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You may think that if your product is right and your website is landing customers, you've cracked it. There's one more little thing though: how to get paid. Denis Jarrett takes you through the steps

 

Thursday April 24, 2003

The Guardian

 

So you have a product to sell and a website to sell it from. Now all you have to do is post up the details, add some nifty sales-speak, and wait for the orders to roll in.

Except that you don't want to get involved with issuing invoices and chasing debts: you'd like cash (or at least a credit card payment) with the order. Offering an instant payment facility is likely to increase your sales volume by between four and 15 times, depending on what you're selling and whose market research you are reading. So, you really do need to offer payment by credit card on your website. This is surprisingly easy to do, as it happens.

 

Merchant accounts for beginners

 

The conventional route requires you to have "merchant status" - meaning that you have signed with a bank (in the jargon, an "acquiring bank") that offers credit and debit card processing services. The bank "acquires" the money from the customer, processes the transaction and credits your account.

 

Many of the well-known high-street banks in Britain run separate operations to offer merchant services. NatWest's Streamline is the market leader, Barclaycard Merchant Services is another established provider, Cardnet is the Lloyds TSB brand and HSBC has HSBC Merchant Services.

 

They charge a set-up fee as well as a percentage of the transactions processed. As an example, it might cost around ?250 for the card-swipe machine, plus ?15 a month rental, plus 2% to 4% on each transaction. The banks may vary their charges and/or apply other conditions depending on your turnover, credit rating, the type of business, and just about anything else they choose to include.

 

These services are geared for use in shops when the customer is present. So you'll need to apply separately for an internet version that covers transactions generated over the web.

 

If you've signed up with an acquiring bank to take face-to-face credit card payments, you could apply for an additional internet merchant service ID. Barclays runs its online merchant services under a separate brand, ePDQ (the card-swipe machine in shops is called a PDQ - the online transaction processing service does all the same things in terms of verification and billing, hence 'electronic PDQ').

 

In addition to the bills for standard merchant service, you'll probably have to pay a further set-up charge and a monthly usage fee. The percentage that the bank takes may also be slightly higher than for in-person transactions. EPDQ, for instance, charges ?25 a month, plus 2% of all turnover up to ?10,000 per month (above that it's 1%).

 

If you don't currently take credit cards, things get stickier. To sign on as a merchant, the bank will probably require trading records and maybe a business plan. It will certainly run a thorough credit check on you. All this could take four to eight weeks, and then you might be turned down.

Links:

www.streamline.com

www.barclaycardmerchantservices.co.uk

www.lloydstsbcardnet.com

www.bankofscotland.co.uk/business/as/creditcards/cardprocessing/index.html

www.epdq.co.uk

 

Processing payments

 

If you already have merchant status you don't have to use the internet merchant services provided by your bank. You could just invite the shopper to fill in a form on your website that includes credit card details. This is emailed back to you and you manually enter the card name and number on your PDQ machine.

 

This is an easy but fairly crude solution, which requires that the form page is on a secure server so that the card details are protected from prying eyes. It's also labour-intensive, not a great attribute if business takes off. Card details aren't verified before acceptance of the order. And, in any case, your bank acquiring service may prohibit the use of an "offline" merchant service.

 

There is a better solution: use a third party to process payments. There are lots of middlemen who can do this, and generally they're no more expensive than the banks. Furthermore, you can usually set up the service very quickly. The disadvantage of this system is that you lose the comfort factor of dealing with a big-name brand.

 

DataCash believes it is the UK's leading payment solution provider, handling more than 1.8m transactions a month. Others to check out include NetPayments, Protx, SECPay and SecureTrading.

 

SECPay's SEC-Card service is pretty typical - set-up costs ?50, there's a ?10 monthly fee, and transaction charges are either 1.9% of value or a fixed rate of 39p per transaction. Protx has a spectacularly simple alternative: no set-up fee, no monthly or annual payment, no minimums, just a flat rate of 5p per transaction. CI-Card, which will only work with Barclays Merchants, charges ?125 for set-up, ?15 per month administration costs and 1.99% on transactions up to a monthly total of ?2,000.

Links:

www.datacash.co.uk

www.netpayments.co.uk

www.protx.com

www.secpay.co.uk/seccard.html

www.securetrading.co.uk

www.ci-card.com

 

Payment bureaux

 

You don't have any kind of merchant status with any kind of acquiring bank? And you don't want to wait? In that case you need a payment bureau, the ideal option for a business's first experiments with e-commerce.

 

A bureau service is the simplest way to begin taking payments online. Basically it's an easy-to-use one-stop shop - no separate agreements for merchant status and an internet merchant ID, few forms to fill in, simple-to-understand charges, acceptance within a few days.

 

All you'll need is a business bank account (Abbey National is still doing its no-charges-at-all current account), some indication of what you're selling and where, and a business-like address. The bureau runs its own acquiring service to collect funds from holders of credit or debit cards. It minimises the risks simply by hanging on to the money for longer than a conventional acquiring bank - most fraud and refunds occur within 30 days of a transaction, so the bureau will often pay out a month or more after the sale.

 

You'll probably be charged more for the service, too. On credit card payments the fee could be 4% or more, compared with around 2.5% from a bank. Debit card transactions will carry a fixed fee, typically 50p a time.

 

The two big bureau services are WorldPay's WorldDirect and NetBanx Bureau (both companies also have payment processor services for businesses with a merchant ID).

