One of the most common questions I'm asked by people who are interested in starting an online business is "How do I start accepting payments from my customers over the internet?"
The logistics of setting up your website to accept online payments can seem like a big hurdle for new business owners. But the fact is, if you want your business to be successful, you must offer convenient and easy ways for your customers to pay.
Credit cards are currently the 900 lb. gorilla of the online payment world. In fact, more than 90 of all the orders I receive are placed with credit cards. No online business can survive without offering this payment option. The good news is that setting yourself up to accept credit cards on your site is way easier than you think, and in this article, I'll show you how to do it in as little as 48 hours.
Just because credit cards are the most popular way to pay for goods and services online, however, that doesn't mean you can sit back and relax just because you're already accepting them.
If you're serious about maximizing your sales, you've got to think about offering other online payment methods, including:
- PayPal, which has recently improved its service, making it even easier for your customers to use, and
- Debit cards, which are poised to become the online fundraising vehicle of the future.
Plus, it's still important to provide traditional offline payment techniques such as toll-free numbers and order forms that can be printed out and faxed or mailed.
It's all about giving your customers choices--and about capturing every sale you can. Web-based businesses that don't offer payment alternatives to credit cards are shutting out millions of consumers who either don't have credit cards or are nervous about using them online.
According to a recent study by CyberSource Corp., websites providing four or more payment methods other than credit cards have a sales conversion rate that's 12 percent higher than those offering just one payment option in addition to credit cards.
But before I get ahead of myself, let's take a step back and I'll tell you how accepting credit cards will dramatically increase your sales.
Capture More Sales
The simple truth is, you must accept credit cards on your site if you expect to stay in business. It's been repeatedly proven that if you don't accept credit cards on your site, you'll only capture about 15 percent of your potential sales.
You have to make it easy for site visitors to buy your products. Internet users expect instant access to information, goods and services, and online customers can be very impatient. If dial-up users have to log off the internet to free up their phone line in order to call in their order, you can forget about doing a large volume of sales. That's just too much work for most of your customers, who would be far more likely to buy from one of your credit-card-accepting competitors.
Accepting credit cards will also...
- Give your business a degree of credibility,
- Allow you to capture the sales of impulse buyers, and
- Provide you with a fully automated payment and tracking system.
But before you can start accepting credit cards at your site, there are two important things you'll have to do: 1) Establish a secure server to process credit card transactions, and 2) set up a merchant account.
At this point, you may be thinking, "How I am I going to do this? I don't even know what secure servers or merchant accounts are!" Don't worry--the concepts are really simple. With just a little effort and patience, you'll soon be accepting credit card payments on your web site and reaping huge rewards.
For your site to be as professional as your customers expect it to be, it must feature a secure server that protects your customers' confidential information and gives them the confidence to safely enter their credit card numbers.
A secure server is simply a computer server that can accept and transmit confidential information such as credit card numbers without the risk of someone intercepting the transmission and "stealing" the information. The data is kept secure through encryption, which only the oldest web browsers don't support. You can find out more about secure servers by contacting merchant account providers, which just happens to be the next step in getting your site ready to accept credit card payments.
You have a few different options when getting a merchant account:
You can get your own merchant credit card accounts with a local bank. If you have a good relationship with your bank--and they don't require a large security deposit--it's best to get your merchant credit card accounts through them. You may, however, have to go through two different banks to process the major cards--Visa, MasterCard, American Express and Discover--because some banks deal with only two out of the four providers.
Another problem with local banks is that they often charge a very high "discount rate" or require a very large security deposit (between $5,000 and $10,000) before they'll set up an account for you. For those of you who don't know what a discount rate is, it's not really a "discount" at all! It's the percentage you pay on each transaction for the privilege of using credit card services, and it varies according to your credit rating, business history and the amount of business your site is doing.
For example, if you have a discount rate of 2.5 percent and you make a credit card sale for $100, you'll only receive $97.50. The remaining $2.50 goes to the credit card company.
You can get merchant credit card accounts through a broker. Getting your merchant credit card accounts through a broker is my personal preference for a number of reasons:
- They're web-based specialists in getting credit card accounts for online businesses, and, as should be expected, you can apply over the internet.
- They have a higher approval rate than banks and should be able to get you a discount rate of 2 to 3 percent, even if you've been bankrupt.
- They're affordable and can often have you accepting credit card payments on your site in as little as 48 hours.
Finding a broker isn't difficult--searching online should generate numerous results. But do your research and make sure the broker you choose has a good track record. There are lots of shady operators out there, so be careful whom you select.
You can hire a fulfillment house and use their credit card accounts. If your company is doing only a few thousand dollars of business each month, a fulfillment house may be a good option for you. A fulfillment house is a company that will...
- Take your orders through a toll-free number with live operators,
- Process credit cards,
- Provide some customer service,
- Ship orders, and
- Maintain your customer database.
These companies will also let you use their merchant credit card accounts to process your orders for a fee. The downside is that the discount rate fee is usually 5 percent instead of the 2 or 3 percent you would pay if you had your own accounts. Because of the high discount rate charged by fulfillment houses, I'd recommend that once your business grows larger, you get your own merchant accounts and save some money.
A great place to find nearly 100 fulfillment houses is Yahoo!'s Fulfillment Services Directory. To get there, just click on "Directory" at Yahoo!'s homepage and then search for "fulfillment houses."
You can use a "third party" merchant account provider. Like fulfillment houses, companies such as iBill let you use their merchant accounts. The upside of third-party providers is that they can get you up and running quickly, set up your order forms and process your orders. The downside is that they charge you a processing fee of 11 to 15 percent of the selling price, based on the volume of business you're doing.
While the discount rate offered by these companies is substantially higher than the other options I've been talking about, most don't require any setup fees, software or security deposits, which make them a simple and convenient option for some.
In addition to iBill, you could also check out CC Bill, Authorize.Net or CyberSource.
How PayPal Can Increase Your Sales
PayPal is an increasingly popular way to accept payments online. Founded in 1998, this service enables any individual or business with an e-mail address to send and receive payments over the internet affordably, securely and quickly.
First of all, I'd like you to know that PayPal has recently improved its service--making it an even better payment alternative for your online business. One of PayPal's biggest limitations used to be that customers needed to set up a PayPal account before making payments, but not anymore. For new users, signing up for a PayPal account is now optional. This means your customers can complete their payments and then decide whether or not to create an account.
The need to establish an account first used to drive people away, but by eliminating that requirement, PayPal has dramatically increased your potential customer base and made buying your product easier--which always translates into higher sales and growth for your business. In addition to reaching an already established network of more than 64 million accounts in 45 countries, PayPal has lots of other benefits for you:
- It's secure. After setting up an account, customers don't have to give out credit card details to each individual company. And you know you're dealing with verified buyers.
- There's no need for a merchant account to accept credit card orders, which is convenient and cheap if you're just starting out.
- Your customers can choose to pay by credit card, bank account or PayPal balance.
- It supports payments in U.S. dollars, Canadian dollars, euros, pounds sterling, and Japanese yen, making cross-border sales easier than ever.
- It's free for customers and affordable for small businesses.
- Setup is fast, and you can get started in minutes.
PayPal charges you a fee of 1.9 to 2.9 percent of the transaction plus 30 cents per order, depending on your company's sales volume. The best part is that fees are only applied when you accept a payment, and there are no setup or monthly charges. To get started using PayPal, just go to their site and click the "Sign Up Now" button.