You’ve built your online shop and stocked your virtual shelves, and now you’re wondering how to take payment on your website.
This is where a reliable, cost efficient, and secure payment gateway is needed to convert your browsing visitors into paying customers. Payment is usually the last step in the online sales process, and it is crucial that this step is as convenient and seamless as possible to avoid losing sales at this stage.
What is a Payment Gateway/Processor?
An online payment processor, such as PayPal or AsiaPay, helps to facilitate payment via credit or debit cards and with PayPal/AsiaPay accounts, which are effectively online bank accounts held with these companies. A fee ranging between 3.4% to 4.4% of the value of the transaction is charged to the seller for each sale processed.
Large online companies build their own payment gateways in partnership with their commercial banks; when a customer makes a purchase online, the payment is processed, verified, and deposited directly into the company’s bank account in exchange for a 1% to 3% processing fee. This is often referred to as a merchant account.
As a newly formed small business, you will not be able to build your own payment gateway with a bank immediately; you will need to accumulate a trading history and be able to satisfy Payment Card Industry Data Security Standard (PCI DSS) before being able to process transactions directly. Fortunately PayPal, AsiaPay, and many other payment gateways are here to help.
PayPal Website Payments Standard
When getting started with your online business, PayPal is likely your best (and sometimes only) choice for payment processing. PayPal Website Payments Standard is the most basic offering from PayPal, allowing you to place a yellow “Buy Now” PayPal button within your shopping cart. When a customer checks out and clicks this button they are taken off your site to PayPal’s secure payments page where they can pay with their credit or debit card or via their PayPal account.
Once payment has been completed, the customer is prompted to return to your website, and a piece of code informs your e-commerce software that the order has been completed and can now be shipped. The funds appear in your PayPal account shortly after, and you can then transfer this money to your linked bank account.
PayPal Website Payments Pro
While easy to set up, Website Payments Standard has one major drawback; customers are taken away from your site to complete their purchase. As you might expect, the change in branding, look and feel, and shopping experience can result in confusion, lost sales, and a lower overall customer conversion rate.
Enter PayPal Website Payments Pro. This payment gateway integrates seamlessly within your shopping cart payment page, offering the familiar fields for credit card details for a more professional feel.
The customer never leaves your website, and when the transaction is confirmed they are served with a thank you page and encouraged to continue browsing on your site.
Website Payments Pro (WPP) charges US$25 per month as well as processing fees of 3.4% to 4.4% (depending on volume processed) plus US$0.30 per transaction. WPP is not a cheaper option compared to Website Payments Standard, and you will probably want to be processing US$1,500 or more per month to justify paying for these extra services and features.
Signing up for WPP is also not as straightforward as using PayPal Website Payments Standard; you will need to complete an application with PayPal and possibly show some trading history, as PayPal bears more risk by offering vendors this service. When you first use WPP you will probably also have a 90 day “reserve” placed on your account of 5% to 20% of the funds received; PayPal will hold back a percentage of your funds for 90 days after each transfer, giving PayPal a security deposit in exchange for trusting your new business to be legitimate. After around six months of trading you should be able to request that this reserve is lowered or removed.
Other Payment Gateways
As we mentioned above, you may not have many choices when it comes to payment processing; new businesses with little trading history don’t have much information to show payment processors who want to minimize risk and maximize their larger accounts. PayPal Website Payments Standard will therefore offer a good, basic, and trusted initial solution to your payment processing needs, and you may choose to upgrade to PayPal Website Payments Pro once your sales volumes increase.
What about other payment processors you ask? Here are a few key factors to consider when assessing a new potential payment processor:
- How long has the company been established?
- Is the gateway PCI DSS compliant?
- What are their fees? (Setup fee, monthly fee, transaction fees, bank transfer fees)
- Which cards do they accept/not accept?
- Which currencies are supported?
- How quickly will you be able to access and transfer out your money?
- Does the processor support on-form payments (such as PayPal WPP)?
- If needed, does the processor support recurring billing?
More mature markets such as the USA, Europe, and Australia offer a range of choices of payment gateways. The choices in Asia, however, are generally limited to PayPal and AsiaPay as the two major players, among a number of smaller local payment gateways. Use the above information to research the gateway that works best for you.
Alternative Payment Methods: Bank Transfers, Cheques, Cash on Delivery
Depending on your market, you may find the need to offer your customers alternative payment methods. Perhaps many of your customers don’t have a credit card or PayPal account, but would happily pay via cash on delivery, a local bank transfer, or by cheque. Each of these is a viable solution to accepting payments, however it will be up to you to determine whether the benefits outweigh the costs.
For example, accepting cash on delivery may mean negotiating an arrangement with your delivery courier to collect the cash and remit this money to you on a monthly basis. This will inevitably entail extra accounting, follow up, and work for you or your staff. Accepting bank transfers or cheques will also require manual order follow up, cheque cashing, and extra administrative work.
Happy payment processing all!