BEST Payment Processor for an ONLINE Shop?

Though I nearly always recommend starting out on eBay and then progressing to Amazon, the last piece of the online business puzzle is starting your own eCommerce store!

I’m not going to go into too much detail now as I’ve written about this in a separate blog post (eBay, Amazon or an Online Shop?) but to put it simply – eCommerce is the holy grail and the potential is MUCH larger than if selling solely on other 3rd party platforms, like eBay and Amazon.

But of course with bigger potential comes more complications and decisions and one of the first questions that people face when creating their own ecommerce store is what payment processor to use? After all, you can’t leave it to Amazon to handle that or simply take PayPal and be done with it.

So that’s what today’s article is all about – a guide on which payment processor to use for your online eCommerce store.

Let’s get to it!

When choosing a payment processor, there are a few important things you have to bear in mind and they are:

Compatibility

This really goes without saying, but the payment processor you choose has to be compatible with the shopping cart that your eCommerce store is built on.

The shopping cart is the more integral part of your store that will affect everything else so I’d always suggest choosing that first and then finding a payment processor option that fits, not the other way around!

Cost

As with everything, the cost is a big consideration, both in terms of any up-front charges and then ongoing costs – which can include a monthly “subscription” fee as well as a per transaction charge (similar to the 3.4% PayPal charge on eBay).

Quality of Service

Again, this goes without saying, but nowhere is the standard and quality of service provided more important than here. After all, this is your customers’ money and entire business livelihood at stake!

Plus another aspect that I always place a lot of importance on is the quality and speed of customer support. It’s no use at all having a terrific service at an amazing price if when something goes wrong (as it invariably will) there is no way to get any help.

Speaking of problems occuring, another hugely important factor when comparing different providers is how they protect you from and prevent:

Chargebacks

For some high-risk niches this is actually the single most important aspect to consider and you need to choose a payment processor that has systems in place to protect you from fraudulent chargebacks. As I said, this should be a consideration for everyone but in some niches it’s even more important (such as when selling game codes, gift cards and other such digital goods).

Of course compatibility and cost can be easily found out simply by comparing options and checking with your shopping cart but quality of service and customer support are quite hard to judge beforehand.

But thankfully, I’ve done the hard work for you and have trialled a number of different payment processors in my own eCommerce stores – so with my experience, coupled with checking the reviews left online, you can find the perfect solution for your business.

I’m actually going to start off with a company that you should all be very familiar with:

Pretty much everyone nowadays knows about PayPal, mainly in conjunction with eBay, but it’s actually also a fully fledged payment processing system.

With a PayPal Pro account you can accept debit and credit card payments (as well as PayPal payments of course) WITHOUT customers being redirected to PayPal – it all takes place within your website.

It costs a simple £20 a month plus a per transaction fee, which ranges from 3.4% + 20p to 1.4% + 20p, depending on your monthly sales volume.

As well as taking payment online through your site, you also get the Virtual Terminal included for the monthly fee which allows you to accept payments over the phone; all you need is your PayPal login details and internet access.

In terms of fraud and chargeback protection, PayPal scores a high mark with the usual address (AVS) and card verification (CVV2) checks as well as 3-D secure (basically the same as Verified by Visa) which dramatically lowers the amount of chargebacks and fraudulent transactions you’ll face.

And last but not least, PayPal also have a nice little optional add on service that I’ve heard good things about – and that is their PayPal Here app and card reader:

This card reader costs a one-off £99 and it basically allows you to accept card payments wherever you are.

This offers a lot of flexibility and is a terrific option if you occasionally sell face to face, at a market or trade stall for example.

I quite like this additional service, as I’ve always said the more options you can offer to your customers, the better, so if other sellers can only take cash but you can take fully encrypted card payments there and then, then you’ve put yourself at an advantage.

Another thing I like about using PayPal and their Merchant Pro option, and this is a benefit that most people completely overlook, is the familiarity of their brand.

As I mentioned above, you’d be hard pressed to find someone today who hasn’t heard of PayPal so when you’ve got their logo and “Checkout with PayPal” displayed on your site, it adds a degree of trust, which is hugely important when selling from your own eCommerce store, rather than a well known 3rd party site like Amazon or eBay itself.

But I also want to point out a downside as this popularity and brand recognition also has a negative aspect to it.

Sometimes when consumers see the PayPal logo, they automatically assume that they need a PayPal account to checkout, which isn’t so!

As a result, one thing I’d definitely recommend if you use PayPal for your eCommerce store is to make it clear that you don’t need a PayPal account to checkout:

Many smarter sellers have already implemented something like this – just a simple banner saying checkout with MasterCard, Visa, Maestro, American Express etc. can really help to allay any fears and boost conversions.

Next up we have WorldPay, who are the UK’s leading payment provider, processing 26 million transactions a day!

WorldPay are one of the most established brands in this industry and they offer two main benefits over using PayPal Merchants Pro – support and cost.

In my experience, WorldPay offer a higher level of support than you get from PayPal and their transaction charges are also slightly less at lower volumes.

With WorldPay there are actually two payment options, a “Pay as you go” plan and a “Pay monthly” plan.

For pay as you go there is a simple charge of 2.75% + 20p and for the monthly option you pay a set £19.95 plus 2.75% for credit card transactions and 0.75% for debit cards.

