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Setting up an online payment system

More small businesses are turning their websites into virtual showrooms to sell their goods and services online. But how do you take people’s money? Afsheen Latif weighs up the pros and cons of the different online payment systems

Getting your ‘virtual showroom’ right is important to attract customers when selling online. But being a successful e-retailer is not just about offering the best deals – repeat sales are also dependent on making the online payment process as easy as possible.

Deciding which online payment system is best for you involves weighing up the ease of setting-up, cost, flexibility and the impression it creates of your business. There are three types of standard online payment system to choose from, each of which has pros and cons.

Handle payments yourself

Taking the customer’s card details via your website before passing them to your bank to process the payment will convey the impression that the business is established and well-resourced.

“This appears seamless to customers because they never leave the seller’s website,” says Giles Sirett, director of Octavia Information Systems. “However, there is a significant amount of programming and cost in setting it up, you could be looking at five figures.”

Once up and running, costs are limited to your bank’s normal handling charge for payments.

Pass customers to your bank

“The second approach involves handing the customer directly to your bank’s website to handle the payment,” Sirett continues. “It’s easier to set up, the implementation costs are lower, and people like the fact that they are paying a bank, because they are reputable.

“However, they may think that if you are not able to take payments yourself, you are not a big operation, and that’s important,” he warns. Your bank will also charge for each transaction – usually between one and five per cent of its value.

Use a third party

Using a third party such as PayPal or Google Checkout means the entire transaction is handled by them. Both you and the customer have an account with the provider, which simply shifts the funds from their account to yours. In return, the provider charges you a percentage of the value of the sale – between one and five per cent, depending on your sales volume.

“It’s easy to set up, but it’s very obvious to the end user that they’re using an external website to pay,” Sirett explains. “For a lot of small businesses it is important to look established. But customers are likely to feel more secure with providers such as PayPal than giving credit card details directly to a small website.”

Making a choice

“A system where your customers are paying through your website is well-integrated, but less flexible than the other options,” Sirett comments. “Passing customers to your bank’s website or using a provider like PayPal are the best option for start-ups because you don’t have a massive capital investment to get your online payment system up and running.”

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