Small online businesses are mostly represented by home-based entrepreneurs.
In this regard any payment scheme or system should meet at least two
criterions:
(article continued
below ...)
- First. It should be relatively cheap. Individuals are usually not
enjoying huge investment potential in contrast with legal
entities.
- Second. It should lead to complete automation of financial
transactions as a result of lack of time or inability for the majority
of entrepreneurs to hire support stuff to serve these transactions.
In short, it all comes down to the shortage of money and time. For these
simple reasons, sophisticated e-commerce systems based on merchant accounts
are expensive, hard to establish and support for an average entrepreneur.
That is why third party payment processors that will handle all online
orders on your behalf became widely popular among small businesses. They
require very little effort to establish and even less effort to support. In
most cases they will provide you with completely automated as well as quick
and reliable for your customer way of payment.
This will allow you to accept payments 24/7 focusing your business to
work on other tasks and activity.
In practice once set up, the whole customer paying and product delivering
process becomes fully automated and consists of the following steps:
- Customer fills out the order form and clicks on the submit button to
pass the order to the payment gateway;
- Automatic payment gateway routes credit card (e-check etc.) data and
purchase amount to the payment processor of the merchant (seller)
acquiring bank;
- Acquiring bank sends authorization request to the payment processor of
the customer's issuing bank;
- Issuing bank validates customer's account, credit limit and authorize
the transaction, freezing the specified amount on the customer's
account;
- Issuing bank routes authorization code (or "transaction
declined" message) to the acquiring bank's payment processor;
- Acquiring bank routes payment approval (declined) message to the
payment gateway;
- Payment gateway notifies the merchant (seller) about approved (denied)
transaction;
- Provides customer with the product s/he ordered, the details of
shipping etc. or notifies about payment problems;
- Banks' clearing settle the mutual transfer of funds, crediting the
respective merchant (seller) account with the specified amount of
purchase.
All these steps due to complete automation process, if we don't speak
about phone or mail orders etc., will take somewhat between several seconds
to several minutes, still usually faster than when you are billed at the
store's pay desk and much faster considering the speed of going for online
shopping instead of the "offline".
This publication intended to analyze existent picture of third party
processing companies and represent you the comparative facts that would help
you to determine your preferences based on business needs and capacities.
The table below will provide you with basic features of the most
"visible" today's online payment processing players. Please note,
that the online financial market evolves extremely fast, so the table data
is accurate as on the February 2003 what I cannot guarantee in a month, all
the more in a year, so my advice here is to choose 3-5 most acceptable and
affordable financial intermediaries (even if some important for you feature
is missing) and recheck their services and fees once more at their web-sites
before making any final decision.
|
Company Name
|
Setup
fees
|
Monthly
fees
|
Commission
structure* |
| 2CheckOut
|
$49
|
no
|
$0.45
+ 5.5%
|
| CCNow
|
no
($11.95 for Int.)
|
$9.95
|
$0-$100
- 0%, $100+- 9% (11% for Int.);
|
| ClickBank
|
$49.95
|
no
|
$1
+ 7.5%
|
| IBill
|
no
|
no
|
$0-$9,999
- 15%, $10,000-$24,999 - 14% etc.
|
| MultiCards
|
$15
or $150
|
no
|
11.9%
or 9.9%
|
| PayPal
|
no
|
no
|
$.30
+ 2.9%
|
| PaySystems
|
$49.00
|
no
|
$1.00 + 3.95% or $0.45 + 5.5%
|
| ProBilling
|
no
|
no
|
$0-4,999
- 13.5%, $5,000-12,499 - 12% etc.
|
| ProPay
|
$35.00
(yearly)
|
no
|
$.30
+ 2.9%
|
| Regsoft
|
no
|
no
|
$0-$30
- $3.00, $30+ - 10%
|
| Verotel
|
no
|
no
|
$3.75-$75.00
- 13.5%
|
| V-Share
|
no
|
no
|
$0-$15
- 20%, $15-$100 - $3+4%, $100-$200 - $2+5% etc.