 

WorldPay, which is part of the Royal Bank of Scotland group, says it accepts over 90% of applications and can get you trading in 48 hours. Its WorldDirect service has a one-time ?85 setup fee plus an annual ?160 charge. The per-transaction rates are 4.5% on credit cards and 50p for debit cards. The money is remitted to you in 4-6 weeks. NetBanx does not have annual fees and charges a maximum of 4% on transactions (less if you're selling more than ?2,000 a month). There's a ?10 per month minimum. Setup is ?75 for the basic service.

Links:

www.worldpay.co.uk

www.netbanx.com

 

American alternatives

 

You might also consider a US-based bureau service. Some are happy to accept international clients, though your customers will probably be billed in US dollars. You'll probably be paid in dollars, too, so there will be currency conversion changes.

 

Although the US options have lost much of their appeal now that the likes of WorldPay are so well established over here, there are some advantages - easy online application, quick acceptance procedures, no particular bar on newly established businesses.

 

The downside? Transaction fees can be as high as 13%, and check the terms carefully - there may be restrictions on what you can sell via their services. For instance, one of the better-looking examples, CCNow, will cover only tangible goods: downloadable software or e-books are excluded. In contrast, Verotel will only accept websites offering content - tangible products and services cannot be sold. And if you want to sell software, consider RegSoft: it is designed specifically to sell downloads, and charges a simple 10% on each transaction (there's a minimum of $3).

 

CCNow's rates are better than most; $11.95 per month plus 11% of all transactions beyond a total of $100 (anything less is uncharged, presumably out of sympathy for your poor sales). Transaction fees at Verotel are much higher, ranging from 12% (on prices over $20) to 19% (for prices under $10).

Links:

www.ccnow.com

www.verotel.com

www.regsoft.com

 

How it works

 

Shoppers select their purchases, probably using a shopping cart of some kind - you can buy off-the-shelf packages such as Actinic Catalog or Shop@ssistant that are easily integrated into your website. Most of them will also link easily with the better-known payment processor services, but it makes sense to check how much integration work (if any) will be required. You could write your own shopping cart pages, and if you don't have many products to sell that might be worth considering. In most cases the shopping cart could simply be a web form that POSTs parameters to a CGI script on the payment processor's server, so if you're happy with that level of technology the DIY option is available.

 

When they're ready to pay, the purchaser clicks the check out button and is taken to the payment pages - which are actually on secure servers run by the payment processor or the bureau, even though the pages may have your look and feel. The buyer enters a card number and contact details, then clicks the make payment button.

 

The payment processor runs an online check to verify the information supplied. A few seconds later, the transaction will be authorised and completed (or rejected and denied). Both the shopper and the retailer will probably receive confirmatory emails from the payment processor to acknowledge that the transaction has taken place. The shopper is returned to your website, probably (preferably) to a 'thank you' page.

 

The beauty of this approach is that you never see the credit card details and they are not stored anywhere on your web space. The middleman handles all the credit card information, and their systems will probably feature the best anti-fraud measures around. The downside is that the charges may be prohibitive on large-value sales.

 

Help panel: which payment method?

 

It can be tricky to work out your best option. Fortunately Scottish Enterprise and UK Online for Business have put together a neat calculator that should help to identify the most cost-effective online payment methods for your business - it's at www.electronic-payments.co.uk .

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U mean.. if I have a new shopping cart website, then I need to register with

A Merchant Account with bank

A payment processing gateway

 

okay... And how many SSL certificates I need and what type they are of?

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You don't necessarily need all of that stuff. I have just set up a web shop for a friend who already has a shop. We just used the default credit card module to capture all the card details and then process offline using the PDQ machine in the shop.

The hosting company provides a free shared SSL certificate so data is safe between the custommers web browser and the site server. I then added some code to use openssl public key encryption on the credit card details before they are stored in the database so even if someone did manage to get at the database and shop php code it would be very difficult for them to obtain the credit card information.

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or you can buy an ssl certificate if you do not have one yet.

we use 'Thawte' - i think it is thawte.com


always here to offer some useless advice....

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You don't necessarily need all of that stuff. I have just set up a web shop for a friend who already has a shop. We just used the default credit card module to capture all the card details and then process offline using the PDQ machine in the shop.

The hosting company provides a free shared SSL certificate so data is safe between the custommers web browser and the site server. I then added some code to use openssl public key encryption on the credit card details before they are stored in the database so even if someone did manage to get at the database and shop php code it would be very difficult for them to obtain the credit card information.

This is the same method we are looking to use. We currently have a PDQ machine in the store and I would like to just process the orders offline as it seems like a cheaper option, especially as we sell at low margins and the cost of a internet merchant account along with payment processing seems to be expensive ~ or maybe thats just me?

 

Anyway, the site currently hosted by webfusion, wheres the best place to get a SSL certifcate, and whos doing them for free?

 

Please help

 

Andrew

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We currently have a PDQ machine in the store and I would like to just process the orders offline as it seems like a cheaper option

 

Regardless of cost, years ago (circa 2005-6), I told our bank we were processing Internet payments offline and they were not best pleased. It defies so many PCI compliance rules. If you do go down that route (which being a consumer as well as a trader I know people do), I would tell your bank they are phone orders.

 

Thinking about it, I think "cardholder not present" transactions actually carry a higher rate as they are not protected by chip and pin (offline) or 3DSecure (online), so you might actually SAVE money doing proper online payment processing. Although, with the bank taking their "cut" and the merchant gateway taking theirs, it does sometimes feel like a protection racket! Saying that, on one of my store's turnover £3M+, we only pay a combined rate of around 2%, so there is encouragement to do more to save more!

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