Giving your customers the right payment options is essential for delivering a great customer experience. Accepting a range of credit cards and other online payment methods (such as digital wallets) will bring you a wider audience. Today, there are many ways to accept payments, including credit and debit card terminals, mobile POS systems, and online payment gateways.
Once you've decided to diversify your modes of payment, choosing the best payment processor for your business is critical. First, consider whether a third-party payment solution or your own dedicated merchant account is the right choice for your business. There is a myriad of third-party payment solutions out there, with Business News Daily providing a thorough rundown of the current options.
Dedicated Merchant Account
A dedicated merchant account is a single merchant account specifically set up for your business. With this type of service, the entire transaction takes place on your dedicated website. A customer selects the items they want to purchase and is then directed to your checkout page, which is secured using Secure Sockets Layer (SSL) encryption. The website has a payment gateway, which securely transfers the payment information to the card issuer for authorization. The whole process is seamless for the customer.
Third-Party Payment Processors
Using a third-party payment processor means that you can accept online payments without having a merchant account at your bank. You use the third party's banking relationship to your advantage so you can avoid having to set up your own relationship, which can be time consuming and expensive, including paying a deposit and often a monthly fee. If you have employed a third-party payment processor, the customer is taken to a gateway hosted by a third party that handles requirements such as purchasing and maintaining the SSL certificates and payment gateways. Some of the best known are PayPal, Google Checkout, and Amazon Payments. These solutions require you to have less technical knowledge and are less time consuming to set up and manage.
Third-party payment processors are especially beneficial for international retailers and those with relatively small sales volumes to take away the pain of handling payments. For international sales, some processors will display the total landed cost to the customer, including taxes, fees, and transport costs. But it is worth shopping around to find a processor that offers low rates since there are many to choose from and rates vary widely. Plus, many payment processors offer different options based on sales volume, sometimes requiring minimum volumes of sales or offering discounts for larger sales volumes.
However, while it can be expensive to set up your own merchant account, third-party payment solutions come with their own unique costs. Transaction fees are generally higher and there may also be hidden fees, such as a penalty for early termination should you decide that the service is not for you, since some processors require a long-term contract.
Which Option to Choose
Whether you choose to use a third-party payment solution or set up a dedicated merchant account will depend on your business needs and the brand image you want to project. If you are a small, specialized retailer, using a third party would probably be the way to go. However, if you are a higher-volume business, generally with sales of $40,000 upwards, or wish to accept a broad range of payment options, setting up your own merchant account and handling all payments directly through your website would likely be the best option. It will project the most professional company image, provide your customers with a seamless payment experience, and incur lower processing costs in the long term. With dedicated merchant accounts, you also avoid any payment delays that may be caused by third-party processors.
Whatever you decide is right for your retail business, it is not an all-or-nothing decision as long as you don't pick a third-party payment solution that locks you into a long-term contract. Take your time and do your research to make sure that the solution you choose is the best one for your business.