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Guide to accepting online transactions

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For many small businesses the thought of taking payments 24 hours a day is quite appealing – especially when you go to work in the morning and find a list of orders that have already been processed and the payments cleared to your account.

Taking payments on your website is a big step to take, but if you are successful is another way of making money for your business.

Building a website that processes online payments can cost from £5,000 to £100,000+, dependent on its complexity, so you will need to justify the business return for such an investment.

Why take payments online?

Quite simply the more transactions you can process that don’t require personal intervention then the more scalable your business and the bigger you can grow. Once setup online transactions are generally simple to manage and enable you to focus on sales and marketing rather than the logistics of order payment. By accepting credit card payments you are also improving your cash flow by getting payment at the time of the order.

When not to take payments online

Think about your business and the products you sell. Are they easy to buy and something that a customer would pay for using a credit card? For durable goods such as books and DVDs online payments are suitable, as these are well defined products that people understand and can buy instantly. For products that have a more involved sales cycle, and maybe need a salesperson to explain to a potential customer you would expect little business to be closed via online payments directly.

You also need to consider the cost of a website able to process online transactions. To setup and manage such a site takes time and money. If you get it wrong you can face huge reputational damage as you are playing with people’s money. If you are in any doubt you are probably better using your website to market your goods and then accept cheques or credit card details via the telephone. You may also wish to consider selling products using an online e-auction site which

Building an online order processing site

Unless you have considerable website design and IT expertise it is very strongly suggested that you use an outside supplier to help build your site.

Before you build your site you will need to have a merchant account with a credit card provider. You will need to open an account and obtain bank references. You will also need to pay the card processor a % of each sale which will vary depending on the nature of the business you are involved with. “Card holder not present” transactions, which include those processed on the web, will attract a higher % due to the higher risk of card fraud.

Here are some links to suppliers of credit card merchant services;

• BARCLAYCARD BUSINESS
• STREAMLINE
• AMERICAN EXPRESS

A number of merchants provide a quicker way of taking online payments than setting up a complex website. This basically involves you integrating a payment “engine” into your website which passes card details to the card provider for processing. The precise implementation of these services does vary from provider to provider.

PayPoint.Net give you two options of accepting online payments. With their 'Complete Solution' they will arrange an Internet Merchant Account for you, whereas, if you already have an Internet Merchant Account their Payment Gateway is more suitable. They work with all UK leading banks as well as several European and US banks.

Payment can also be taken using a third party such as PayPal. This enables you to incorporate an online payment system into your website without setting up a merchant account with a credit card supplier. The system works much in the same way that any other credit card payment would work, except you use the third party to broker the transaction. Transactions are charged at around 2.2% + 15p each, which is quite competitive with the mainstream credit card suppliers.

These third party sites offer a useful middle ground between not accepting online payments and building a complex integrated website with your credit card supplier. The disadvantages are that they may appear unprofessional to some buyers especially if you are selling to other businesses.

Some suppliers are able to sell you a ready made “eshop” that can be customised to fit your business. These shops enable you to collect all of your goods into one location for customers to purchase. The benefits are that you are using an established online brand to support your sales infrastructure and the costs are a lot cheaper than building a complex online transaction based website. An eshop can cost anywhere from £6 - £300 per month, depending on how complex you want it.

Some of the eshop suppliers will expect you to have a track record with them of selling goods and receiving good customer feedback, but this should not be too onerous.

Two of the leading eshop providers are: ebay and Amazon.

Online Security

Taking payments online is possibly the most risky activity many small businesses will undertake. As a small business owner you will be aware that there is a lot of credit card fraud going on, and online transactions are one place where it is prevalent.

Unfortunately the onus will very much fall onto the small business merchant if anything goes wrong with the transaction, and payments can be retrieved if there is a dispute with the customer.

If you decide to build a shopping website you MUST ensure that it is secure and will be free from abuse.

You must take professional security advice and have your site audited by an objective, independent expert.

Remember – it is your business reputation at risk.

About the Author

This guide was provided by The Business IT Guide - a free online tool designed to help smaller businesses in using ICT to improve efficiency and productivity. It enables businesses to access a wide range of high quality independent advice to help them fully exploit ICT.

Posted October 7, 2008