Comparison of online payment systems

Written by james johnson
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Website online payment systems are found in two forms. The first option is a third-party provider system such as PayPal, Google Checkout or Amazon Payments in which the customer signs up for an account and pays the website they are shopping with using credit card or bank information stored in those accounts. The second option is to pay by credit card directly through the website; this type of service is known as "merchant services" and is the equivalent of using a credit card machine on the Internet. As an e-commerce owner, it is important to understand the differences between online payment systems, especially when considering your bottom line and future growth.

PayPal Fees Charge To Business Owners

PayPal uses a sliding scale to determine the cost of each transaction: The more a business takes in on a monthly basis, the less they pay. For example, charges up to £1,950 are paid at 2.9 per cent of the total cost of the item (including shipping) + a 30 cents transaction fee. Charges of £1,950.0 (U.S.) - £6,500 (U.S.) are placed at 2.5 per cent + 30 cents, £6,500.0 (U.S.) - £65,000 (U.S.) is 2.2 per cent + 30 cents and any higher transactions are offered at 1.9 per cent + 30 cents.

Google Checkout Fees For Business Owners

Google Checkout offers the exact same fee structure as PayPal with the same dollar amounts required before fees are dropped to each lower rate.

Amazon Fee Structure For Business Owners

Amazon uses the same fee structure as offered by PayPal and Google Checkout; however, an addition fee of 5 per cent + 5 cents for all transactions under £6 is also offered, making Amazon a less desirable option for businesses selling "small ticket" items.

Merchant Express Fees For Business Owners

Merchant Express does not offer a sliding scale fee structure, but instead relies on a more traditional fee base for all transactions. As of May 2010, the cost is 2.27 per cent per transaction plus 24 cents per transaction and a 24-cent batch processing fee. Merchant Express also charges a monthly statement fee of £6.40.

Seller And Buyer Protections

All services listed and various other online payment solutions options provide both the buyer and the seller with certain protections. For example, third-party services (PayPal, Amazon and Google Checkout) all provide the ability to request a charge back if a product does not arrive as advertised or fails to arrive at all. Merchant service companies also provide the same type of guarantee. Third-party services also protect their sellers by guaranteeing payment for products if the item is shipped to a verified account name and address. Amazon Payments takes their protection policy one step further, giving customers a 30-day window to return products that have arrived in broken condition or with incorrect information, while sellers are guaranteed to receive payment once Amazon tells the seller that the payment has been accepted.

eBay Payments and other Online Portals

It should be noted that PayPal is owned by eBay; therefore, the only type of online payment accepted by eBay directly from their website is PayPal. Users can still choose to call a merchant and pay over the phone with credit card information or send a check or money order; however, due to fraud, PayPal is the suggested form of payment. Some sites also choose only to accept certain types of payments such as credit cards only (merchant services), PayPal, Google Checkout or Amazon Payments. Other sites may employ two or more of these options.

Process Flow Analysis--Third Party Vs. Merchant Services

For third-party providers (PayPal, Amazon Payments, Google Checkout) the customer visits the website, adds any items they wish to their shopping trolley and then they choose their method of payment. Customers are then asked to provide credit card information (if they don't have the account they chose--such as if you are not a PayPal customer but wish to pay through the service) or to sign into their account (such as PayPal). The third-party provider then asks the customer if their order amount is correct. If the customer has a credit card or bank information on file, the money for their transaction is debited automatically and sent to the seller. Typically, customers will either have a credit card or banking information on file with their third-party vendor. For merchant services, the customer instead will enter in their personal information (name, address, credit card number) directly at the website, then submit their information to the website. The site receives that information in secure form from a third party (known as a gateway) to ensure credit information is not stolen, then the company verifies the customer's information (once again, using third-party services) and proceeds with the transaction.

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