We have been building stacks of ecommerce (online shopping) sites lately and I often get asked about the options for taking payment. This post will hopefully provide a good overview of the main considerations for taking payment online.
The first consideration is automatic vs manual. If you are dealing with high cost low transaction products this won’t be your biggest concern. However some businesses that are based on high volume low cost products (think Ebay sellers or electronic stores etc) wouldn’t survive if they had to manually take payments to automated is a must. The 3 main options used here are:
- Bank Deposit – When someone orders you generally show a message and send an email with your bank details. You keep an eye on your account and once the money comes in you update the status of the order from pending to confirmed and you ship the product.
- Cheque – as above but you have to wait till you receive the cheque and till the cheque has cleared in your account before shipping the order – this will take even longer.
- Manual credit card processing – this is where you take the customer’s credit card number (either directly on the site or over the phone) and you process it manually using a portable Eftpos machine or another system your bank has given you access to (such as an online merchants system). You don’t pay for a gateway to process the card but its still manual and it results in the order being in a stat of ‘pending’ until you manually process the order. If it fails you have to call the customer and work out an alternative. Also see the comments below about an SSL Certificate which apply if you are taking credit card numbers on your site.
All of the options above require manual steps and they result in orders being in a state of ‘pending’ until money is confirmed some time after purchase. There are implications for you in the work it takes to process orders and for customers in the extra delays while you process the orders. But of course the more choice you give people the better so you may have some customer who prefer to work this way and don’t want to use the automatic methods below. In addition there aren’t any direct transaction costs which do apply to using gateways (see below).
Automatic Methods – credit card payment gateways
The other main way to take money online of course is to use a payment gateway where the customer pays money (generally from a Credit card) during the process of ordering from you and therefore ends up with a completed transaction paid and ready for shipping when they leave your site. This all happens without you having to do anything. The 2 main ways payment gateways are used in ecommerce stores are:
- A hosted service where the customer leaves your site and is taking off to the gateway site (such as PayPal), pays the money and is then returned to your site. The fact that they are hosted on a 3rd party site means you don’t have to be concerned about the security of taking credit card numbers on your site. However it also means the user is taken off to the 3rd party site and its a less enjoyable purchasing experience with more room for drop-out. With PayPal the usual process is the order will come into your site it will be marked pending and then the customer will go off to PayPal and pay the money and when they are returned from PayPal the order will be marked as confirmed.
- An integrated gateway where you take the customers credit card details on your site and then your website posts them to the gateway live during the transaction. The customer never leaves your site and doesn’t see what is going on behind the scenes. The gateway passes back a result instantly and the customer is informed (i.e. failed due to insufficient funds for example or approved) and the order is marked accordingly. Depending on who you bank with your bank is likely to have a gateway offering themselves or have a partnership with a 3rd party gateway provider. There are also a number of 3rd party providers who work with different banks. One example is Eway who we have used a number of times and provide great support. This is the easiest and cleanest method for the customer who never leaves your site. However you will need an SSL (see below) to protect the information that they are entering on your site and you will also have to give some thought to whether or not you are saving the credit card details and where you are saving them (for example are they mentioned on any auto emails – are they saved in the database – are they in the CMS – who has access to these etc).
More PayPal Considerations
There are 2 other main considerations with using a service like PayPal (or other similar services like Google Checkout). Firstly they are generally a lot cheaper than an integrated gateway. You won’t be charged by your bank at all and only charged a small %transaction charge by PayPal. The other consideration is with PayPal you have a PayPal account and that is where the money goes when people pay you. You can transfer it out of course and as long as you don’t transfer tiny amounts you won’t be charged. However this creates a double accounting procedure that is a bit of a bookkeeping headache and one more thing to manually manage.
An SSL Certificate is required whenever people are entering sensitive information like credit card numbers on your website. This applies regardless of whether you are using a gateway. If the customer is entering the information on your site then you need to have an SSL installed and the address where they are entering the information needs to start with https://. When you do this you will see the secure padlock near the address bar and in the status bar (depending on the browser).
Hopefully that addresses some of the main ways to take money in an ecommerce site.