Choosing and setting up an online payment system for your business can be overwhelming. As you conduct your research, you’ll come across popular names like Stripe and PayPal and some that aren’t as common. You’ll also have to decide between developing an in-house solution and using a third-party solution. Each has its pros and cons to consider.
Here’s a breakdown of the basics and details of setting up the online payment form.
How do online payment systems work?
An online payment system is a method of completing payments for products and services online. Usually, they consist of three parts:
- Payment gateway – a tool that operates between the payment processor and the card company to manage the technical aspects of data transfer. It ensures transactions are completed securely and fast.
- Payment processor – a solution that primarily moves money from the customer’s account to the merchant’s account.
- Merchant account – a special account that allows businesses to accept debit/credit card payments.
Types of online payment systems
Generally, there are two major methods of receiving payments from customers online:
- Credit/debit cards – you can opt to create the payment system yourself or have a third-party payment service provider handle the transactions for you plus manage PCI DSS compliance. To know about Payment Service Provider you can visit for more information.
- Direct debit – this is an automated payment system that allows you to get payments directly from consumer bank accounts.
Setting up an online payment system using third party software
If you choose to take this path, take the steps below to ensure the payment system is cost-effective and secure.
1. Researching the solution
With so many third-party software options, research is crucial. Consider the following when making your choice:
- Setup fees
- Monthly service fees
- Extra transaction fees
- The funding practice; is the money deposited directly into the merchant account, or will you have to retrieve it from the service provider?
2. Setting up the merchant account
Depending on the third-party software solution, you may not need to undergo merchant account underwriting. But if you prefer getting a merchant account, your software provider will guide you through the underwriting process.
3. Building the payment form
With your new software, you can customize the payment forms. Determine the services, products, and payment types you want to offer, and then upload logos and activate your form.
4. Integrating into your business
Transitioning to an online payment system will make your work easier. However, you need to notify clients about the change so they know what to expect.
Advantages of using third party software solutions
- Simplicity – it doesn’t require immense software development skills to set up the online payment system.
- Security – you can rely on the software provider to meet security requirements
- Guidance – third-party solutions that integrate with merchant accounts can guide you in the underwriting process and easily integrate the account into the payment solution set up.
- Low ongoing and upfront fees – though there are monthly service fees, you don’t spend on secure hosting or major software development.
Advantages of in-house online payment systems
- Control – You can customize the online payment solution to meet your needs.
- Feel – you can design the payment forms to match your business’ look and feel.
- Flexible – because you have access to the code, you can add or remove functionality as needed.
In-house online payment processing lets you focus on all of the other things that take up the most of your time and provides following advantages:
With an in-house payment system, the process is in your hand, hence you can provide the same support your customers receive from your support systems.
Because there is no third-party to take care of the payment process, you can expect to save money on your fees. Thus, you can enjoy cost-savings that make your business more profitable.
Limited set-up time
It may take time for you to set up an online payment system. You need to install the software that you need to use. With an in-house system, you have the power to install the software yourself. You can also choose the pricing that you want.
Types of payment systems
There are several types of payment systems. The most common types of payment systems can be segmented into three major segments:
Physical payment systems
Physical payment systems refer to the use of cash or credit and debit cards in card-present transactions.
Physical payment systems can be further classified into segments such as point of sale (POS) terminals, terminals used for electronic payments, cash on delivery and other physical payment solutions.
Online payment systems
Online payment system refers to the use of websites or apps to process card-not-present transactions for payments cards or digital based transactions using services like PayPal.
Mobile payment systems
Mobile payment systems rely on mobile phones and near-field communications (NFC) to process payments.
Accepting online credit card payments on your website
The obvious reason for accepting online credit card payments is the convenience it affords your customers. Greater ease-of-use and access to a line of credit is likely to encourage customers on your site to spend more than they would otherwise.
Most Americans today simply aren’t used to paying cash on delivery or via money order. They expect to use their credit or debit card to transfer funds for purchase.
Many clients, regardless of where they come from, want to use their purchases to gain points on their credit card rewards program.
Also, keep in mind, online credit card payments usually have a higher acceptance rate than phone or offline credit card payments. That means you are likely to maximize your profits by accepting online credit card payments.
Best option varies by business
Whatever choices you make, remember that the best online payment system may vary from one business to the next. A business selling 1,000 products daily has different needs from a consulting business that collects customers’ payments on a per engagement basis. Always weigh your options and determine what your business needs for seamless operation.