From the December 2000 issue of Entrepreneur

It's a fact: Your e-tailing Web site will not survive unless customers can pay for their purchases with minimal disruptions and maximal convenience. Whether you decide to accept credit card payments or online cash, you've got to ensure those transactions go through as seamlessly as possible.

Accepting Credit Card Payments

If you choose to go the credit card route, you're going to need an Internet merchant account with a bank. Not all banks support Internet merchant accounts, so check with yours to see if it does (or if it's affiliated with a bank that does). For this service, most banks charge a one-time setup fee, plus a fee for each transaction. Transaction fees vary widely, from 1.65 to 5 percent of the gross sale, and depend on the volume, the type of product and the average ticket price. Fees may include an additional 10 cents to 40 cents for transaction, batch and statement fees.

You'll also need an online credit card transaction vendor, which will allow you to accept orders online and process telephone and retail orders. Some companies that offer credit card payment-processing services include Authorize.Net, CyberCash, IntelliPay and VeriSign. Before signing up with any provider, make sure it works with the bank that holds your Internet merchant account. You can expect setup fees for credit card service to range between $500 and $1,000, fol-lowed by a monthly access fee of between $40 and $80. A per-transaction fee of 20 cents to 60 cents might also be applied.

Or try your Web hosting company as an alternative-it should offer credit card services, or at least help you set them up on your site. It will probably charge transaction fees similar to those of credit card transaction vendors.

Because building a secure site requires special programming knowledge, you may want to use one of these pre-existing services to to avoid building the site from scratch or processing transactions manually. Real-time credit card transaction systems do their processing through a secure socket layer (SSL). SSL ensures the connection between you and your customers is safe for transmitting sensitive information. Without SSL, information could be intercepted.

Accepting Online Cash

If you sell low-cost goods and services, you may want to go with an e-cash system instead. E-cash systems are an inexpensive, secure alternative to credit card systems. They're designed for micropayments, which are loosely defined as transactions less than $5. Software, music samples and articles are a few examples.

Traditionally, Web merchants have stayed away from selling or charging for this low-cost category of goods and services-the costs and complexities of traditional credit card transactions made it unprofitable. But these days, thanks to current technology, vendors such as eCharge, Qpass and Trivnet have come up with ways to allow customers to quickly and easily make small payments at a relatively low cost to sellers.

While these systems vary, most allow your customers to buy low-cost goods and services with a single click, then have their charges appear on their phone, credit card or ISP bills. Usually, after you sign up with a particular e-cash vendor, you can offer an icon of the service on your Web page, which customers click on to enter the e-cash site and access the service. ECharge, for example, lets customers buy goods online and then charges purchases to their monthly telephone bills. The Qpass system keeps track of each consumer's purchases and processes them on a credit card at the end of the month. Trivnet's WISP system adds shoppers' purchases to their monthly telephone or ISP bills.

These services do cost money, however: Companies that offer them usually charge a percentage for each transaction-and that percentage is similar to what you'd have to pay to set up a merchant account with a bank. But some experts explain the fees are ultimately less, because the complexity involved in setting up a new micropayment system is considerably less than setting up a credit card transaction system, which involves several vendors.

The real appeal of micropayment systems, however, is they usually eliminate the need for customers to register or set up accounts to use them. That's important when asking shoppers to pay for small-ticket items or impulse buys. Few customers will take the time to perform a long credit card transaction-which includes filling out an extensive form-just to make a $1 purchase.

What's more, according to vendors such as Qpass and eCharge, the unique architectures of their systems make fraud virtually impossible, with each claiming to experience near-zero fraud levels.

Still, despite all the advantages, few e-tailers have set up their sites to accept e-cash. According to a second-quarter 2000 study of online merchants from Gartner, 1 percent were signed up with a micropayment vendor in the first quarter of this year. Only time will tell if the systems will grow in popularity.


Melissa Campanelli is a technology writer in Brooklyn, New York, who has covered technology for Mobile Computing & Communications and Sales & Marketing Management magazines..