Most e-commerce businesses use third-party systems to process, verify, and accept or decline card transactions made online. It’s the most efficient way to securely take payments from customers for products or services, but there’s no one-size-fits-all approach.
Choosing the right payment system
With different platforms offering their own fees and features, how do you choose?
“Finding the right payment partners can be tough, and as is the case with other types of business relationships, you may well need more than one to cover different bases,” says Philip Dawson, managing director at jewellery retailer Lily Arkwright.
“The first thing to consider is that your options might be limited by your chosen e-commerce platform developer,” he adds.
This isn’t necessarily a bad thing; it’s likely that the payment services listed by your e-commerce platform will have been chosen for their security, reliability and ease of use – and set-up should be straightforward.
Navigating fees
Most payment processing services make their money by charging a subscription fee or by taking a percentage of each transaction as commission. Some do both.
Commission fees are the most variable factor here: a quick look at the current market shows rates between 0.74% and 3.4%, although some platforms offer allowances for free transactions and others also charge a set fee – often 10p or more – on each sale.
A high percentage could see your costs mount up during busy spells, but cheaper services may be missing important features. According to Stephen Lever, who runs online clothing retailer Parka London, finding the right balance is vital.
“Don’t just go for the cheapest solution,” he says. “You have to think about how your customers want to pay for the order, as they should be your priority. If, after deciding to buy your product, a customer has trouble paying for it, they won’t stick around long, and they certainly won’t come back in the future.”
“My advice,” Lever adds, is “to pick a gateway that can handle a wide range of payment types – and not just major credit and debit cards. Consider methods like PayPal, Apple Pay and Google Pay too, as they’re growing in popularity.”
Using different tools together
Don’t assume you have to stick to one e-commerce platform and one payment gateway, because variety can help you secure more customers.
“Without question, offer a range of payment options for your customers, and make sure you’re only using trusted payment processors,” says Sanjay Aggarwal, co-founder of food and drinks business Spice Kitchen. “We now sell our products through more than 10 different platforms, from our own website on Shopify through to other gifting platforms such as Notonthehighstreet and Etsy, as well as food platforms like Yumbles and The Food Market.
“We’re also on e-commerce marketplaces like Amazon and eBay. So, naturally we make use of the different payment processing options that come and fit well with all these channels.”
Getting set up
The simplest way to get a retail business up and running online is to use an all-encompassing e-commerce platform that handles every part of the process. Marketplaces like Amazon and eBay have their own infrastructure, for example, and any payment processing costs will be included in your regular fees or subscriptions.
Shopify can process payments too, but it offers alternatives. Choose the platform’s Shopify Payments service and integration should be quick and easy. You’re free to choose another processor: after logging in and accessing the ‘settings’ or ‘preferences’ menu, you will be able to integrate your account with a third-party provider, such as PayPal or WorldPay.
With other e-commerce platforms, it may take some tweaking to get your site to ‘talk’ with an external payment processor. Your website’s designer or developer should be able to do this.
Receiving money
Settlement is the process between your payment gateway and the bank, where funds are moved from a shopper’s account into your own, minus applicable fees. The time this takes will depend on your chosen gateway; some providers promise same-day processing, while others take up to seven days. Naturally, this will impact your business’s cash-flow, and is an important factor to consider when creating an account.
Rather than process each payment as soon as it happens, gateways tend to work in batches: they collect a day’s transactions and process them together, making it easier for you to monitor sales figures.
Top tips for payment processing
- Look beyond the cheapest option: Sometimes it’s worth paying a higher transaction rate so customers see a familiar and secure means of payment
- Make use of your e-commerce platform’s built-in payment processing: This is the simplest and quickest way to start
- Consider a range of payment systems: If you’re selling across different e-commerce channels, it could be cost- and time-efficient to diversify your payment processing set-up
- Account for all payment methods: Tools like PayPal, Amazon Pay, Apply Pay and Google Pay help your customers make faster purchases, and that can only be good for business
- Listen to your web developer: If you had, or are having, your website built professionally, your developer should have experience of setting up payment processing and be able to guide you
Article courtesy of NatWest
Original article
