Payment Processing Basics
by John Calder

© 2004, John Calder
http://www.TheEzine.net

If you want to sell your own products online, you will need to choose a means for your customers to pay you. Otherwise, you wont be in business very long! If you have regular office hours and employees, or want to hire a service, you can offer to let your customers phone in their orders and/or credit card number.

But most marketers want total automation of their ordering and payment process. They understand that without automation, they cant have the time freedom that the Internet marketing lifestyle can bring. And many of todays Internet shoppers are used to ordering online, without having to phone anyone. They expect to be able to add their items to a shopping cart, then complete the checkout process smoothly. If you dont offer that to them, they may choose to shop at another site that does.

For automated payment systems, there are just two basic choices. You can either get your own merchant account and do all the payment processing from your site, or you can choose a third-party processing service. It really is that simple - everything else is detail. Of course, the devils in the details, so lets take a look at each.

For high volume or high dollar sales, having a merchant account is almost always the best option. Theres a certain break even cost point where it makes sense to pay the monthly fees and processing charges of a standard merchant account. Not so long ago, it was difficult for online merchants to even get an account, because of the extra risk associated with Internet payment processing. And when you could find a bank willing to offer you an Internet merchant account, the monthly fees were much higher than for standard accounts, enough to make them out of the financial reach of many small businesses.

Today, its relatively easy to get approval for an Internet merchant account. In fact, its a very competitive field in the search engines, and search results are often filled with a mixture of legitimate offers, spammy sites, ripoffs, and outright fraud. So if you choose to go this route, be very careful in giving out any of your financial information. Try to get referrals from fellow marketers if you can, and investigate any companies and their offers thoroughly. One caution on having your own merchant account - if you get too many consumer chargebacks, your account could be canceled, and you may find it difficult to get another one.

If you want to process your own payments, you will need to hook your shopping cart software up to a payment gateway and authorization processor. Unless youre using an all-in-one service, or are very familiar with web site technology, you will likely need to hire technical assistance for this.

As an alternative, even for some merchants with larger volumes, there are third party services who will process credit card and e-check payments for you. These firms typically charge a much higher percentage of the sale, plus a per-transaction charge, for their service. However, for beginning marketers, it often makes sense to process payments through one of these firms. They are especially good during a testing and business-building phase, when sales volumes and product longevity are unknown.

Some firms, such as Clickbank, process payments only for products that are delivered digitally. Others process for only physically shipped goods, and others not only process payments for both, but offer recurring subscription payment processing as well. The most well known of these firms is Paypal, which is owned by, and heavily linked to, eBay. You can also consider 2CheckOut.com, Propay.com, Ibill.com, CCNow.com, and Payloadz.com, depending on your product.

• TD Bank Financial Group Reports Third Quarter 2008 Results; Raises Dividend (PR Newswire via Yahoo! Finance)
  
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• TD Bank Financial Group Reports Third Quarter 2008 Results; Raises Dividend (CNW Group via Yahoo! Finance)
  
  TD Bank Financial Group today announced its financial results for the third quarter ended July 31, 2008. Overall results for the quarter reflected solid earnings contributions from TDBFG's personal and commercial banking operations in both Canada and the United States and its Wealth Management segment, while the performance of Wholesale Banking was affected by continuing challenges in financial ...
  


• CIBC Announces Third Quarter 2008 Results (CNW Group via Yahoo! Finance)
  
  CIBC announced net income of $71 million for the third quarter ended July 31, 2008, compared with net income of $835 million for the same period last year. Diluted earnings per share were $0.11, compared with diluted EPS of $2.31 a year ago.
  


• PaySpot Expands Prepaid Program in Pilot Travel Centers (Centre Daily Times)
  
  PaySpot, Inc., a leading prepaid and payments processor in the U.S., and Pilot Travel Centers ("Pilot") today announced the launch of an exclusive multi-year, multi-product sales and service agreement designed to expand Pilot's in-store prepaid services. PaySpot went live in 304 Pilot locations mid-July, integrating its electronic prepaid product delivery system with Pilot's existing ...
  


• PaySpot Expands Prepaid Program in Pilot Travel Centers (Business Wire via Yahoo! Finance)
  
  LEAWOOD, Kan.----PaySpot, Inc., a leading prepaid and payments processor in the U.S., and Pilot Travel Centers today announced the launch of an exclusive multi-year, multi-product sales and service agreement designed to expand Pilot's in-store prepaid services.