|
|
Company Name
|
Credit Cards acceptance
|
Online
Check acceptance
|
Phone(Fax) orders acceptance
|
Recurring Billing feature
|
| 2CheckOut
|
yes
|
yes
|
no
|
yes
|
| CCNow
|
yes
|
no
|
no
|
no
|
| ClickBank
|
yes
|
yes
|
no
|
no
|
| IBill
|
yes
|
yes
|
yes
|
yes
|
| MultiCards
|
yes
|
yes
|
no
|
yes
|
| PayPal
|
yes
|
yes
|
no
|
yes
|
| PaySystems
|
yes
|
yes
|
no
|
yes
|
| ProBilling
|
yes
|
yes
|
no
|
yes
|
| ProPay
|
yes
|
yes
|
no
|
no
|
| Regsoft
|
yes
|
yes
|
yes
|
no
|
| Verotel
|
yes
|
yes
|
yes
|
yes
|
| V-Share
|
yes
|
yes
|
yes
|
yes
|
* Commissions are charged in two most popular ways:
(a) depending
on the sales volume, for instance, 10% for $0-$1000 in gross sales and 5%
for $1000+ or; (b) flat fees plus percent of the transaction amount: $2 +
5%, so
if you
sell your item for $50 the commission is $2+$2.5 (5% out of $50)=$4.5 Note,
that commissions shown for credit card billing may be the same or may differ
from company to company for online checks and, especially, for phone order
processing.
As you see, the table compares the most common features of services, while
some secondary options like affiliate program, online auctions support or
inability of such companies like PayPal to process all worldwide customers
including yours truly, were left behind.
IBill and Verotel, for instance, have retail price maximum limits. The
dominating majority of payment processors charge additional fees for
chargebacks and refunds, while Regsoft, Verotel or V-share offers a completely
risk-free start up, charging commission from actual sales only.
The middleman you will commit to should offer easy ways to administrate
your account, view statistics, add/delete products on sale, setup price, tune
and customize with your web-site image the order page etc.
Depending on the nature of your main product: tangible or intangible, some
companies may or may not meet your needs. Check Verza.com payment processing
company for tangible and shippable goods. They are the Mother company of
Verotel - division specially designed for intangible products or
"bits" sellers.
Carefully read terms & conditions agreement, other regulations as well
as charge back policy before signing up for any service.
Find out the offered ordering security options. While some companies
provide sophisticated fraudulent control system and supply you with both
server secured order form and non-secured order form for your customer
convenience, other payment processors had problems even with the coding of
their order web-pages, what allowed anyone to literally steal your intangible
products by downloading them without payment. That happened because the URL of
the so-called "Thank you" page (where sellers arrange their info
materials to download) was clearly visible in the source code of the order
form. This is unacceptable.
You may also want to test their support system and uptime the same way you
do before selecting a web-hosting provider. Because your order page(s) is(are)
hosted at the 3rd party payment provider server(s), if they are down for any
reason, it may be very sad for your customer to choose a product, click on the
order link and get error or "The page cannot be displayed" massage.
As you see there are a lot of points to check and analyze. On the other
hand, remember a rule of not complicating things. The key for easy
decision-making process is not to avoid research as some people do going for
the first offer they see, rather than knowing your needs and capabilities
including financial beforehand.
Determine them at the very beginning and search companies accordingly,
making the whole research smooth and easy. Besides, on the contrary to, say,
domain name choosing, payment processor service is temporal to help you build
your online business in a quick, cheap or zero cost way. At some stage due to
economy of scale it will be cheaper and more effective for your business to
establish personal merchant account with respective e-commerce gateway system.
About the Author:
-- Pavel Lenshin is a publisher
of NET Business Magazine, professional web-developer and CEO of: - http://ASBONE.com
- informational portal and provider of discounted internet services for
entrepreneurs, including internet access, web-design and hosting; - http://InfoAlchemist.com
- a must-have business library.
August 19, 2003
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