bCentral Home
Your Online Business Center

Online payment services

Let your customers buy how they like - take credit cards and sell online

In business, giving your customers more choice can increase sales. To really profit online, businesses need to give their customers a wide choice in how they pay for goods and services. Being able to take secure online credit card and electronic cash payments gives your visitors more chances to buy - after all, why go to the expense of getting a customer only to find you can’t take their money?

But installing online payment facilities is fairly complex, because there are plenty of options on offer. These range from purse-friendly basic services to one-stop-shop solutions with strings attached (usually higher fees and a longer time to wait before you see your money). And what suits one business may be problematic for another.

Shop around

Graham JonesIt’s important to find a payment solution that suits you. For example, copywriter Tracey Dooley of MediaMinister says, “In the end, I plumped for NoChex for UK transactions and Paypal for international customers.

“NoChex accept credit card payments up to �100 (without customer sign-up, which makes it really useful), or �300 from other members. And, like its competitor Paypal, there are no joining fees. Its user-friendly interfaces and payment options, chargeback guarantee, online security and good customer relations nudged me to make my choice.”

Tracey looked into solutions such as Worldpay, but was put off by their long-winded chargeback process and administration fees. Conversely, Graham Jones of InfoSelling.com has found Worldpay to be the best solution for him.

��Get the latest advice with our free newsletters.

“WorldPay is without doubt the best payment processor for me. That's because it provides three currencies as standard - hence you can charge in Sterling, Euros and US Dollars all within one account. Plus, it’s easily integrated within most leading shopping carts. I only had to enter one piece of code into my shopping cart (1ShoppingCart.com) and WorldPay integrated automatically.”

Graham also tried SecureTrading but, “found their costs higher than WorldPay,” and, in Graham’s experience, Paypal hasn’t integrated as well with shopping carts and only a small percentage of his customers have accounts or are likely to use it.

Evidently it’s wise to shop around before making your final choice. Here are the choices available to you.

Merchant Accounts

If your business already accepts credit cards offline, setting up an online merchant account should be relatively painless. To qualify you must meet stringent criteria, including the past history of the business. Similarly, if sales volume is high or expected to be high, the merchant route is worth considering as a merchant account will usually deposit funds to you within one to five business days, which is excellent for your cashflow.

If you’re just starting up, achieving merchant status could be tricky, and it can take 8 weeks or more to process an application thanks to all the credit checking involved.

The 'acquiring' banks who provide merchant account services include NatWest (Streamline), Lloyds (Cardnet), Barclays and HSBC.

The 'acquiring' bank receives your money from the customer, processes the transaction and credits your account. Each of these acquiring banks is able to issue online traders with an Online Merchant ID, allowing them to take credit and debit card payments.

Payment Service Provider (PSP)

Quote�You’ll pay slightly higher fees than you would with merchant status.�End Quote

A Payment Service Provider (PSP) is the alternative for businesses who have trouble getting a merchant account. PSP’s collect card details online and pass them on securely to an acquiring bank. Payment service providers include SECPay, protx, Velocity Pay and NetPayments.

Most High Street banks prefer you to use a PSP even if you do have a merchant account, because it’s safer for them to authorise a small number of PSPs than rely on each trader to be secure. So if you can’t get a merchant account, PSPs are ideal. The catch is that you’ll pay slightly higher fees than you would with merchant status, and you’ll wait longer for payment (usually 14 to 45 days).

Payment Service Provider Bureau Services

If all this sounds like too much hassle, you may wish to consider the integrated approach offered by payment bureaux. Bureaux do all the work for you, so you don’t need a merchant account or acquiring bank. For example, WorldPay provides everything from store building software to a merchant account and a transaction processing facility under one roof.

However, it takes much longer (30-60 days) for funds to clear in your account (known as the ‘settlement period') which can cause potential cashflow headaches, and fees per transaction are higher.So be sure to weigh up the pros and cons of each payment service option before launching forth into the world of e-commerce. And don't forget that you can always start small with an integrated solution, and then upgrade to a higher-volume solution as sales increase.

Electronic cash

Quote�It’s worth asking what help you can expect if you find yourself a victim of card fraud.�End Quote

Electronic cash allows customers to save credits online, either by cash, cheque, credit card or smart card. These can then be spent on your site. The downside is that customers often have to have an electronic cash account before they can start spending, which could deter shoppers if it’s your only option.

The main electronic cash providers are PayPal and NoChex. Paypal is the largest - with 50 million account holders worldwide, it handles transactions worth more than �9.5 billion a year.

There are no set up charges (unlike the �100-200 fees for registering a merchant account) but with a Premier or Business account you'll be charged a small fee for accepting payments. Verified members can withdraw and send higher amounts of money than regular restrictions allow, and you can use merchant tools which include 'buy now' buttons, shopping baskets, and subscriptions or recurring payments.

There's one more important consideration. Payment systems come with different levels of support for anti-fraud protection; it’s worth asking what help you can expect if you find yourself a victim of card fraud.

What next?

Find out more about e-commerce and whether it's right for your business.

Read the DTI's information about online and electronic payment solutions, and compare costs with their online tool.

Sign into Microsoft Small Business+ for web-based training, online chat help and software support.

sign in

Find an IT consultant
Enter your postcode to find your nearest IT consultant

Learn more >>

How did you finance your startup?

How did you finance your startup?

Free business newsletters - subscribe now

Our free newsletters are packed full of business advice and ideas - plus all the latest news

Security information

Get the latest bulletins and updates direct from Microsoft