option.
No setup or monthly fees (for Payflow Link)
Simple, transparent flat-rate pricing with no hidden fees
Easy to setup and begin accepting payments
Flat-rate processing charges are higher than most merchant accounts offer
Elevated risk of account holds, freezes, and terminations
Inconsistent quality of customer support
For more detailed information about PayPal, see our complete review here.
While theyâre not nearly as well-known as the other heavy hitters in the payment gateway industry, PayTrace offers a solid product with lots of specialized features, particularly for merchants in the B2B sphere. Unlike other merchant services providers who offer a broad range of products and services, PayTrace is a payment gateway provider first and foremost. They donât offer merchant accounts or any hardware, so youâll have to go with a third-party provider for these items. Although the PayTrace gateway is their primary product, the company also offers a virtual terminal and a mobile payments app.
PayTrace offers both Basic and Pro pricing plans, with the former being suitable for small eCommerce businesses and the latter offering specialized options for larger B2B merchants. The Basic plan has no setup fee and costs only $15.00 per month after that. Youâll also pay $0.30 per transaction processed over the gateway, which is in addition to any processing charge you pay to your merchant account provider. The Pro plan requires a $75.00 setup fee, and $20.00 per month after that. However, your gateway processing fee drops to $0.10 per transaction. Youâll also be able to process Level II and Level III credit card data, which will save you up to 1.0% in processing charges due to the lower interchange rates for these transactions. Processing Level III data requires some additional data input on your part and is mostly useful for B2B transactions, but if you process a lot of these types of transactions, the savings could be significant.
The PayTrace gateway also supports additional features such as eCheck (ACH) processing and recurring billing. However, these are optional features requiring additional fees, and are only available under the Pro plan. PayTrace bills on a month-to-month basis only, so thereâs no long-term contract and no early termination fee to worry about. Be aware, however, that your merchant account provider might not be so generous. As always, we highly recommend that you read all contract documents thoroughly before signing up for a merchant account. The same advice goes for payment gateways, even though gateway providers are generally much more flexible about contract terms.
Like most gateway providers, PayTrace also offers a customer information database so returning customers donât have to re-enter their payment method data every time they make a purchase. Unfortunately, itâs only available under the Pro pricing plan. Data portability is supported, although PayTrace notes on its website that âonly truncated payment information is available for export from the system.â
Month-to-month billing with no long-term contracts
Integrates with most merchant account providers and shopping carts
Supports Level II and Level III credit card data for B2B merchants
High per-transaction processing charge under Basic pricing plan
To learn more about PayTrace, check out our full review.
Much like Braintree, Stripe Payments is a tech-focused merchant services provider that specializes in serving the eCommerce community. Those services are tightly integrated into their payments system, so the company doesnât offer a discrete Stripe-branded payment gateway. Instead, itâs built into their overall payments platform and comes with every Stripe account. For small businesses, this is a very affordable approach, as thereâs no separate account setup fee, no monthly gateway fees, and no additional per-transaction processing fee. You also donât have to worry about trying to integrate two or more third-party services into your website. Another advantage is that Stripe includes several additional features for free that most gateway providers charge extra for, including eCheck (ACH) processing and recurring billing.
Stripeâs pay-as-you-go pricing couldnât be simpler. Credit card transactions are processed at a single flat rate of 2.9% + $0.30 per transaction. eChecks are 0.8%, up to a maximum of $5.00. Stripe also supports digital payment methods such as Bitcoin and Apple Pay. Qualified nonprofit corporations get a discount on these rates, and enterprise users (i.e., those processing over $80,000 per month) can also negotiate volume discounts on their processing rates. Like most of its direct competitors, Stripe bills month-to-month only and doesnât impose long-term contracts or early termination fees.
Sounds great, doesnât it? If you think that there must be a catch â of course there is. Stripe is a payment service provider (PSP), and so they donât provide true full-service merchant accounts. Like other PSPs (i.e., Square or PayPal), funding holds and account freezes or terminations are distressingly common. Customer service is another weak point, with almost all communications between Stripe and its merchants being conducted via email.
The best thing about Stripe is that itâs designed specifically for eCommerce merchants. Most providers are more focused on the retail sector, and their support for eCommerce always comes at a higher cost in the form of gateway fees and additional per-transaction charges. With Stripe, new eCommerce merchants get everything they need to start accepting payments as soon as their account is approved. While a Stripe account covers all the basics, you can also add or customize features through their huge API library or supported third-party integrations. Stripe also supports data portability, so you can easily take your customer information with you if you decide to change providers later.
Pay-as-you-go pricing with no setup or monthly fees
Simple, transparent flat-rate pricing structure
No long-term contracts or early termination fees
Huge API library for developers
Flat-rate pricing is more expensive than interchange-plus for high-volume merchants
Frequent account holds and terminations
No telephone customer support
For more information, see our complete review of Stripe Payments here.
If youâve been reading this far, youâve probably concluded that selecting a payment gateway provider can be a very complicated decision. While thatâs sometimes true, it doesnât have to be all that difficult. Gateway providers offer a dizzying array of options, customizations, and add-ons, but in most cases, you wonât need all of them. Take a close look at what your business needs are today, and consider how those needs might expand over time as your business grows. For example, if you donât need recurring billing, thereâs no reason to pay extra for it. If your needs change later, you can always add it to your service. Level II and III credit card data processing is another feature that a sales agent might try to upsell you on. Yes, the rates are lower, but you still pay extra to access them, and if you donât take many B2B transactions, youâll wind up paying extra for something you donât use.
Youâll also want to put some thought into whether the integrated or non-integrated approach will work best for you. Payment service providers (PSPs) like PayPal or Stripe are an excellent way to add credit card processing to your business without spending any money up front. However, once your business grows large enough, the high flat-rate pricing will end up costing you more money than youâd pay with a traditional merchant account offering interchange-plus pricing. Since thereâs no long-term contract to worry about, itâs relatively easy to make the switch once this happens. However, youâll probably have to find a merchant account provider and a new gateway.
Although there are no hard and fast rules, we recommend providers such as PayPal or Stripe for new, low-volume eCommerce businesses. Braintree is also a good option, especially if youâd like to get all your merchant services from the same company. When youâre ready to step up to a full-service merchant account, Authorize.Net is a good option. However, we recommend getting their gateway through a third-party provider rather than the company itself due to the generally lower costs. PayTrace is also an excellent choice if you already have a merchant account, especially if you run a lot of B2B transactions.
Much like merchant account providers, there is no single âbestâ gateway provider. Even the companies weâve profiled here have their shortcomings. Every business has different needs, and itâs up to you to decide what features your business needs the most. Fortunately, most payment gateway providers offer a similar set of standard features that cover the most common requirements of a majority of businesses. They also provide a very high degree of customization to make their service work with your business, although in many cases youâll have to have developer skills (or hire one) to implement them. If youâve had any experience with the providers profiled in this article or you want to highlight a gateway provider we havenât mentioned, please feel free to tell us about it in the Comments section below.
The post The Top 5 Payment Gateways for Online Credit Card Processing appeared first on Merchant Maverick.