What Service Providers need to know about online booking payments?
OK, you want to start taking payment when a customer books your
business online. This involves linking 4 components together to process the
payment.
You need a (1) website with a (2) booking widget connected to
a (3) Payment Gateway linked to a (4) Merchant
account.
Before this can happen your need to setup a merchant bank account
and attach a payment gateway.
What is a merchant account?
Put simply, a merchant account links a customer's payment to
your business' bank account. This will let you accept debit and credit card
payments.
To automatically process credit card payments online,
businesses need:
·
A secure server with PCI compliance
certification. Use SSL encryption so the data is protected.
·
An order form on a secure server. This is where
your customers will type in their banking information.
·
A payment gateway. This works with the merchant
account to make sure your customers' information gets processed so that you can
get paid.
What costs should you be aware of?
Unfortunately, they're not exactly cheap. There are lots of
rates and fees to be aware of:
Application fee. Your application may be rejected, but you
have to pay a standard application fee, and may even have to provide a copy of
your business license, P&L statements, tax return copies, and a photo of
your office.
Per transaction fees (for example, 50 cents per
transaction).
Monthly minimums. Vendors usually have a minimum fee that is
charged if a certain amount of money isn't processed. They may also charge
annual fees like this.
Discount rate. This includes fees, dues, assessments,
markups and network charges that merchants must pay for accepting card
payments. They are usually between 2 and 3% of every sale.
Chargebacks. It's expensive to process these, so your
provider will pass the charges onto your business (it can range from several
dollars or more). These are usually charged per occurrence.
Some things might influence your discount rate and fees:
·
The length of time you've been in business,
·
Your personal credit rating,
·
The percentage of sales that are made on the
phone or internet,
·
The type of business you're in,
·
The total amount of sales per month,
·
The average dollar amount of each sales
transaction, and
·
Service fees tacked on by third party providers.
What options do you have?
1. Banks
Although banks do provide merchant accounts, they are highly
regulated and generally unhelpful for businesses who are just starting out.
This is because banks will either reject or charge a higher fee for businesses
with high possibility for returns and refunds.
2. Credit card
companies
Small businesses usually get their merchant account through
credit card companies, and not their business bank. Credit card companies will
either set up merchant account processing, or ask you to use a third party
processor (this is the case for Visa and MasterCard). Some credit card
processing companies require you to maintain an account in their bank before
you can process cards.
3. Third parties
Small-sized businesses typically need to go through third
party providers to secure the merchant account. One example is PayPal. They
collect customers' data and do all the work to process payments for your
business.
The upside is the sign-up process is much easier and quicker
than it is with a bank or credit card company. Also, if you're just starting
out and your sales volumes aren't high, this option can save you money. The
disadvantage is that if your sales start to grow rapidly, it will start to
become very expensive.
What is a Payment Gateway?
A payment gateway is used to process the credit card payment
and transfer the payment to your merchant account. Banks and 3rd parties offer
payment gateway services.
A payment gateway is an e-commerce application service that
authorises credit card payments for online businesses. It is the equivalent of
a physical point of sale terminal located in most retail outlets. Payment
gateway services are offered by banks and 3rd party service
providers. Bank transaction fees are often a lot higher than 3rd
party payment gateway providers.
What costs should you be aware of?
Most payment gateway providers offer a variety of plans that
cover pre-purchasing transactions or pay as you go. Like phone companies they
do not make it easy to compare plans.
Setup fee are often charge to establish the account
Per transaction fees can range from 26 cents to 50 cents
A failed transaction can often incur a fee.
What about Paypal?
Paypal is an alternative to using a Payment Gateway and
merchant account but the fees are high (2.4% + 30 cents a transaction) and the
user experience requires jumping to a separate site just to pay you. This looks
unprofessional and can result in a customer abandoning the payment which
results in unpaid booking. Instead, you could connect your PayPal account with
SecurePay, so that the payment process is seamless and processed within your
website fully and it's easier for your customers. Using SecurePay and PayPal
does not require a merchant account.
If you're interested in testing out bookitlive, take a free
trial today. You can start taking bookings in minutes and your trial lasts for
30 days:
Topics: credit card transactions, online
payment, payment gateway, merchant account, PayPal, SecurePay.
