How to start taking payments online

How to start taking payments onlineIf your business sells products or services online, it's essential to provide a secure payment facility for your customers. Benjamin Dyer of Powered Now looks at how to accept payments online, and the best payment software solutions for small businesses

In my job I come into contact with a lot of online businesses. And although the range of websites is staggering, there is one common factor: they all need to be able to accept online payments.

Figuring out how to start accepting payments online can be a daunting process, especially for a new online shop. There is a lot of jargon, bureaucracy and confusion about how to get started.

Here's how to find the best business payment facility for your ecommerce store.

Third-party payment gateways: PayPal, iZettle and Shopify

PayPal is the most well-known third-party payment gateway that can process online payments for you. In the years since its launch, PayPal has become one of the most successful online businesses of all time. People have huge trust in the brand, and it's incredibly simple to set up.

To my mind, every online shop should accept payment by PayPal, regardless of its size.

The downside to PayPal is the fees. PayPal charges vary between 1.4% and 3.4% per transaction, in addition to a small handling fee. This may not sound a lot when you are starting out, but it can become fairly painful in the long run, especially if you are successful.

Other payment gateways include iZettle, which charges a flat fee of 2.5% per transaction, and integrates with point-of-sale payments - which may be handy if you sell in-store as well as online.

Alternatively, Shopify's per-transaction charges are low, between 1.6% and 2.2% plus a small handling fee, although you'll also need to pay a monthly subscription fee for their services.

To take PayPal payments, you will need to add the secure PayPal button to your website. iZettle and Shopify also let you add a secure button to your existing site, or you can build an ecommerce site from scratch through their platforms.

To choose the best payment gateway for your business, look at:

  • the average number of transactions you need to process each month;
  • the average value of each transaction.

If you're processing a large number of low-value purchases each month, a payment gateway that doesn't charge a per-transaction fee will probably be best.

If you need to process a small number of transactions, at a high average value, a small transaction fee or monthly subscription charge in exchange for paying a lower percentage of the value of each transaction may work out better for you.

What is a merchant account, and do I need one?

You may feel you'd prefer to take more control and accept online debit and credit card payments directly. This allows you to create a more seamless experience for customers, who no longer have to be passed to a separate website to make payment.

If your site accepts card payments, your customer can pay for their purchase in their own currency and the funds are transferred to your bank account in sterling - making the payment process easy for overseas customers, as well as those from the UK.

To do this, you need an internet merchant account. A merchant account is an online bank account which is separate to your usual bank account, linked to a payment service provider (see below).

When customers pay you online, the money goes into your merchant account to be processed by the PSP. They deduct the processing fee automatically, and transfer what's left to your usual bank account - making it all very user-friendly.

How to get a merchant account

If you come from a traditional retail environment (perhaps you run a high street shop), you may already have a merchant account as part of your business banking package.

If not, your first step should be to contact your existing bank. This is often the quickest and cheapest way to get a merchant account.

Linking your merchant account to a payment processor

Once you are set up with your merchant account, you need to sign up with a payment service provider (PSP). Well-known PSPs include WorldPay, Sage Pay and SellerDeck.

The PSP is the bridge between your online shop and your bank. Think of it as an electronic till. Check how well your chosen PSP will integrate into your website, and see whether it offers additional features such as anti-fraud measures.

Cheaper merchant accounts for your businessCheaper merchant accounts for your business

If you want to take card payments, when selling sell face-to-face, over the phone or via your website, you need a merchant account. Compare quotes from top merchant account suppliers and get the right deal for you.

Find out more

Securing your online payments - PCI-DSS

Are you PCI-DSS compliant? The Payment Card Industry Data Security Standard (PCI-DSS) is a worldwide standard created to help prevent credit card fraud.

If you hold, process, or exchange cardholder information, it's important you comply with the standard. Breaching PCI-DSS carries heavy fines that could put many small companies out of business.

However this needn't be a huge hurdle. If you are using a PSP, it's the PSP that has to be PCI-DSS compliant, not you. They have all the headaches of staying compliant, and your systems hold no sensitive payment data.

Key steps to taking online payments

  • Assess the viability of using payment platforms such as PayPal for your business.
  • Set up an internet merchant account.
  • Sign up with a payment service provider.
  • Ensure your payment systems are secure.

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