How to Accept Payments Online
With consumers making more online payments than ever before, particularly via their mobile devices and in light of the COVID-19 pandemic, it’s vital your business offers your customers a variety of options for making a payment online or you could face losing sales opportunities and revenue.
Essentially, there are five main methods for taking payments online
- Payment Service Providers
- Direct Debits
- Online Payment Gateway
- Pay by Link
- Virtual Terminal
The above methods allow your customers to make quick, simple and safe transactions online and will ultimately improve the customer experience as they can complete transactions from anywhere, at any time around their needs. Not only that, they can help reduce the time it takes your business to get paid.
Why Should I Accept Debit and Credit Card Online
Allowing your customers to pay with credit or debit cards on your website is the most basic way you can accept online payments. They are great should you need to collect payments or payments from around the world instantly.
The benefits of accepting credit and debit cards:
Customers trust your business
By displaying the logos of the credit cards you accept on your website, you give your customers a sense of trust in your business. They trust these credit card brands and therefore trust businesses who accept them.
When you start to accept credit and debit cards, your potential customer base will expand and the more likely you are to make further sales. Most people prefer using credit cards because it is safe, legal, and convenient. Post-COVID-19, fewer people feel safe making face-to-face payments, you could face a loss of potential earnings if you don’t accept online payments.
Shoppers like being able to make a purchase quickly and easily without having to run to a card machine. The fact they can just enter their card details without fuss is extremely beneficial to them and to you with transactions being processed, settled and deposited fast meaning your cash flow will be improved and less chasing of customer invoices and checks etc.
Rewards for shoppers
Your customers want to be able to choose the method of payment that’s not only the most convenient but also the most beneficial for them. Many cards offer rewards, points, or mileage that encourage them to use their credit cards more whenever they make a purchase.
Inexpensive for businesses
The cost of setting up an increase in sales generated by accepting credit and debit cards often counterbalance the costs involved in setting it up - meaning it’s an excellent return on investment.
Due to the huge growth of ecommerce sites over the past ten years, credit card accounts aren’t hard to set up on your site.
There are several ways that you can accept card payments online by setting up your own merchant account and payment gateway or opting for a full service payment provider, who do a lot of the hard work for you whilst supporting you with PCI compliance requirements.
Do I need a merchant account to take online payments?
If you want to start accepting payments online, via credit or debit cards, then you should consider opening up a merchant account. A merchant account is a business bank account that’s used to take payments from a customer’s debit and credit cards. Money is taken from their account and sent directly to your merchant account, where the funds are held until they are settled into your nominated bank account.
What is a merchant account?
Holds onto transactions while a payment is being processed
Works with card networks (Visa, Amex, etc.), card issuers (your customer’s bank) and card processors (your terminal provider) in order to clear transactions into your own bank account.
Comes with a contract and card processing fees
Provides an extra level of security to card payments.
For a more detailed account about what a merchant account is, how to set one up and how, click here.
It’s worth noting that if you don’t want to do all this yourself and opt to outsource to a payment service provider (see below) then they will typically act as both the merchant account and the payment gateway letting you accept online payments without a merchant account of your own.
Online Payment Methods
What is an online payment gateway?
A payment gateway is a tool that securely validates your customer's credit card details, ensuring funds are available for you to get paid.
In order to accept payments online you need both a payment gateway and a merchant account. Payment gateways are often confused with merchant accounts but they are not the same thing. Payment gateways are the services that authorise credit card payments for online and offline businesses. It’s just like the physical point-of-sale (POS) terminal in a shop or restaurant.
How does a payment gateway work?
A payment gateway does the following while accepting a payment via a credit or debit card.
When your customer gets to checkout on your website to enter their credit card details, the payment page will either be provided by your payment gateway or will securely transfer the details to it.
The payment gateway sends your customer's credit card information safely and the details about the transaction are then passed onto your payment processor (the company that manages the credit card transaction process).
The information then passes through the card network and to your customer's bank, authorisation of the transaction will make its way back to your payment gateway, where you and your customer are informed whether the transaction has gone through or not
What are Payment Service Providers?
As already stated above you can opt to use a payment service provider (PSPs) to help you accept online payments. Payment Service Providers are essentially the go between you and the banks who ensure that the funds end up in the right place by taking it from the cardholder’s account and delivering it to your account.
Full service payment service providers typically act as both the merchant account and the payment gateway letting you accept online payments without a merchant account of your own.
