Alternative Online Email Payment Systems

by Godfrey Heron

One of the most frequently asked questions I get as a webmaster is "can you setup an ecommerce system for our company?"

For most businesses venturing into ecommerce, e-payment means accepting credit cards. This involves setting up a complex system including a SECURE order page/shopping cart software, a merchant account (basically a bank account that receives the credit card proceeds), and a credit card processing service. Care has to be taken to ensure that the shopping cart is compatible with the authorization service. All the various elements need to be compatible and interface with each other.

While the bulk of Internet ecommerce is still transacted using credit cards, there has been steady inroads being made by alternative methods of settling e-transactions. These Web Payment Services (WPS) have ingeniously utilized the most popular application on the internet "e-mail", to appeal to customers.

By using an existing platform to launch their services, WPS providers have enjoyed wide appeal with customers worldwide. The largest of these, PAYPAL, has approximately 11 million users, processes 150,000 payments per day, and attracts over 20,000 new users each day.

But are there any advantages of using these alternative payment systems over credit card merchant systems? To help you decide the following criteria will be evaluated:

(a) SetUp
(b) Maintenance Costs
(c) Ease of Use/Convenience
(d) Cash Flow Effect
(e) Customer Perception

SETUP
As mentioned above the setup of a credit card merchant system is complex. The setup of a merchant account may take up to two weeks or more for final approval to be granted from the financial institition involved and verification of the integration of various components completed.

WPS services on the other side of the scale, are incredibly easy to setup, almost laughably so. For example, Paypal, which is the largest WPS just requires a merchant to go to the Paypal site to register their account. This whole process may take 5 -10 minutes. There is no transaction processing software to install, and importantly, no shopping cart to rent or buy. Paypal simply generates a HTML code which you can place in your site next to your inventory items.

A click on these buttons takes the customer straight to Paypal's secure server. When customers want to make a payment they send a message to Paypal, and then Paypal, the middleman, does the rest.

MAINTENANCE COSTS
Establishing your own merchant account for credit card processing and installing a shopping cart can easily run into hundreds of dollars. In addition there are the ubiquitous monthly minimum fees and address verification fees (a proven anti-fraud strategy).

WPS providers don't levy application setup or monthly charges, and the costs are competitive with Credit Card transaction processing charges. These average at $0.35 and 2.5% per transaction.

EASE OF USE / CONVENIENCE
Although WPS providers intimate that their services are very user- friendly, the fact of the matter is that WPS services are not as easy to use as credit card systems. WPS services require the user/ customer to register with them, if they have not already done so. Now this is a major disadvantage as it interrupts the flow of "impulse" purchases. Potential customers have been known to abandon shopping carts for even less interuptive purchasing hiccups.

On the merchant side, payments received in WPS accounts are not automatically lodged to your bank account. The merchant will have to manually claim and then transfer payments into their bank account. With credit card merchant accounts your account is automatically updated.

CASH FLOW EFFECT
Having your own merchant account will certainly increase the flow of funds to your bank book. While a merchant account provider will hold your funds to prevent charge backs losses, the period of time is usually relatively brief, about 48 hours. Expect to wait for at least a week before money appears in the account of WPS providers.

CUSTOMER PERCEPTION
At this point in time credit cards are the medium of choice and a business that uses only WPS providers as the means of receiving payments may appear to be amateurish and "small-fry". In the online world, where site visors don't have a face to relate to, perception is critical, and the ability to accept credit cards has been held as a mark of an established, feet on the ground firm.

CONCLUSION
There are definite advantages to using WPS providers. They should however be used as backup payment services or in conjunction with merchant accounts. Its always to your advantage to present the customer with as many payment options as possible.

The following is a list of WPS providers:

• http://www.paypal.com
• http://www.c2it.com
• http://www.westernunion.com
• http://www.billpoint.com

--- Godfrey Heron is the Web site Manager of Irieisle Online a leading web hosting and design company. Hosting solutions Starting from US$9.95. http://www.irieisle-online.com

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