Is Online Credit Card Processing Necessary?
For online business owners today, offering the options customers want is a vital aspect of winning the sale. Multiple payment methods give consumers a choice, but credit card payments are far and away the most popular.
Credit cards are convenient for consumers to use and sites that accept them show higher revenues from impulse purchases and other add-ons.
There are two ways that ecommerce sites can arrange to accept credit card payments. One is by establishing a merchant account and the other is to use a third-party service to process the payments.
Most banks offer merchant accounts and processing gateways to their account holders. Funds from credit card purchases, less the agreed-upon fees, are deposited into the merchant account, then moved to the owner’s business or personal account on a regular basis (usually within 24 hours).
The primary disadvantage is that approval for merchant accounts is more difficult to obtain for internet businesses than for standard retail businesses. Every bank has its own qualification guidelines and fee schedules.
Third-party services such as VCS eliminate the need for a merchant account. They offer real-time processing of payments and transfer of funds to the business owner’s account for a fee, usually a small flat rate plus a percentage of the sale total per transaction.
For the start-up or small business owner, third-party services may provide a more accessible, affordable alternative to traditional merchant banking option.
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Bernard said,
Wrote on May 15, 2008 @ 2:01 pm
Accepting credit cards is a must – especially in SA where we can’t really make use of Paypal. From my experience people are hesitant to get a merchant account because of the admin involved and the perception that it has additional cost associated with it.
For a start-up with low sales volumes, the small additional fee the service providers take to act as merchant is preferable to paying a monthly fee for the merchant account.
Greg Bahlmann said,
Wrote on September 9, 2009 @ 5:41 pm
With faster Internet speeds and lower costs, more and more entrepreneurs will be encouraged to take the plunge and try setting up an online business. This sector could do great things for the South African economy. I agree that using a 3rd party credit card processing solution like VCS is the key to empowering online commerce. Another good option for credit card processing is netcash.