Electronic payment systems

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There are so many electronic payment systems and solutions on the marketplace it is difficult for the online seller to choose the appropriate one for their business.

PAYPAL

PayPal is one of the most recognised brands in the ecommerce world,  operates in 190 markets, and offers  a suite of different payment options.   

 However PayPal has been a controversial payment system with merchants reporting increasing levels of frustration due to the fees deducted from payments received by buyers.

Sellers have also reported being disenchanted  with PayPal because of increases in fees and hidden fees, and dispute resolution policies and outcomes which they allege unduly favour unscrupulous buyers.  

PayPal does have the advantage of being an established online system dating back to 2002 which online consumers online trust.

Online consumers are attracted to PayPal’s anti-fraud and buyer  protection policy. 

The PayPal Buyer Protection Policy states that the customer may file a buyer complaint within 45 days if they did not receive an item or if the item they purchased was significantly not as described. If the buyer used a credit card, they might get a refund via a chargeback from their credit card company. 

Therefore this program is attractive to online consumers insofar as it offers protection for  unauthorized purchases, such as an “item not received” claim, a chargeback, or a reversal providing eligibility criteria are satisfied for the transaction to PayPal’s satisfaction.

Sellers are still reluctant to purchase goods online without some means of resolving disputes where transactions go wrong.

PayPal offers seller protection, hardware and software security, tools to protect against identity theft, a customer help centre and dispute resolution facilities. Sellers don’t perceive PayPal’s seller protection policies as offering any more than token coverage.

Under the Seller’s Protection Policy certain kinds of chargebacks or complaints can be made if a seller meets certain conditions including proof of delivery to the buyer. PayPal states the Seller Protection Policy is “tailored to provide protection to sellers against claims by buyers of  unauthorised payments and against claims of non-receipt of any merchandise”.

However the policy includes a list of “Exclusions” which  includes “Intangible goods”, “Claims for receipt of goods ‘not as described'” and “Total reversals over the annual limit”. There are also other restrictions in terms of the sale itself, the payment method and the destination country the item is shipped to. Just having a tracking mechanism is not seen as sufficient to guarantee the Seller Protection Policy will protect a seller.

 You may wish to offer PayPal but also consider taking advantage of other payment options as well.  For instance, you  might consider setting up a merchant account so that you can receive credit card payments directly.

However if you are a new entrant to ecommerce or a small provider, PayPal may offer you the convenience of securely processing credit card charges in a secure way without the hassle and expense of setting up a conventional merchant account.

There are no initial setup fees, and you don’t incur monthly gateway or other charges. PayPal’s merchant rate is 2.2% + $0.30 USD per transaction.

PayPal is popularly perceived as a quick and convenient method of processing online payments, enabling a buyer to make a charge to a credit card account or a debit from their bank account.

The funds are transferred to your acount with the payment service after the service has deducted a fee for receving the payment.

Most online shoppers in the consumer market expect the option to use PayPal which handlse the submission of customer purchasing and data verification. The customer uses ther credit card number to make a purchase from your website and PayPal debits the customer’s credit card account, transferring the payment to you.

How To Add PayPal to Your Website

If you are selling on your own ecommerce website there are different types of merchant tools which offers customers various ways to pay using their credit cards or debiting their bank accounts. 

 Accept Payments From Your Website

If you already have a shopping cart which you have integrated into your website, PayPal will provide you with the back-end functions that allow customers to pay you from your website.

You merely need to add a PayPal Secure Checkout button, such as ‘add to cart’ or ‘buy now’  to one of your catalog or shopping cart pages. The customer will complete a form on PayPal and transfer the relevant payment to you.

 If you don’t have a shopping cart, you can install one which PayPal will provide you. PayPal will not charge you a  fee for the shopping cart, however you will incur percentage transaction fee and a fee per transaction. PayPal’s shopping carts enable your customers to purchase multiple items from your site. 

PayPal partners with and is compatible with many popular shopping carts such as ZenCart, the free open source shopping cart software   Magento amongst others. For example were you to decide to use Magento as your preferred shopping cart, you would be able to provide  PayPal Express Checkout certified integration,   PayPal Website Payments Standard, PayPal Website Payments Pro certified integration and PayPal PayFlow Gateway.

Otherwise when  customers click on the paypal button they are sent to PayPal’s website which processes the payment, with the customer being automatically returned to your website at the conclusion of the transaction.

