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.


Debit Cards

If you want to get the edge on your competitors, you may want to look into setting up your site to accept debit card payments online. Here's why: Debit card use is becoming hugely popular. In fact, according to AllBusiness.com, although credit card purchases have been expanding by about 15 percent for the past five years, debit card purchases have been growing even faster--at a rate of more than 50 percent per year. By the end of 2005, credit and debit cards are expected to account for 43 percent of all purchases in North America, proving that you can no longer ignore customers who want to pay by debit card over the internet.

But before I tell you how accepting debit cards online will help your business grow, it's important that you understand how debit cards work, as well as the different types that are currently in use.

When a payment is made using a debit card, the funds are immediately withdrawn from the purchaser's bank account. There's no "pay later" option with a debit card. With a debit card, you pay now.

There are basically two types of debit cards. The first is a signature-based card that has a Visa or MasterCard logo on it. You can use these cards anywhere Visa and MasterCard are accepted. If you're already accepting credit card payments online, you should be able to accept this form of payment as well. Just check with your merchant account provider.

The second type is a personal identification number (PIN-based) debit card. I'm sure most of you have at least seen this type of card used at offline stores--you swipe your card through a small reader and enter your PIN number, making this type of debit card impossible to use over the internet...until now.

A company called UseMyBank has developed software that allows purchasers to access their own bank accounts and pay for goods and services in real time. The process is nearly identical to paying bills online with your bank, and the money is immediately taken from your account, just like when you use a debit card.

Here's how it works. If your customer decides to use this service to purchase a product, they'll be asked to select their bank, as well as which account they want to pay from. You're then immediately notified of their payment and can start your delivery process. One of the best features of this service is that your customers don't have to give up any of their credit or banking information to you, making this one of the most secure options available.

And in addition to providing another payment option for people who don't like to use credit cards for online purchases, this method also targets teens, who represent a huge market but who often don't have access to credit cards.

UseMyBank is currently available only in Canada, but the company is launching its service internationally in the second quarter of this year. That's why I'm giving you this information now--so you can stay ahead of your competitors by providing your customers with the newest and easiest ways to pay online.

For more information about how you can offer your customers this payment option, just go to UseMyBank's websiteand have a look around. Signing up is straightforward, and the site should be able to answer all your questions.

Offline Payment Options

In addition to providing the online payment alternatives I've been talking about, it's still very important that you give customers the option of ordering and paying offline to ensure you capture the maximum number of sales. Many people are still nervous about giving out their credit card information over the internet, despite secure servers, and some customers will always want to speak with a live person. Giving your customers the option of speaking with a "real" person adds credibility and a human element to your online business.

Another benefit is that the person taking the call can answer customers' questions as well as help "close" the sale by encouraging customers and giving them the final push to buy. To make sure you're able to capture the orders of these customers, you should also have a toll-free number available 24/7 and offer an order form customers can print out and fax or mail.

Final Thoughts

If you're not already accepting credit cards directly from a secure order form on your site, you're missing out on a huge number of sales. With 90 percent of all online purchases being made with credit cards, you literally can't afford not to offer this payment option on your site.

However, even if you're set up to process credit cards online, you can't leave your site off limits to the millions of people who don't have or want to use credit cards. To tap into this lucrative market, you've got to provide some of the alternative payment methods I've mentioned above.

And don't forget that in addition to PayPal and debit cards, there are still lots of other online payment methods, including e-checks, e-wallets, person-to-person e-mail payments and so on, that you may want to explore.

Making it easy for your potential customers to do business with you is essential to your online success. That doesn't mean you need to provide all the payment methods available, but if you're serious about maximizing your sales, it's good to know what's out there so you can make sure you're taking advantage of the options that best suit your type of business and customers.