Using a payment service provider also reduces what can be a huge burden of PCI compliance. You never actually touch sensitive financial information. PSPs also offer other services including subscription billing, fraud management, payouts and transfers, etc. making the payment process even easier.
For further information about payment service providers and how they work click here.
What are direct debits?
Another way to accept payments online is using direct debits. Generally these are a cheaper way to take payments but aren’t ideal if you need payments instantly.
A direct debit payment means that your business is given permission to take an amount of money out of a customer’s bank account – typically monthly – without the need for the customer to supply their details again.
As with card payments, there are several ways to accept online payments with direct debit, ultimately that will depend on your business and the amount of payments you collect.
If you decide you want to collect online direct debit payments yourself then you’ll need your own Service User Number (SUN) and to invest in Bacs approved software. Alternatively you can invest in a direct debit bureau, a third party, which handles payments on your behalf.
What is a Pay by Link?
In essence, a ‘pay by’ link is any link or button a person can click within an internet browser, text message, email, app or social media networking site to pay a certain amount of money online to a specified receiver.
Depending on which provider you opt for they can also be called:
A pay by link can refer to any of the following online transactions.
That one-time link sent via text, email, chat message, social media to allow the recipient to enter payment details in a browser. Can be time-limited, but also valid for an unlimited time until the payment is made.
Email invoice link. With invoices, you specify recipient details such as name, address, VAT and company details.
‘Buy button’ placed on an ecommerce website, which would take you to a typical online shop checkout page.
Whatever link / button you click on they all take a customer to a payment page so they can enter the card details etc and then submit the payment which is processed over the internet.
You, the merchant ,will then be sent confirmation of the transaction or be able to view it in the merchant portal of the payment system.
What is a Virtual Terminal?
A virtual terminal is a secure web page in your internet browser where you can process card payments online. It works like a credit card terminal, but through a non-physical software application.
You can generally access the virtual terminal online via your payment provider’s account where you manually enter the customer’s card details – which you may be given over the phone, a mail order form or through an online chat – and submit it for processing. The customer’s card will then be charged, and the money transferred to your payment provider account or bank account.
These payments are often taken if you need to take a booking, reservation or order for a product over phone.
How can I reduce eCommerce fraud?
Ecommerce can be great for businesses, but with it comes the risk of ecommerce fraud. However there are steps you can take to help keep your business from becoming an easy target:
Achieve and maintain PCI Compliance
The Payment Card Industry’s Data Security Standard (PCI DSS) is a set of standards and requirements to help ensure that all online merchants and their customers are protected from fraud and data breaches.
Achieving and maintaining your compliance via our PCI Compliance checklist is a critical first step to protecting your eCommerce business. Failing to do so could result in large fines and could ultimately result in loss of your company.
Keep your shopping cart software updated
If you use a payment service provider work with them to make sure you consistently update your shopping cart software. It might mean you have to buy extra features to protect against fraud.
Make sure Address Verification (AVS) and Card Code Verification (CVV) is part of your payment gateway.
AVS checks the entered billing address with the one on file with the credit card company. CVV is an additional security feature aimed at reducing card-not-present (CNP) fraud, and goes by several names depending on the credit card.
Look out for signs of suspicious activity.
Unusually large orders or high-priced orders
Expedited shipping on large quantities or high-priced orders
Expedited shipping when billing and shipping addresses differ
Orders where the purchaser asks to pick up the order at your location
Fake phone numbers
Suspect email addresses
Inconsistent address information
These are just a handful of ways to fight against ecommerce fraud. Remember if you are in doubt, check it out.
For further information please read about ecommerce fraud prevention.
Regulations for Accepting Online Payments
Accepting online payments isn’t just about having a sleek and easy checkout process. As already stated, handling sensitive payment information means that businesses are subject to a number of regulations. The Payment Card Industry Data Security Standard (PCI DSS) applies to all organizations that store, process, or transmit cardholder data. It was developed to help keep customers and their sensitive payment data safe. While PCI DSS is overseen and managed by the Payment Card Industry Security Standards Council (PCI SSC), the council doesn’t enforce PCI DSS. Instead the networks are responsible for making sure you (the merchants) adhere to PCI DSS. Failure to do so could result in fines and possible cancellation of merchant accounts PCI DSS compliance requirements will vary from business to business.
As you can see from the above, the number of options for how to accept payments online for your business are constantly growing and evolving. The key to working out which is right for you and your company is to understand how each option can work for you as well as the cost of having (or not having) a particular method.
At Opayo, we can help your business to accept online payments with ease. For more information, please visit our Online Payments page or call us now on 0800 084 1480.