Choosing an online payment system
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More small businesses than ever are selling their goods and services online. But what is the best way to take people's money? Afsheen Latif weighs up the pros and cons of online payment systems
Being a successful e-retailer is not just about having an attractive website or offering the best deals; repeat sales are also dependent on making payment easy, and Internet shoppers are no longer content to read out their credit card number over the phone.
"The way of taking payment is evolving very quickly," says Giles Sirett, director of software firm Octavia Information Systems. "It is all about ease and convenience for the customer. Accepting online payments in some form really opens up the Internet to sellers." There are three standard payment systems to choose from; deciding which is best for you means weighing up the ease of setting-up, cost, flexibility and the impression it creates of your business. Handle payments yourself Taking the customer's card details via your own website before passing them to your bank to process the payment will convey the impression that you are an established, well-resourced business. "This appears seamless to customers because they never leave the seller's website," Sirett explains. "However, there is a significant amount of programming and cost in setting it up - you could be looking at five figures." Once up and running, however, running costs are limited to your bank's normal handling charge for payments. Pass customers to your bank "The second approach involves handing the customer directly to your bank's website to handle the payment," Sirett continues. "It's easier to set up, the implementation costs are lower, and people like the fact that they are paying a bank, because they are reputable. "However, customers may think that if you are not able to take payments yourself, you are not a big operation, and that's important," he warns. Your bank will also charge for each transaction - usually between one and five per cent of its value. Use a third party A third party such as Paypal or Google Marketplace will handle the entire transaction. Both you and the customer have an account with the provider, which simply shifts the funds from their account to yours. In return, the provider charges you a percentage of the value of the sale. "It's easy to set up, but it's obvious to the end user that they're using an external website to pay," Sirett stresses. "For small businesses it is important to look established. However, customers are likely to feel more secure giving their details to providers such as Paypal." Making a choice "Passing customers to your bank's website or using a provider such as Paypal are the best option for start-ups because you don't have a massive capital investment to get your system up and running," Sirett concludes. "Speak to professionals who have experience setting up similar facilities for businesses like yours and shop around for the best deal."
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