Accepting Online Payments

:: Introduction ::

For many small businesses, accepting payments online provides some major benefits. Customers increasingly expect this facility and it can improve your cash flow significantly.

It's easy to accept cheques or invoices for your online sales and to process payments in the traditional way. However, because buyers often use the Internet for a speedy service, most sales are paid for with credit and debit cards. To accept cards online, you will have to make special banking arrangements.

Online payments using cards are "card-not-present" or CNP transactions. There are higher risks of fraud with this type of payment and banks require you to operate within a well-defined set of rules and accept a higher level of commercial risk than a conventional swiped card transaction in a shop.

This guide will help you to understand these requirements and look at the options available for taking advantage of online payments.

:: Online Payment Jargon ::

Debit and credit card payments and their application online involve some key concepts and jargon.

An acquirer can be a high street bank or other financial institution that offers credit and debit card accepting/processing services. It acquires the money from the customer, processes the transaction and credits your account. You need to apply for a merchant service agreement if you want a bank to handle your electronic payments. For web-based online transactions you need an Internet merchant account.

Obtaining an Internet merchant account from an acquirer may be quicker and easier if you already have "offline" card-processing facilities set up. In this case, just ask your acquirer for an additional Internet merchant account ID for use exclusively with Internet transactions. This process is normally quick, especially if the risk to your business does not change.

To help protect merchants and cardholders from fraud, the card schemes have developed a service that allows cardholders to authenticate themselves when shopping online. MasterCard's is called "MasterCard SecureCode" and Visa's is "Verified by Visa".

A payment service provider (PSP) will provide you with a "virtual" till or terminal that collects the card details over the Internet and passes them to the acquiring bank. To take electronic payments over the web, you will need a PSP.

Your choice of PSP will depend on its cost and compatibility with your chosen e-commerce software solution. A fixed monthly fee starts at around £10, but there are some cheaper options available, starting as low as 5 pence per transaction. Usually, the higher your transaction volume the cheaper the rate you will be charged.

Some acquiring banks offer PSP services as part of their product and there are other less expensive options available.

:: Checklist: applying for an Internet merchant account ::

Banks that offer Internet merchant accounts (IMAs) for accepting card payments have strict requirements. When you apply for an IMA the bank will want to know certain details about you and your business. You need to make sure that you:

* outline your business plan - including details of your cash flow and how you'll promote your online activities
* supply your website address
* explain the details of your product or service
* give your suppliers' details
* describe how you will deliver your product or service
* set out your terms and conditions for online trading
* work out your expected average online transaction values, your estimated turnover from online sales and number of credit and debit card transactions
* provide details of the secure server you'll use
* make your audited business accounts available
* supply your bank details and authority to carry out a check with credit reference agencies
* detail your trading history
* provide details of the directors or partners in the business - including full contact details

For details on Website Design City and how we can help create your perfect online shop, using specialised ecommerce software, please visit our 'Ecommerce Page' or conatct us for more details.

This guide has been taken from Business Link; for more information, please visit: Business Link