eCorner

eCorner
Secure eBusiness Solutions

Friday, 16 February 2007

Confused about payment systems?

Many of the questions that we are asked are about taking payments online. It is a confusing area and also one that is very important. There are a number of issues to consider:


  1. What type of payments will I accept?
  2. If I accept credit card how will I process them?
  3. Can I keep credit card information?
  4. Do I need a refund policy?
  5. Do I need a Privacy Policy and Terms and Conditions?

Lets try to cover each briefly. This information is relevant to everyone but some is specific to Australia and New Zealand. You need to check with your bank and local authorities regarding country specific legal and regulatory requirements.

What type of payment will I accept?

In general you can multiple payment methods on your website. If you can't then you probably need to change your web provider. Having different methods for different areas or products can be very good. One example might be to use a COD shipment service for large and expensive items. But you would not use COD for say a music download. So pick the payment method/s that best suits your business and products. Ask your customers what they want and what works best for them. Check out what your competitors are using.

If I accept credit cards how will I process them?

Credit Cards online is the most used payment method. We always recommend that you use a Payment Service Provider (PSP) to accept and process the credit cards. The PSP will take the card details and process them securely via the card provider. They have a gateway into the card schemes and onto your bank. Generally the money gets to your account in 1 - 5 days depending on the PSP. These companies need you to setup an online merchant facility with your bank. If your company is new and does not have a trading history this can sometimes be difficult.

The alternatives are to use companies like Worldpay or PayPal. These companies don't need an online merchant account but put the money into any bank account you nominate.

Typically there might be setup, transaction fees and annual fees. Some PSPs charge a percentage of each transaction like Worldpay and PayPal. If the value of your product is small this is a good approach, typically this can range from 1% up to 5%. Some charge a fixed fee for each transaction and the range can be from 15c up to 40c so check first. PayPal as an example is very reasonable but settlement takes up to a week. There is no setup cost and they charge around 1.5% per transaction. Every PSP and bank will take some time to get your account setup this can be up to a month in some cases. As an example PayPal may take 2 weeks from registration, they will send a letter to the address you provide with a verification code and they will make two small deposits to your bank that you must verify online. So take the setup lead time in to account when you are building your business plan.

You will hear about payment systems that are free. Be very careful about payments and in our experience nothing is ever free.

Can I keep the Credit Card information?

If you use a PSP you don't need to keep the credit card information. If you process manually then you do get card numbers, CVCs, names, expiry dates and so on. This data has to be kept only in a secured data base. We never recommend keeping that data online. The card schemes have rules from country to country that place limitations on what you can keep so make sure you ask.

If you keep this data you need solid terms and conditions and you need a Privacy Policy online.

Do I need a refund policy?

Customers ask for refunds it is a fact of life. So if you have a well documented refund policy it could save you a lot of arguments. Laws vary from place to place and some countries (like Australia) have strong consumer legislation that requires you to accept returns and issue refunds in certain circumstances.

One other issue here is the cost of refunds. If you use a PSP (or credit card) they will charge you a fee to process refunds through their system. These can be expensive so check. Sometimes it is better to send off a cheque rather than process a refund through a credit card.

Do I need a Privacy Policy and Terms and Conditions?

Again we always recommend that you have a Privacy Policy and T&Cs. These can save you a lot of pain. Think of all the issues you need to cover in your T&Cs for example are your products able to be returned. In some countries the Privacy Policy must cover some legal issues and so needs to be compliant so make sure you check.

Another issue that varies by country is your own company information and contact details. Personally I won't buy from a website where I cannot find the company address and contact details. So I strongly urge you to show this on your site. Again in some countries there are legal requirements to show company details including Company Numbers or VAT Registration and so on.

Anyone with any comments let me know.

All the best

John

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