Online Payment: Shopping Carts, Gateways and Merchant Accounts, Oh My!

Better WordPress

4 Crucial Points You Need to Understand Before Choosing  the Right Online Payment System

E-Commerce is big business. Whether you're a small solo shop with a couple of ebooks or full on with tons of products, online stores are the way to go.

No matter the size, there’s one thing all online shops need – an online payment system. And, not all are created equal.

The Hubs is not a shopper, or, at least, he wasn’t. He hates getting in the car, fighting traffic, spending all that time in crowded stores and then having to take me for a meal, after all was said and done.

Then he learned about online shopping. He thought it was just awesome to be able to sit in the comfort of our home and get everything he needs while still watching sports.

You would think. But he stops short of actually completing the purchase. Why? Because he doesn’t understand all, that's involved in making the online payment.

I was telling a client, who is also a friend, about this and how it drives me crazy that I need be his checkout girl. She, too, confessed that the reason she hasn’t added her digital books to her website was because she didn’t understand the inner workings of an online shopping cart. They totally frustrate her.

Then it dawned on me; not everyone is so jazzed about the way the online payments work. At least, not enough to wade through all the boring, snoozefest information and instructions.

So let’s break it down.

What is a Payment Gateway?

A payment gateway is the online equivalent of the cash register at your favorite brick and mortar store. It connects you, the client, their credit card provider to your bank.

Your shopping cart software sends the card numbers to your payment gateway to authorize the purchase and process the payment. If the information submitted matches the information on file, then the charge is approved, and the gateway will transfer the money into your merchant account.

What is a Merchant Account?

This is the point of the process that people get confused because a payment gateway and merchant account are not one in the same. A merchant account is the most complicated of the two. It's an area that holds your money until it's transferred to your bank account. This can take anywhere from a couple of days to a week. In most cases, the money is automatically transferred from here to your bank account.

Many of you are familiar with Authorize.net. Authorize is a merchant account that processes payments once they’re through the gateway.  Some services such as PayPal or Stripe have their own merchant account which is why they’re a little more expensive and easier to sign up. These types of services are known by the terms dedicated versus aggregate accounts.  Dedicated being just for you and aggregate is a pool of money to draw from.

What’s a Shopping Cart?

The beauty of WordPress is there are many options to add a shopping cart to your site. However, just like no two payment gateways are created equal, no two shopping carts are either. Some are easy to set up while others need lots of add-ons to make it function as you need it to.

Four Things to Look For and Understand Before You Choose:

To make the best choice for you, you need to know what to look for as far as terms, services, and fees.

Payment Types

You need to know what kinds of payments you’ll accept. Credit cards are the most popular type of payment, but there are others. Electronic checks are another option, but they do take longer to process. Then there’s gift cards. There are two choices there too: store-specific and those issued by a major player credit companies.

And let’s not forget PayPal, a popular (and recognized) choice of many.

Transaction Fees

There are no free options, so it is important that you know about the fee structure. Some gateways will keep a small percentage of the sale while others will be a flat fee. Sometimes it’s both. It’s best to start with anticipated sales and compare fees based on that number.

Be sure that you check to see if there are any additional fees such as set-up or monthly subscription fees. And watch out for additional gateway costs.

Hosted Accounts

Several gateways will take you to their own server to complete the cart process. This means that the customer is taken to a page on their site and uses their form to checkout. Then they are redirected to a confirmation or thank you page.

Because of PCI compliance rules, hosted payments are popular since the host is responsible for maintaining and keeping your customers’ information safe. Without a hosted site, you’d need at the very least an SSL certificate and dedicated hosting that will add fees starting at $10 per month to your website hosting costs.

Several hosted gateways now allow you to “slurp” your site — which is a fancy way to say mimic the look so that customers don’t get confused when being sent away from your site to the host for payment.

Shopping Cart Integration

When choosing a gateway be sure to check that it can be easily added or integrated with your cart of choice.

The popular options such as PayPal or Stripe are included in many of today’s WordPress shopping cart plugins. Stand alones such as 1ShoppingCart or 2CheckOut are not. You don’t want to be stuck paying additional fees for a plug-in you can’t make work or pay a programmer to customize your cart.

The Final Stop

Having worked with many e-commerce stores, most don’t need their own dedicated merchant account It’s simply not worth the length of time and trouble to get everything approved and set-up. Unless you’re consistently doing high volumes of sales each month (e.g., > $5,000), an aggregate service like Paypal or Stripe will be just fine.

My suggestion for credit card processing is Stripe. There is no monthly fee with Stripe and like PayPal, they have a fee structure of 2.9% + $0.30 per transaction.

With an easy online application, you can be up and running in about 15 minutes.

While some are not keen on PayPal, it is a great second option. Most shoppers are familiar with it and for those doing international transactions, it takes the guess work out of the currency conversion process.

Do you have an online store for your products and services? Got a question? Let’s start a discussion about what works, or doesn’t work for you.

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