If you’re just starting out in eCommerce, you’ll need to set up an internet merchant account, for credits associated with your sales, and a payment gateway that allows your customer payments to be processed between your website and the merchant account.
When considering these needs, you should always bear in mind the process of conducting online purchasing:
- Your customer will add your product to his online shopping cart
- At the ‘checkout’ your customer will provide payment and billing details
- These details are communicated to a payment gateway
- The payment gateway communicates with the bank/ card company
- The customer’s card/ bank is debited and funds credited to your merchant account
- Once the funds have cleared into your merchant account, you can withdraw to your business account
In simple terms, the payment gateway is the piece that allows customers to buy from you, while the merchant account is the piece that enables you to access those payments.
Finding a Merchant Account
Most major banks offer merchant accounts, though you should check the fees charged before opening your merchant account. These charges will depend upon the level perceived to be associated with your business – such as the length of time you’ve been trading and the business sector you serve.
You’ll want to avoid chargebacks – when the customer transaction is found to be fraudulent and the payment has to be backed out. The higher your chargeback rate, the higher your risk rating.
Other costs and factors you’ll need to consider include:
- Application fees
- Set-up charges
- Statement and account maintenance charges
- Transaction fees
- Reserve requirements (to cover potential chargebacks)
- Appropriateness – will the provider be able to process payments from all potential sources (eg. Language and currency issues)
4 Things to check when looking for a Payment Gateway
There are a number of issues you’ll need to consider when searching for a payment gateway. Not least of these is it must provide secure payment processing: the customer’s card details must be kept secure. Here are three other areas that will need to be addressed:
Payment gateways charge transaction fees or a percentage on sales (sometimes both). They may also be subscription fees, currency processing charges and costs for fraud protection.
Protection against fraud
You’ll want to protect your business at the highest possible level. Different payment gateways offer different fraud protection capabilities, including Address Verification and CV2 authentication. Some providers may offer liability shift (which moves liability from you to the card issuer).
In the same way as you’ll need your merchant account to be compatible for your business, so, too, will you need your payment gateway to interact with your shopping basket and merchant account.
Look for payment gateways that offer guaranteed support levels and fast turnaround times.
Without a payment gateway, transactions into your merchant account will not happen. You should shop around for both your merchant account and payment gateway, and secure both with regards to the needs of your business now and in the future. If you are expecting most of your orders from international sources, for example, you’ll need a gateway provider that can accept those payments, and support transactions in different currencies.
Look for a payment gateway that offers extensive coverage, is well-respected, and has good links with merchant account providers.