Last week, I wrote about how your credit card merchant account works with your Web site to electronically process customer orders over the Internet. That is all well and good if you have a merchant account or can afford to get one. Sadly, the setup charges and monthly fees associated with a merchant account are too steep for many small businesses. Your credit card sales may need to be as much as $1,200 per month just to "break even" with the minimum monthly charge. This week I'll cover some alternatives that can save you some money, although there may be some non-monetary costs to consider.
The simplest approach to accepting Internet payments is: don't do it. You can ask customers to come to your store, call in their order over the telephone, or print an order sheet and mail it. However, you can make up the minimum monthly cost of a merchant account pretty quickly if you have to manually process very many Web orders.
Keep in mind that the whole point of your Web site is to make it easier for your customers to do business with you. On-line payment processing lets you can collect payment from your customers with no human intervention, which saves on labor costs and telephone charges. There is a lower chance of human error in the order taking process. Your customers get the convenience of 24/7 ordering because computers don't need sleep (although it may seem that way at times). Finally, there is the issue of Web culture, by which I mean that Internet shoppers expect an Internet-based ordering solution.
Fortunately, there are solutions that fall between NO Internet payment processing and a fully automated solution with a dedicated merchant account. Some Internet payment processors handle on-line payment for you. PayPal is an example of this kind of service. Anyone who makes purchases on eBay is probably familiar with PayPal.
Here's the way it works: PayPal establishes an account for you. When customers place an order on your Web site, your site sends them to the PayPal site for payment. This PayPal link includes a special code that identifies your company. When the customer pays, PayPal deducts a service charge and deposits the payment to your PayPal account. You periodically request payment from PayPal via check or direct deposit to your checking account.
The advantage of PayPal is that it is free of setup fees and monthly service charges. You pay a reasonable per-transaction charge and that is it. The disadvantage is that your customers have to sign up with PayPal as well. For customers who are already PayPal users, the payment procedure is simple. If customers need to sign up, then they have to go through the free registration process before they can complete the purchase.
Although there are alternatives to processing Internet payments through a payment gateway and your own merchant account, the loss of flexibility, convenience, and time may outweigh any cost savings. Think about your own situation. You don't want to waste a lot of time and money trying to sell your products on your Web site at all, if you don't expect to be successful at it.
In the next issue: Web Site Security |
