Taking payments online can boost your business. Here are Danny
Bradbury's tips on setting up an order processing system
Along with all the other considerations when setting up an
e-commerce operation, companies have to think about how to receive
payments online. Negotiating with credit card companies, installing
the right software and managing security are all essential to
creating a viable e-commerce solution.
However, not everyone gets it right. Music and video retailer
HMV, for example, originally handled online payments by manually
taking orders from the system, handpicking products from the
shelves of its Oxford Street store in London and re-entering the
orders into the store's point-of-sale terminals. This manual
approach was clearly inefficient.
Automating online payments can cut down on overheads
significantly. Just ask HMV; it has since adopted a more
sophisticated system.
Merchant accounts
The first thing you need is a merchant account. This will enable
your bank to transfer payments to you. If you are an existing
business with credit card processing facilities, you may already
have a merchant account.
It is important to check the terms and conditions - and
particularly the charges - involved with processing online
payments. Banks often impose restrictions or charges on 'Cardholder
Not Present' transactions, where the credit card holder is not
physically present when making the purchase. Internet purchases are
classed as such, for obvious reasons, so you must factor any
additional charges into your overall transaction cost.
Once you have established a merchant account, or checked your
existing account for Internet friendliness, the next step is to
choose an online payment service provider. There are lots of these
companies springing up online, many of which offer a range of
services that address various levels of complexity.
VeriSign, for example, which has made its name in the digital
certificate market, offers two different levels of online payment
system. Payflow Link is browser based and aimed at businesses
processing fewer than 1,000 transactions per month.
Businesses get into the system using a simple hyperlink entered
on an HTML page, and the system offers credit card, debit card and
electronic cheque payments. Payflow Pro, on the other hand, uses a
secure, dedicated Internet link (TCP/IP link) and comes with its
own software development kit for advanced payment applications. It
supports more payment types, such as purchase cards.
Still, when using online payment mechanisms such as these, you
will want to be sure that US service providers support
international customers. Although US-based VeriSign can support
transactions in sterling, you will need a US bank account to make
it work.
One of the most popular online services is WorldPay, which
offers a UK-centric payment service. Following a relationship with
NatWest bank that began in 1996, it now handles multicurrency
processing.
In a typical session, after browsing an online retailer's
catalogue and making a product selection, a customer elects to make
a payment. The electronic retailer sends an encrypted purchase
token to WorldPay, which decrypts it and presents a payment form to
the shopper. Shoppers enter their card details and submit the form.
The card is authorised by the card issuer and authorisation is sent
to WorldPay. Both the retailer and the shopper are informed that
the transaction is complete, and then the money is transferred from
the shopper's credit card account to the retailer.
Safe-keeping
Security is a big issue when handling online payments and many
companies use secure socket-layer technology in order to make
things safer. There are other standards on the market; Visa clubbed
together with Mastercard and leading technology providers to
produce the secure electronic transaction technology in the
mid-1990s, for example.
Using digital certificate technology, the system enabled credit
card data to be stored using a browser plug-in. Unfortunately, the
technology is quite complex to implement and real-world use has
been minimal.
Taking online payments is far from a simple task, and a lot
depends on your relationship with your bank. Nevertheless, get it
right and you will be able to make your e-commerce operation much
more efficient.
Penny pinching: charges
Retailers have traditionally been reluctant to authorise credit
card transactions of very small sums because it is unprofitable for
them to do so. The nature of the Internet, however, makes low-value
sales desirable. For example, a company may wish to charge a fee
for viewing video clips online, buying individual songs or playing
games.
The value of such transactions would not exceed a few pounds
and, in many cases, would cost no more than a few pence.
Microtransactions are a small but growing segment of the market.
WorldPay produces WorldAccount, a microtransaction system that
enables customers to set an opening balance and then debits their
accounts to cover such small purchases.