How to Start Accepting Payments Online: A Simple Guide to Success
So maybe you’ve been running a brick & mortar business for years and are wanting to expand into eCommerce… or maybe you’re brand new to your venture and are laying the groundwork for your business… or maybe you are reevaluating your current payment process and are looking to understand a bit more about the payments ecosystem — regardless, accepting online payments is one of the most fundamental (and important!) aspects of your business.
According to a recent PWC study, almost one-third of all consumers buy products online weekly or more frequently. It’s pretty amazing what twenty-five or so years can do.
Online shopping is more popular than ever, with mobile shopping in particular on the rise. This same study found that mobile phones finally edged out desktops for general online shopping.
Here are some other stats to drill home just how important online payments are:
- In 2017, ecommerce was responsible for around $2.3 trillion in sales and is expected to hit $4.5 trillion in 2021 - Source
- On average, millennials now make 54% of purchases online (versus 49% of non-millennials). - Source
- In 2018, E-Commerce Sales Accounted for 11.9% of All Retail Sales Worldwide (Statista)
- As of Q2 2018, 2.86 Percent of E-Commerce Website Visits Converted into Purchases (Statista)
- In Q3 2018, Smartphones Accounted for 61 Percent of Retail Site Visits Worldwide (Statista)
- 80% of Respondents Said They Had Stopped Doing Business with a Company Because of a Poor Customer Experience (HubSpot)
And contrary to what you may think, accepting online payments probably has a bit more nuance and choice than you may think.
Yes, there are simple options and choices practically everywhere for payment providers, but the decisions you make around accepting online payments can have reverberating effects across your business — especially when you start to scale.
If your system is slow, you’ll lose customers. If your system isn’t secure and you get a breach, you may be hit with business-crippling fines. If your system isn’t sophisticated, you won’t have the ability to implement marketing techniques like related upsells or down sells.
The key to a great online payment system is threefold:
- Easy and engaging for customers.
- Easy for employees to use.
- Flexible and innovative without sacrificing the integrity of the user experience. This includes abilities for integrations etc.
Those choices are often coupled with your decision on what merchant service provider to choose, which we’ll talk more about later.
There are many types of online payments, and there are advantages and disadvantages to the ways you can accept transactions online.
But in general, the more ways the better. By giving your customers more options, you can increase customer satisfaction and reduce efforts spent on collections.
We’re going to talk about what you need to know about online payments, and then we’ll give you a roadmap to success.
Here’s specifically what we’re going to cover:
- The Types of Online Payments
- Choosing the Right Payment Processor
- Services that Accompany Online Payments
- Typical Rates and Features of Online Payment Systems
Accepting Online Payments 101
At the most basic level, in order to accept payments online, you’ll need these things:
- A merchant account. This is the account you receive through an acquiring bank or more commonly through a merchant services provider like Tidal Commerce that gives you the ability to accept transactions.
- An online platform (either standalone or connected to your website). Some services like Squarespace or Wordpress (via plugins) can easily give you a platform to work with, although if you plan on doing a lot of eCommerce work having your own custom system will give you increased flexibility down the line.
- A payment gateway that securely processes the payments and handles all the transaction communication.
These options are usually combined into the three different types of businesses:
PayPal and other similar solutions combine the account and gateway into one service. While this is pretty easy to integrate into your platform, they typically come with slightly higher flat rate fees.
Best for: Businesses with small online sales volume who don’t need a comprehensive system.
Acquiring your own merchant account & payment gateway
Depending on who you work with, this can be a great way to go. MSPs like Tidal Commerce give you ownership of your merchant account and equip you with a great gateway without sacrificing integration flexibility or stacking up rates.
Best for: Growing businesses who need security and payment flexibility but look to the merchant service provider to provide the innovation and best practices. Legacy businesses and large companies who need completely custom solutions can also find success here.
Streamlined credit card processing
Companies like Square fall into this camp. These are solutions that take all of the elements of payment processing and do it all for you. You have no need to get your own account or gateway, and that usually translates to a simpler but slightly more expensive experience than something like interchange plus pricing.
Best for: Small businesses with simple needs who are just starting out and have small average ticket prices.
The Types of Online Payments
Again, online payments don’t just fall under one general category. There are multiple types and uses for each type.
Here are a few basic categories of online payments your business can (and should) support.
Credit cards or debit cards via a gateway
Accepting credit cards or debit cards from the major card member associations like VISA, Mastercard, or American Express is the most classic form of online payment. This functions a lot like an “at terminal” transaction, except that customers will have to enter their credit card information into your secure platform. Modern payment solutions let customers save their payment information for easy repeat buying experiences.
If you run any sort of eCommerce business that relies on customers buying multiple times, you need to take special care to pick a system that gives you the option to make the buying experience as easy and repeatable as possible.
ACH and the power of recurring payments
ACH, or automated clearing house, is essentially a check without the paper. It’s a lower-cost, slower alternative to direct credit card payments. If you’ve ever been paid in direct debit, then you’re familiar with ACH payments.
