Gerry Harvey may be a very smart man, but he didn't have his thinking cap on when he alerted everybody to the benefits of buying (and selling) online. The interest in on-line shops has definitely increased recently and we have been setting up a lot of them. There are some gotchas and hidden costs involved and I can take you through them. One of the biggest decisions, though, is how money will change hands.
Below are two common options for credit card processing online. I have included their costs and some pros and cons. At the end I'll include a real-world example that will make you think twice about "free" Paypal.
Paypal
Paypal is the most widely known internet payment gateway. To use it a merchant account needs to be set up with Paypal.
The costs of using Paypal are:
These amounts are fixed by Paypal. They can be reduced by becoming an approved merchant.
This only changes the per transaction percentage based on the monthly amount of sales made.
Paypal works by passing a "shopping cart" to a Paypal webpage where the website visitor makes their payment. This can be changed only slightly to match the original site's look. Once the payment is made (or cancelled or declined) the website visitor is returned to the original site for confirmation.
It must be noted that Paypal has three major drawbacks:
- Any money deposited into a Paypal account stays there until the merchant manually transfers it into their own account.
- The website visitor leaves the website, makes their payment on Paypal's site, and is then returned.
- Support is, in our experience, less than adequate.
Integrated Payment Gateway
An integrated payment gateway is FAR superior to Paypal. I have used eWay on many sites now and recommend it.
It has the following advantages over Paypal:
Funds from each transaction are transferred immediately into the merchant’s bank account.
All payment processing is performed on one website resulting in a faster and more consistent experience for the buyer.
Support is excellent, Australian-based, via either phone or email.
The cost of using eWay are:
no setup fee
$350.00 per year (Budget plan, other options are available)
$0.50 from each transaction
an SSL certificate for data encryption (optional - at eWay's discretion)
All payment gateways that transfer money into a merchant account have an extra cost, imposed by the merchant’s bank, to set up. This charge differs based on the type and size of business, amount of transactions, and other factors decided on by the bank in question. These amounts are not advertised. eWay will get a quote for this amount from the merchant's bank and help with the integration of the internet payment facility and merchant account.
A Real-World Comparison
We have a site that took 456 orders in the past 12 months for a total value of $118,230.
Using Paypal the costs would have been:
456 x $0.30 = $136.80
2.4% of the total amount = $2837.52
Total using PayPal = $2974.32
Compare that with Eway's payment gateway:
456 x $0.50 = $228
$350 per year
Total using Eway = $578
That is a difference of $2396.32 !!!
Another option that suits some people is one that really is free. It's not suitable for everybody but it is worth considering when planning your on-line shop. Ask us about it today.
Getting good advice could save you thousands of dollars. Don't get locked into using Paypal before looking at the other options!
Note that I have not included bank charges or the cost of preparation of legal documents such as Return Policy or Terms & Conditions of Sale. They will vary, but will be required for both options.
