Internet Merchant Account

How to Receive Payments for Your Online Sales
By Nowshade Kabir

Once you decide which products you are planning to sell on the
Internet, and what type of web store you are going to use in
order to display your products, next vital decision that you have
to take is to figure out how your customers are going to pay you.
Whatever you plan to sell online, accepting credit card
transaction is a must! A full 90 percent of all online sales
occur through credit card payments.

There are two ways you can add e-commerce capabilities to your
website:

1. Having your own merchant account

2. Using third party processors

What is a merchant account?

A merchant account is a special kind of bank account where funds
received from credit card transactions are first routed to the
special account and held there before being remitted to your
business account. You as an online merchant will need an account
called “Card Not Present Merchant Account”.

Having the merchant account is, actually, the first step in
processing credit cards online. You will also need a payment
gateway. A payment gateway is a service provided by billing
processor which allows real time authorization of online
transactions. The payment gateway you choose to work with has to
be compatible with your shopping cart. Three top payment Gateway
providers are AuthorizeNet (http://www.authorizenet.com/),
Verisign (http://www.verisign.com/) and USAePay
(http://www.usaepay.com/). All payment gateway providers have
their own merchant solutions. Most banks, today, work with
partner payment gateway providers and are fully capable of
furnishing with a merchant solution.

If you are just starting an online business and you don’t think
that your sales will generate more than a thousand dollars a
month, you will be better of with a third party processor.
However, once your sales become a few thousand you will save a
bundle by switching to a merchant account.

PayPal

With 72 million accounts worldwide and payment volume which is
growing at a rate of 44 percent each year, PayPal by far is the
most popular third party processor on the Internet.

PayPal is a simple and affordable payment solution for those
online merchants who are unable to or don’t want to go through
the complex process of setting up a bank merchant account.

At present, PayPal has four unique solutions for merchants.

PayPal Website Payments Standard: This solution allows you to
accept credit cards on your website. However, the transaction is
processed on the PayPal secure server. The customer can choose to
pay either by credit card or PayPal. If you don’t have shopping
cart as yet, you may get one from PayPal; or you can integrate
PayPal solution to your existing shopping cart.

Cost: No monthly fee. No setup fees. No cancellation fees.
Transaction Fees are 1.9% to 2.9% + $0.30 US$.

PayPal Website Payments Pro: This solution is virtually same as
having your own merchant account. If a customer pays by a credit
card, PayPal works as a payment gateway for you. The customer
does not leave your website at anytime if she pays you by a
credit card.

Cost: $20.00 US$ monthly fee. No setup fees. No cancellation
fees. Transaction Fees are 2.2% to 2.9% + $0.30 US$.

PayPal Email Payments: This is the payment system PayPal started
with. You send invoice to your customers by email and get paid on
PayPal.

Cost: No monthly fee. No setup fees. No cancellation fees.
Transaction Fees are 1.9% to 2.9% + $0.30 US$.

PayPal as an Additional Payment Option: If you already have a
merchant account and you would like to add PayPal to your
existing payment solutions, you can use this option.

If you are planning to sell products through eBay, you definitely
should have PayPal option. According to eBay, three out of four
eBay customers choose to pay by PayPal.

When you use PayPal as your primary processor, make sure that you
have at least one more alternative payment solution handy. The
reason is many disgruntled former users of PayPal claim that
PayPal might freeze your account anytime without any apparent
reason. Read http://www.PayPalsucks.com for more information.

However, According to a new report, Merchant losses from fraud on
PayPal are now only 0.17% of revenues, vs. 1.8% for online
merchants that accept credit cards through merchant accounts.
This gives one more reason to use PayPal.

WorldPay

If you are facing problems to get a merchant account due to the
factor that you are not located in the US, WorldPay could be the
solution for you. WorldPay is a one-stop solution for your
merchant account, payment gateway and store front. The payment
option comes with fraud protection and risk management
applications to safeguard your business. Based in England,
WorldPay is a division of Royal Bank of Scotland.

Cost: If you compare with PayPal, WorldPay’s fees are pretty
stiff. 50 US$ monthly fee. 400 US$ setup fee. Transaction Fees
are 3.25% + $0.40 US$. The charge for multicurrency processing is
5.25% per transaction.

2Checkout

2checkout.com works as an online distribution center. When
customer buys a product from your website through 2checkout, you
actually make your sale to 2checkout for immediate resale to your
customer. Customers are billed by 2checkout not you. 2checkout
accepts vendors from virtually all over the world. You can also
set up recurring billing through 2checkout.

Cost: No monthly fee. 49 US$ setup fee. Transaction Fee:
5.5% + $0.30 US$.

ClickBank

For selling e-books, reports and other similar digital products,
ClickBank.com is probably your best option. The great thing about
ClickBank is it has over 100 thousand affiliates promoting
products available on the ClickBank marketplace. By listing your
product with ClickBank, you automatically tap into a huge
potential market. ClickBank accepts all major credit cards and
PayPal.

Cost: 50 US$ set up fee. Depending on the percentage of the
commission you pay to your affiliates, transaction fee varies
from 2.5% plus 0.33 US$ to 7.5% plus 1 US$.

There are many other third party processing companies available
on the Internet. Two of them worth mentioning are
http://moneybookers.com and http://www.ikobo.com.

Since fees fluctuate considerably from one solution to another
depending on your location, products and other needs, make sure
to do a thorough research before signing up with any of the
mentioned providers.

Nowshade Kabir, is the founder, primary developer and present
CEO of Rusbiz.com – a Global B2B Exchange with solutions to
create e-catalog, Web store, business process management and
other features to run a business online. You can read various
articles written by Nowshade Kabir at http://ezine.rusbiz.com.

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