Your Online Presence > Delivering Services Through Your Website

Online Payment Processing

By Lasa Information Systems Team

Increasingly organisations are looking for ways to collect payment for goods and services online. But how do you go about setting this up? This article gives an overview of the options.

Why process payments online?

Online payments can be fast convenient way for your users to pay for goods and services over the Internet using their credit card, debit card or other methods. For example:

• You may wish to accept payment for events such as conferences online
• You may wish to fundraise via your website
• You may have publications or other merchandise to sell

Advantages of collecting payments online include:

• Convenience
• Immediacy
• Potential to reach a wider audience and hence more "customers"

However, accepting online payments is not without risk and won't necessarily be a realistic option for your organisation. Risks include:

• Fraudulent use of cards and / or "chargeback" for which you may have to bear the cost (chargeback is when a customer demands a refund from their credit card company)
• Cost of collecting payments online may exceed income generation capability
• It can be difficult to implement / integrate online payment systems into your website
• Your organisation's existing infrastructure may be unable to cope with delivery and customer service issues and any new business processes that may be required

Getting started

In order to be able to accept payments online you will need an Internet Merchant Service and a Payment Service Provider.

The Internet Merchant Service is the online equivalent of an off-line merchant account required by any business that wishes to process card payments.

A Payment Service Provider provides software that allows card details to be processed, and details of transactions to be passed on to the bank that provides you with your merchant service (the acquiring bank) for authorisation. In other words a Payment Service Provider provides you with a "virtual swipe machine" equivalent to the card swipe machines used in shops.

Organisations that do not already have an off-line merchant account with a bank may find it difficult to get an Internet Merchant Service so will usually find it quicker and easier to use the services of third party online payment bureaux, person to person payment services, or a hosted online shop. It will usually be much easier for organisations that already do off-line trading and already have a merchant account for their off-line business to get an Internet Merchant Service through their bank.

If you want to fundraise via your website you may wish to consider using a specialist online fundraising provider.

Options

Internet Merchant Service / Payment Service Providers

Acquiring banks (the banks which provide Internet Merchant Services) and Payment Service Providers make a charge for their services.

This will usually involve a set up fee in the region of £200, ongoing monthly fees (up to around £25 per month), and transaction costs, typically around 3%. You may also have to pay a bond of up to £2000.

Often the acquiring bank will also provide payment services as part of one package. Similarly, you may be able to get Internet Merchant Services through a payment service provider.

Advantages include:

• Users do not need to leave your website to have their card payments processed so get a more seamless service
• You will generally receive payments within 3-4 working days
• Costs may be lower than for Online Payment Bureaux (see below)

Disadvantages include:

• Getting up and running can take much longer than for other types of online payment processing services - verification checks can take up to 8 weeks or longer
• Strict requirements mean that you may not qualify for an Internet Merchant Service
• You will need to set up your website to accept secure payments

Examples:

Payment Service Providers:

• Velocity Pay
• WorldPay-Bank Direct
• Secure Pay 

Acquiring Banks:

• Barclaycard Merchant Services
• HSBC 

Online Payment Bureaux (payment processing companies)

Online Payment Bureaux collect payment from your customers' credit and debit cards on your behalf and forward the money to your bank account. They are a "one stop" solution to collecting online payments without requiring an Internet Merchant Service with an acquiring bank or a separate Payment Service Provider to be set up.

Costs vary but may involve a one off set up fee of up to around £200, ongoing monthly costs of up to £30 and transaction charges of up to around £0.50 for debit cards and typically around 3% up to 8% for credit cards depending on the provider.

Advantages include:

• Your organisation does not have to bear the burden of administering payments and having to set up secure payment facilities
• Generally quicker and easier to set up
• Most types of businesses accepted

Disadvantages include:

• Your "customers" may have to go thorough the extra step of setting up an account with the payment processing company. They will be taken from your site to the site of the payment processing company
• Payments may take 30-60 days to reach you
• Transaction charges are usually higher than for Internet Merchant Services (can be up to 9%)

Examples:

• World Pay - World Direct 
• Netbanx Bureau 
• Pay Pal Merchant Services 

Person to Person Services

Person to person services allow businesses and individuals to receive instant guaranteed, low cost online payments and / or escrow services. Advantages of person to person services include:

• You can get up and running relatively quickly and cheaply, there may be no set up fees
• Money goes to your bank account usually within around 3 - 5 working days
• Depending on the service, customers may not need to register to set up an account with the provider

Disadvantages include:

• Often only relatively small amounts of cash can be transferred (around £100)
• Not designed for large volumes of transactions
• You may not be able to accept payments from outside the UK
• Customers may have to register to set up an account with the provider in order to send you payments
• Both the customer and organisation may have to pay a transaction fee to send / receive payments
• Fees for debit / credit card transactions can be high (up to 8%)
• Process is not "seamless" users will have to leave your website to make payment via the provider's site

Examples:

• Nochex

Online stores

Many specialist companies and Internet Service Providers offer the facility for you to set up an online shop. The company will host your shop, and the software takes care of payment processing. Advantages include:

• You can get a web presence fairly quickly
• Generally relatively easy to set up and administer by someone with good IT skills
• You don't need to set up a separate merchant account

Disadvantages include:

• Can be much more expensive than other options
• Since shops are built from standard templates they can look the same as everyone else's and are less flexible in terms of design

Examples:

• Actinic
• Shop Creator 

Specialist fundraising providers

If you wish to fundraise through your website there are providers who specialise in this area including Charities Technology Trust, Charities Aid Foundation and Justgiving.

Some of these providers will be using a existing Payment Service Providers such as WorldPay behind the scenes, others will have developed their own solutions.

Other

If you wish to sell digital content or services online it's worth considering services such as BT Click and Buy or Ymogen. Advantages of using such services include:

• Often there is no need for you to set up an Internet Merchant Service or payment mechanism yourself
• Administration of payments is taken care of by the provider
• Services can be used to accept very small payments - as little as 20p

However there are also some disadvantages which include:

• Users will often need to sign up for an account
• Charges can be disproportionately high if you have a low volume of transactions
• You may not be able to accept payments from outside the UK

Further Resources

This article provides a brief overview of online payment processing. For a more comprehensive list of online payment options see the links below.

The DTI's (Department of Trade and Industry) electronic payments website has a free online Electronic payments diagnostic tool which is useful for making comparisons of different online payment processing options (see below).

Information about electronic payments

• Electronic Payments - information from the DTI electronic payments website, including costs and considerations and a useful comparison tool
• Business Link - practical information on doing business online (see Accepting online payments under E commerce in the IT and E commerce section)

Examples of providers

• Electronic Payments Solution Providers Database - List of electronic payment providers
• IT For Charities - List of online donation service providers
• Non Profit Matrix - List of online donation service providers