Increasingly, businesses with brick-and-mortar locations are adding E-commerce options so customers can choose to buy products online if they can’t make it to the store.
In addition to catering to customers who prefer the convenience of online shopping, an E-commerce website opens up your business to a much wider audience.
When you sell online, your store can be located in Florida and customers in California can make purchases easily and securely.
If you’re already up and running in person and are considering adding an E-commerce website to sell your goods or services, it’s important to understand what you need to do to accept payments.
Online transactions can’t be paid for with cash, so you’ll need to accept credit cards, PayPal, electronic checks, or all three. You’ll also need to work with a payment processor if you plan to take any payment methods beyond PayPal.
Understanding E-commerce: Gateways, Shopping Carts and Processors
Taking payments online involves several components, most commonly a gateway, shopping cart and processor.
- A gateway is the “equipment” that enables online payments. You can think of it as the credit card machine of the Internet. It’s what customers “swipe” their card through, by entering their card number and other details. There are universal gateways like Authorize.Net that work with many different processing companies, and there are proprietary gateways that only work with the processor who offers it.
- A shopping cart is an online version of the same thing in person it’s the “storage” space where customers put the items they want to purchase until they’re ready to check out. Many ready-made shopping carts are compatible with a variety of gateways and processors.
- A processor is a company that handles the transaction for you. In the case of online transactions, processors may “host” payment forms on their own secure servers so that you’re not storing sensitive cardholder information. Hosted payment forms are generally easier to set up than other options, and include customization options so that you can make the form match your branding/site.
Any time you take payments online, a gateway and a processor are necessary. Shopping carts are common, but optional you could alternately use "buy" buttons or invoices to accept payments online. In most cases, it will make sense to start by finding a processor, and then choosing a compatible gateway and shopping cart from the processor’s options.
No matter what, you'll need to work with a credit card processor if you want to take payments online. You can continue to use your existing processor (if you have one), you can find a new processor, or you can use PayPal.
1. Working with Your Current Processor
If you’re already taking credit cards in your store, you can contact your existing processor and tell them that you’d like to take cards online, too. Almost every processing company these days has an option for E-commerce transactions, and most require little or no programming knowledge. The processor will work with you to set up credit card processing for your website. It may involve opening a new merchant account. That's generally preferable and perfectly normal, so don't be surprised if a processor suggests or requires it.
2. Finding a Processor
If you don’t take credit cards in-store currently (or if you do but you’re paying too much and want to switch) you’ll need to find a credit card processing company. Credit card processing comparison sites like CardFellow are a great way to see pricing and compare quotes. When you’re looking for a processor, be sure to let them know that you’ll be taking cards online. If you plan to take cards both online and in person, it's important to inform the processor up front so they know you'll have multiple acceptance methods.
Many customers like to pay online with PayPal. It’s secure, and cardholder information isn’t shared with the business. You can offer PayPal as a stand-alone option, or you can offer it in addition to other choices, like paying by entering card information.
It’s a common misconception that if you want to offer the choice to pay by PayPal, you need to go through PayPal for all your credit card processing online. This is not the case it’s completely possible to use another processing company and still accept PayPal. This article offers more information about the different ways to accept PayPal on your site.
Is offering PayPal necessary?
It’s not strictly necessary, but it may be helpful. Customers are familiar with it, and some have indicated (in a study done in 2013 by Hill Marketing Group and Starbucks) that they feel more comfortable using PayPal than a credit card when shopping online with smaller retailers. The study found that as many as three out of four people said that they would rather use PayPal when making a purchase online.
Many things can cause customers to abandon carts before completing checkout, so if adding the option to pay with PayPal helps customers convert, it may be worth your time to take the extra steps to add it.
The Benefit of Separate Merchant Accounts
Generally speaking, it’s a good idea to have a separate merchant account for credit card processing for your online and your brick-and-mortar business. You can even think of them as separate businesses.
The reason you’ll want to use separate accounts is so you can get set up correctly with a processor. Online and in-person transactions have different risk profiles and different pricing and terms. It’s important to set yourself up correctly so that the processor will have a clear idea of your processing needs and you’re less likely to have problems.
Don’t Just Use an Existing Merchant Account
If you’re already running an E-commerce website, it’s important to know that you should not just start accepting payments on another website with your existing account. That’s a quick way to find yourself with a closed account, unable to accept payments. Check out Visa’s Card Acceptance Guidelines for Merchants for more information. Specifically, see Page 49: Merchant Website Requirements, Page 50: Best Practices for Websites, and Page 54: Guidelines for E-commerce Merchants for information specific to online selling.