It’s also extremely popular for recurring payments. Because it’s cheap and convenient for both the consumers and merchants involved, it’s the go-to method for subscription billing of any sorts. You don’t have to ask for permission to withdraw funds every time, so you can get a customer, set the withdrawal amount and frequency, and forget it! If you run a gym, SaaS business, or weekly delivery service that charges on a recurring basis, then ACH is about to be your best friend.
The ability to accept ACH is pretty widespread these days, so any provider you end up going with will probably provide this service, but the innovation comes in things like customizable invoices and other customer-facing UX elements.
To dive a bit deeper into ACH, go here.
Mobile payments are becoming increasingly more popular in sectors like moving and storage or professional services. Remote payments are fantastic and convenient. Whether you’re at a trade show or a job site, being able to take payments anytime, anywhere is a wonderful and recent addition to the world of payments.
All you need to get set up (assuming you have the other things like a merchant account) with mobile payments is a mobile reader and a smartphone.
The best mobile reader services instantly sync your payments across all devices and centralize that data into convenient reports.
Email invoices + payment gateway
Online payments aren’t restricted to customer -> merchant workflows, either. Automatic invoices and scheduled digital reminders are a great way to reduce the time your staff has to spend calling and following up on payments. Sending a nice invoice with a clickable “pay now” CTA that leads directly to your platform with their bill information already filled out is a great way to collect the cash you’re owed.
Remember: in general, everything you do should be about making the online payments process as simple and convenient as possible for your customers.
Choosing the right online payment provider
As I’ve mentioned, the most important choice you can make is picking the right MSP. MSPs like Tidal Commerce are the ones who set a lot of your payment rates, equip you with the right tech, and give you your merchant account.
Here are all the things a typical MSP gives you:
- A merchant account/ability to accept payments
- Your point-of-sale software (what you use on your terminals)
- Online gateway (you need this for online payments!)
- Mobile readers
- Chargeback assistance
- Thought leadership / technical support.
So what makes a good MSP? How do you know how to pick the right one?
Well… on a fundamental level, your MSP should:
- Be fighting for your business and treat you as a partner.
- Be innovative and equip you with the best and latest tech.
- Be your resource and guide to the merchant services world.
The payment processing world used to be full of sharks and companies who only want to sign a bad contract with you and then ignore you until it expires. Fortunately, new tech has finally leveled the playing field for more agile businesses who pride themselves on customer service.
If you’re stuck in a bad contract or nearing a contract with a payments provider you’re not thrilled with, you should get out asap. You’d be surprised out how good untrustworthy payment providers are at bumping your rates for nefarious reasons and just generally taking advantage of you.
We actually wrote a blog on exactly how to choose the right merchant services provider, and you can check that out here.
Typical Rates and Features to Watch Out For When Building an Online Payments Solution
Features you want to have in your online payments system
As you probably know, the actual transaction is just a portion of what you need to make good business decisions and provide a great checkout experience. Here are some typical features you should try to get when you work with an MSP.
- Shopping cart
- Upsell and downsell capabilities
- Centralized business reporting
- Online invoicing
- Clickable CTAs and Customizable invoices
- Mobile online payments
- Secure customer vaults that keep financial data safe while giving customers the ability to save their data.
- Interchange plus pricing.
- Sales and inventory data integrations. When something sells out you don’t want to get a whole bunch of orders you can’t fulfill!
Typical rates in the online payments world
There are three main types of rates in the payment processing world: flat rates, tiered rates, and interchange plus pricing. We’re big fans of interchange plus pricing for established businesses and recommend always avoiding tiered pricing. Flat rate pricing can be useful for brand new businesses, but there’s almost always a time when it doesn’t make sense to pay a flat rate across all transactions.
Read Merchant Account Fees: How They Actually Work for more information on different pricing types.
Keep in mind, these rates and pricing fees are different than the fee your online gateway may charge. Depending on how many tools your preferred system stitches together, your final rate may be significantly higher than your merchant services provider is quoting you. Factors like risk and international border fees can also affect your final per transaction cost.
In general, average processing fees range from 1.5% - 3% per transaction. If you’d like to dig into the nitty-gritty of fees, go here.
The exact steps you need to take to start accepting payments online
- Decide on the features you can’t compromise on.
- Determine if an all-in-one, streamlined, or getting set up with your own merchant account through an MSP is best for your decision.
- Follow up with the companies in that space.
- Make sure there’s no funny business in your contracts.
- Install the necessary services and software.
- Test a few transactions using discount codes to make sure everything is good to go.
- Start directing traffic!
Work with an innovative merchant service provider that will equip you with the tools you need for fast, sustainable growth
We’re obviously biased, but we’re the biggest fan of giving you everything you need to succeed — whether or not you stay on board with us for the long term or not. You should have your own merchant account, you should own your data, and you shouldn’t have to sacrifice what your business needs for your provider.
We work with merchants from every industry imaginable — healthcare, food, professional services, — you name it. Why? Because our merchants know we are keeping an eye out for them. With interchange plus pricing that can save you up to 35% on transaction fees, we analyze your statements to make sure you can save money by moving to us AND give you the best smart terminals and support on the market.
Ready to stop looking for the best solution and work with someone who has your back?
Let’s do this.