About the Author:
Robert Earls has worked for many years as a Technical Consultant in the IT industry. He now runs a successful online business www.argentice.co.uk.
Robert Earls puts the crowded marketplace of online payment processors under the spotlight
Online payment processors are companies who offer businesses a way to accept and process credit and debit cards without dealing with each of the different card issuers directly.
Each of the companies reviewed offer a secure and encrypted (via SSL) environment. The most common way this is used is via a web interface where the business checkout process temporarily jumps to the processing website, to take the credit card details; the processor then passes control back to the business website, either to a confirmation page, or to a declined page. Alternatively a more complex, but seamless, method is for the business website to take and store credit card details, then pass these invisibly to the payment processor for validation. This type of processing would obviously require the business website to be extremely secure.
I have researched many of the payment processors available to UK businesses, submitting each to the same tests and scrutiny. As well as covering the main differences in accounts available, the results of my research have been split into categories that will be important to businesses requiring these services:
Account Availability
For small to medium sized businesses, the market has become crowded with third party payment
processors and it has become difficult to decide which is the most cost effective choice. But cost is not
the only parameter that should be taken into consideration - security, customer service and the reputation of the third party payment processors should also figure highly.
For larger volume businesses, possibly the cheapest method would be to use your own merchant account. If you already have a merchant account with your bank, then you can upgrade this to accept payments via the Internet. The following companies are some of the more recognised third party payment processors who will process the credit card transactions for you:
Fees
When looking at costs, in many cases it is impossible to compare like with like, and frequently there is no overall ideal third party payment processor, just the best for your business at its current
transaction rate and turnover. In this section, I have tried to uncover some of the hidden costs involved.
Accessing Funds
Once the business has completed an online transaction, funds are available in the online account, and can be withdrawn or transferred to other accounts. If your business has a large turnover of high
value sales, you may find waiting for a month to gain access to your money unacceptable.
Chargebacks
"Chargeback" is the term for a customer asking their credit card company to remove a charge from their account due to them not receiving goods or fraudulent use of their card.
Unfortunately, in cases where you do not use your own merchant account, some third party payment processors will "fine" your business
when this happens and reverse the payment.
Trust and Support
With more people using the Internet for shopping each day, there come greater opportunities for fraudulent activity. An amateur or poorly designed website does not instil confidence in potential
customers to buy from you, and the brand of the third party payment processor you use will leave an impression on your customers.
There is no doubt that while Worldpay is one of the most expensive companies discussed here, the Worldpay name is becoming a well recognised and trusted brand. If you can afford to use them and your margins are not too tight, then you would do well to choose Worldpay.
ProtX, SecPay and Netbanx are slightly less well known, but the lower costs of using one of these processors may outweigh any gains you get through using a more well known name. The service they provide is as good as Worldpay, and the withdrawal delay is not so long, is so you maybe find them more cost effective.
At the lower end of the payment processor market, we have Paypal and Nochex. At the time of writing, in early December 2004, customers purchasing via Paypal have to go through the procedure of signing up for an account with Paypal. This involves Paypal placing two small amounts of money into their account and waiting for these amounts to be verified before the account can be used. In theory this should seriously reduce the number of people who can purchase from a Paypal enabled website; in practice, however, there are a vast number of Paypal users out there who specifically look for websites which accept Paypal. However, Paypal is not seen by many as a serious payment processor and may give potential customers the impression that you cannot afford, or perhaps cannot acquire a "proper" payment processor.
The UK alternative to Paypal, Nochex, does not require your customers to sign up in advance for orders under £100 (this can be reviewed, at Nochex's discretion, up to £300). The feather in Nochex cap is the no chargebacks guarantee; once the customer's funds have reached your Nochex account, your company will not be fined for chargebacks as long as you have carried out the business transaction properly, thereby protecting your company from fraudulent chargeback claims. Unfortunately, Nochex suffers many of the same reputation problems as Paypal. In addition it currently only accepts payment using a UK issued card, thereby cutting you off from the international market, although I understand from them that this is being addressed.
There is no reason to distrust Paypal or Nochex, as they are both perfectly good payment processors. They aim at the lower end of the marketplace having no start up fees and no merchant account required. You might think that they would have poor support, but you'd be incorrect, Paypal's support number, although hidden away on the website, it is answered reasonable promptly. Nochex support system is via an online ticketing or queuing system which work reasonably well.
On the subject of support, I tried to telephone Worldpay at 8pm, but the call was transferred to, what I can only assume is, their US division where the call was handled efficiently. This was not the case for their email support. I emailed them a question 5 days ago, admittedly this covers a weekend, but at the time of writing, I have had no response. ProtX and Secpay were able to supply an answer to my 11pm question within 12 hours. Netbanx, although slightly slower to respond than most of the other processors, were able to give me the most comprehensive answer to my question and followed up with a phone call. Worryingly, Secpay's automated email indicates it could be up to 5 days before I get a response.
All of the payment processors I have reviewed offer, as their very basic level, a similar service, but there is no perfect solution for all businesses. Before making a selection, I would suggest working out the number of transactions you'd expect and the turnover in order to work out the costs involved, then take into account the amount of support you would need setting up your shopping cart. Lastly take into account the image of your organisation, and the market you are servicing, who may or may not be dissuaded from using your online shop if you use the wrong level of processor.
In undertaking this review, I looked at the most popular and well known third party payment processors, but there are many more that you may like to consider. As part of any decision making process regarding payment processors, I would strongly suggest taking a look at the DTI website that offers information and a very useful comparison service: www.electronic-payments.co.uk
About the Author:
Robert Earls has worked for many years as a Technical Consultant in the IT industry. He now runs a successful online business www.argentice.co.uk.