PayPal’s product known as ‘Recurring Payments’  allows customers to buy recurring subscriptions from your website, or alternatively via the use of a link in an email. It could be suitable for you if you offer content site subscriptions, charge newsletter fees, club membership dues, or collect recurring donations.

Requesting Money Via Email

Paypal invoicing involves sending your customer an invoice by email. You can create professional looking invoices by using paypal templates.

‘Request Money’ is a quick way to collect moneyfor goods or services or just for sending a personal bill. 

There is a special feature offered by PayPal called Outlook Request Payment Wizard. The beauty of this feature is that it is free and allows you to request money from anyone with an email address from anywhere in the world as long as the country they reside in accepts PayPal.  This option enables you to transmit a variety of different payment requests such as for services rendered if you don’t have a website, solicit payments in the form of donations, subscriptions, or collect money for a special event such as a conference. 

 Paypal has a number of customisable buttons which can be inserted into your email depending on the context in which you are accepting payment,  eg ‘donate’, ‘pay now’, subscribe etc.  You may use email marketing as part of your marketing strategy, however with all of the warnings that consumers receive about clicking links in email, you may prefer to keep customers within your domain if you think they are more likely to deal with you this way rather than subscribing to an email newsletter to mailing list you send. 

Other Features Of PayPal As An Online Payment Provider

Paypal has a feature which sends alerts to you to inform you when your stock or inventory is running low so that you don’t run out of inventory or oversell which you can set up.

PayPal also supports multiple currencies when you are selling goods and/or services abroad.  There are plenty of other features such as transaction records, the ability to issue partial or full refunds, flexible shipping and taxes calculations for the shipping of products both domestically and internationally.

PayMate

PayMate is similar to PayPal in many respects but does allow payments in Australian dollars and US dollars.  They will deposit money into your Australian bank account once  funds are cleared.

ACCEPTING CREDIT CARDS THROUGH YOUR WEBSITE

One of the reasons ecommerce website owners  become a credit card merchant is the ability to process card transactions directly from their customers without PayPal being involved.

You will need to set up an online merchant bank account and the payments made to you by credit card will be sent to that account for which your bank will probably charge you a set up and monthly or annual fee.  You will also pay an percentage of every credit card transaction, between 1-2% forMasterCard or Visa, whilst American Express and Diners Card may charge more. Each payment provider or gateway provider has a different fee structure.

You need to use a payment gateway or payment service provider because when you accept credit cards online you bank will require you website to comply with the Payment Card Industry Data Security Standards (PCI DSS). The PCI DSS requirements for merchants, vendors and security consulting companies, and the certification and merchant support services, are designed to mitigate data security breaches and prevent payment cardholder fraud.

Failure to comply with these standards may result in the cancellation of your merchant account facilityand the imposition of a penalty. Most payment providers bear responsibility for compliance for the PCI ‘DSS standard but you should always ensure your payment provider is complaint.

The Credit Card Transaction Software and Hardware

It is useful to understand how a transaction takes place over the Internet. You will usually have a number of elements in place on your website including a purchase form which buyers complete to provide their name, address and credit card number and details.

You will also need a secure server which encrypts data transmitted over the internet to protect the buyers’ identity and the financial institution. You will also require software or hardware which is configured to transmit the customers’ purchase information to the booking network which is the equivalent of what transpires when a cashier swipes your credit card through an electronic terminal.  There are fees involved in this process.

You will also need a means by which you can verify custoer data to combat credit card fraud where individuals use stolen credit card numbers to purchase goods and/or services from you. You can either pay a verification service to perform this service for you or do it manually using special software.

Most web servers are not secure as they don’t encrypt information that is transmitted to and from them to the required legal standard. To protect the information sent from the buyer’s web browser to the web server that processes the information received from filling out the form it must be encrypted.

Most ecommerce hosting services will impose an additional fee to offer clients the option of using a secure server to retrieve payment data, however consumers only feel secure if they can see a closed lock icon at the bottom of the web browser window indicating they are connected to a secure site. The standard method of encryption used in most secure web servers is known as secure sockets layer (SSH) which means that long encrypted strings of alphanumeric characters called keys are being used to protect the security of data transmitted.

To process the credit card payments you receive you then need to submit the information to your bank or credit card company by point-of-sale (POS) software. The software will contact your bank through your internet connection. After the requested information is authorised your institution will deduct the fees from your account and the purchase price from your credit card account.

There are specialised credit card processing companies which will process credit cards online which are PCI DSS compliant.

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