Understanding online payment systems
Most websites can be configured to handle online payments in some shape or form.
Briefly, this is how an online sale works when buying product. Purchasing a service wouldn’t usually have the delivery component, but can roughly follow the same process:
- Shopper selects product for purchase and it goes into a virtual shopping cart.
- When they’ve finished, shopper proceeds to ‘check out’ where they enter their address details or log-in if they have an account with the seller (which automates this process).
- ‘Check out’ recalculates purchase costs adding in shipping and any relevant taxes.
- Shopper is taken to a secure ‘gateway’ to enter in their credit card details. Most often this is a third party provider who charges a fee per transaction (based on a percentage). They will also usually charge a fee to set up this facility for the site, and an ongoing fee for providing this service (secure hosting, certificate, etc).
- The shopper is sent confirmation that their payment has gone through and a copy of the order via email. The seller receives the payment into their bank account and delivers the product to the shopper.
Scenario One:
The above process, because it interfaces with a bank and a gateway payment system, will require the seller to become a credit card merchant with their bank. There will be fees paid to both the bank and the gateway provider for their services; usually a one-off set up fee, a percentage per transaction, and any ongoing service fees. This means the ticket is clipped twice before the seller gets their money.
The seller will also need to pay for the system to be integrated, the costs of which will vary depending on which solutions are being used. Certain banks prefer certain gateway systems, and its best to find a developer with experience in the relevant system to minimise cost and hassle. Also some systems are easier to deal with than others -for instance I’ve found the BNZ BuyLine solution particularly user-unfriendly. They don’t supply a developers manual which means it is very unclear throughout the process what needs to be done. It also makes it impossible for developers who aren’t familiar with the system to price for integrating it.
Links:
Here is a website page which lists the main NZ Banks and their payment gateway solutions:
Scenario Two:
There is a variation on Scenario One where the services of the gateway and bank are combined into one. This means the seller doesn’t have to become a credit card merchant. These are services like Paypal, Worldpay, Paymate, flo2cash, etc.
They handle the entire transaction, from a credit card or debit card, and deposit the money into the account the seller has with them. Some have requirements about how much money must be in your account before withdrawals can be made, and when it can be withdrawn, etc. So the downside is that sellers don’t always get access to their money as quickly as the bank, and it has to be transferred out to use it outside this payment system.
However these solutions can be a lot easier to integrate, and are ideally suited to lower volumes of transactions, or small sites wanting to ‘test the water’ without shelling out large set-up and ongoing costs. Many of them also offer multiple ways of taking payment, including sending invoices, direct debit, etc.
Summary:
There are a number of factors to consider when deciding if, and who you will use when it comes to payment systems. Some may be dictated by who you bank with, some come down to personal preferences, i.e preferring a NZ based solution, preferring not to pay high initial fees, or wanting your money straight away, etc,
The best way to decide which solution is best for you is to short list the options and review each. Some solution providers will supply you with a free shopping cart, payment buttons to use on your website, and various other widgets you can use on your site to assist the purchase process. Check out if they supply a demo of how it works from the shoppers point of view, as well as the sellers, and make sure they provide a developers manual explaining how the system is to be integrated.
Which ever method you choose, make sure you also have a robust website to start with. No point building on unstable foundations.
Additional links:
I have over fifteen years experience in systems and network configuration and support. For most of that time I have been working with Open Source Software, and believe that Open Source software provides the best solutions for business, educational and personal use.
