Payment Options For Your Online Store

In order to accept payment online, your shopping cart software must be connected to a payment solution or a payment system which allows you to accept payment over the Internet.

Most online transactions require payment by credit card.

Whether you are running an online or offline business, to accept credit cards as a payment method, you need to have a merchant account.

MERCHANT ACCOUNT

A merchant account is simply a relationship between a retailer (in this case, you) and a merchant bank which allows your business to accept credit card payments from your customers. To qualify for a merchant account, retailers must meet the bank’s requirements.

Not every business qualifies for a merchant account. While big companies usually have merchant accounts to help them with receiving payments from customers, small businesses don’t have that advantage.

If you are a home business or small business owner, you don’t need to apply for a merchant account just so you can accept credit card payments. Besides, merchant accounts are difficult to get especially for small businesses (although having your own merchant account means you pay less in processing fees).

THIRD PARTY PAYMENT GATEWAY

So what can you do if you are a small business without any means of getting near a merchant account? What you can do is get a third party payment processor which incorporates both payment gateway and merchant account in one place. The third party payment processor handles payment for you but you need to pay them in return a portion of what you earn online. This is called transaction fees (and sometimes other types of fees are included too) but the upside is that you can easily start accepting payment from customers.

Here are some third party payment processors Malaysians can use to receive payments at their online store.

PayPal (http://www.paypal.com)

PayPal is a common choice of payment because it is fast, free to sign up and easy to use. PayPal allows you to sell physical (tangible) and downloadable (intangible) products along with personal services. PayPal enables Malaysians to conduct e-commerce because PayPal enables you to accept credit cards. The other benefit is that your customers don’t need to register for a PayPal account to be able to pay when they buy from you.

When you sign up to use PayPal as a payment mode, you can accept Visa, Mastercard, Discover, and American Express, as well as electronic cheques, debit cards, and PayPal account balances. You can receive payments in any one of five different currencies – U.S. Dollars, Canadian Dollars, Euros, Pounds Sterling, and Yen.

One of the biggest advantages of using PayPal is that signing up or applying for a PayPal account is FREE. You don’t have to pay setup fees, gateway fees or even monthly fees. That’s why it appeals to all types of businesses who wish to set up shop online. But PayPal earns its money from you through transaction fees.

Although registering with PayPal is free, as a seller, you will be charged a fee for each transaction.

Malaysians can now withdraw their PayPal funds into their local bank accounts. See this article for more info.

2CheckOut (http://www.2CheckOut.com)

2CheckOut works like PayPal.

They accept Visa, MasterCard, American Express, Discover/Novus, Diners Club and JCB and derivatives of those brands. However, while PayPal sign-up is free, 2CheckOut charges a one-time set-up fee of USD 49 (approx. RM 186.20) and for each sale transaction, they’ll charge you a 5.5% commission plus a USD 0.45 charge.

So this means for each sale concluded using 2CheckOut.com, you need to pay a 5.5% commission on top of USD 0.45.

But the biggest advantage for Malaysians at least is that you can get your money, unlike PayPal. But note that 2CheckOut charges you whenever they send you a cheque or wire transfer. You will be charged USD 4 (approx. RM15.20) per cheque mailing or charged USD12 (approx. RM45.60) per wire transfer.

iKobo (http://www.ikobo.com)

iKobo is another way you can use to accept payments if you are Malaysian. You can use a credit or debit card to transfer money to anyone anywhere. Sign-up is free at the iKobo website but there are fees to be paid for each transaction.

Whenever you send money using your credit or debit card, iKobo will send your recipient an i-Kard which is basically an ATM card. The person takes this i-Kard and goes to the nearest Visa Plus ATM to withdraw the money you’ve sent her or she can use the card to buy from any Visa merchant worldwide.

Your recipient does not need to have a bank account or Internet connection to get the money you sent her. The advantage of using the i-Kard is that there’s no need to write cheques or wait for cheques to clear at the bank.

While it is easy to get money, the i-Kard costs you a one-time fee of USD 9.95 ( approx. RM37.81) plus both parties (both sender and receiver) must sign-up at iKobo. In addition, iKobo charges a fee for the money transfer. For transferring less than USD60, you will be charged USD3 while transferring above USD60 is charged at USD5 + 3%.

There are also a host of transaction fees such as monthly maintenance fee, ATM withdrawal fee and more. Do check their website for further details.

BEST SOLUTION

So what is the best third party payment processor to use?

We suggest going with PayPal, now that Malaysians can easily withdraw their funds.

Are these the only payment processors available? Of course not.

If you do a search for payment processor online, you will find a number of these companies. New payment processiong companies are coming up all the time. But the key is to go for a payment processor which has been around for sometime (you don’t want them to go bankrupt or close shop halfway), one that most people use and are willing to use, and one that does not look dubious or resemble a fly-by-night company.

In summing up, whatever third party payment processor you choose, make sure you read the fine print and know your fee structure inside out before you sign up.

The terms and conditions by which these payment processors operate under are likely to change from time to time. So do take the effort to check out the payment processor’s terms and conditions before you sign up in order to minimise any unwanted problems later.

Note: Redbox Studio provides affordable ecommerce set-ups for business owners. Contact us for details.