A quick calculation shows that you’d be better off with the monthly option once you approach around 100 sales a month, not even taking into account the savings on debit card transactions.

Overall, WorldPay is a safe, solid option.

They are a market leader and have been in the business for a while so you shouldn’t expect any problems.

Their fraud protection is one of the best in the business and the reviews are very strong in this area, so that should be a consideration if you’re in a niche more open to abuse.

I’ve been told by a few people that they prefer WorldPay to PayPal because it’s more of a premium brand, whereas PayPal is linked to smaller, eBay businesses. But to be honest, while this may be true, I really don’t see what practical difference this would make… I just can’t see a customer leaving your site because you’re using PayPal rather than WorldPay!

The downsides include a much lengthier application process (with PayPal you can be set up in minutes!) and the cost can become quite uncompetitive if you require additional options such as multiple currencies or recurring billing.

Alright, so far we’ve covered two of the main options out there and ones that you’ll see mentioned often online – the market leader WorldPay and PayPal Pro, which is probably the easiest to set up with and move onto from eBay.

Next I want to provide you with two lesser known alternatives to these first two providers.

Despite only recently moving to the UK market, Stripe is a highly popular option across the Atlantic, with a solid reputation and high market share in the US and Canada.

Stripe’s model is based on two main features – simplicity and developer friendliness.

In terms of their fees, Stripe is amazingly simple (and competitive) with a flat charge of 2.4% + 20p per transaction.

That’s less than both PayPal Pro and WorldPay, plus there are:

• No monthly fees! A big bonus when you’re just starting out and don’t want to fork out £20 a month with no guarantee of making any sales!

• No refund costs! Simple really – if you refund a transaction, Stripe refund it in full and you don’t lose a penny in fees.

• No set-up fees!

• No charge for recurring payments!

Basically, when Stripe say that there are no hidden costs, they mean it!

And perhaps best of all, and a big reason why I always recommend researching Stripe to my customers and blog readers who have a high percentage of international sales, there are no additional fees for accepting payment in other currencies!

Overall, I view Stripe as a very compelling new option. Usually I’d be wary of recommended a company without a longer track-record, just so that you can see reviews and any hidden issues, but Stripe is already very popular in America so in this case, this doesn’t worry me hugely.

One thing I do have to mention, while I can’t comment for sure on their customer support as I’ve never used it myself, I did find the lack of a contact number or live chat option on their site to be worrying… Again this might be improved when you’re signed up, but solely having email an online messaging system really isn’t good enough in this day and age.

But other than that, with their low fees and emphasis on simplicity and no hidden charges, Stripe is definitely an option I’d suggest considering.

Next, let’s take a look at a provider that offers a similar, all-in-one service to PayPal’s Merchant Pro (and it’s another familiar face!):

Yes – Amazon, true to form, have created a competitor to PayPal and their merchant account offerings.

Amazon Payments/Checkout by Amazon basically allows your customers to login and pay for their order using their Amazon account. That way, all their payment and address information is pre-stored and sorted and they can checkout without having to re-enter all of their details.

The pros and cons here are very similar to with PayPal Pro. The familiarity and brand recognition will go a long way to establishing trust with your site visitors, but on the flip side, it will reduce conversions for those people who don’t have an Amazon account.

Due to this, I don’t recommend solely using Checkout by Amazon as it will require customers without an Amazon account to sign-up for one during your checkout process, which really defeats the whole purpose.

The good news is that you can still offer Checkout by Amazon in addition to another checkout method. That way you still have the benefits while not being affected so severely by the negatives.

Alright, so we’ve now covered four of the major options for payment gateways for your ecommerce store; two more traditional options as well as offerings from our old friends PayPal and Amazon!

Of course there are COUNTLESS other providers out there (some of the major ones that I haven’t gone over include Sage Pay, Authorize, Secure Trading, Skrill) but there’s simply no point in me listing their features and pricing when you can just as easily find that information online for yourself.

Instead I’ll finish today’s article by recapping the perfect, step by step system that will allow you to find the ideal option for your business.

Step 1 – Find the options that are compatible with your shopping cart.

You can do this very easily and quickly simply by checking the website of your shopping cart provider. Here is an example from Big Commerce:

https://www.bigcommerce.com/payments/

If you can’t find this page directly from the site, just do a search on google for “shopping cart name payment processors” or “shopping cart name payment gateways” and it’ll come up.

Just to make this process even easier for you, I’ve added some links to this info for some of the more popular cart options:

OpenCart: http://www.opencart.com/index.php?route=feature/feature&path=8

3DCart: http://www.3dcart.com/ecommerce-payment-gateways.html

Volusion: http://support.volusion.com/article/volusion-payment-gateway-integration-information

Shopify: https://www.shopify.co.uk/payment-gateways/united-kingdom

Step 2 – Research these options, find the cost, and compare features.

This part is a little more time consuming as it’ll take you a little while to research the compatible options, get pricing info, read over the features etc.

The best way would be to compile all your findings into a simple table, so you can clearly see and compare set-up costs, monthly fees and per transaction charges.

Another option would be to use a comparison site to get all this information in one go, quickly and easily.

One that I’ve used myself in the past is:

http://www.paymentbrain.co.uk/payment-gateways

You simply enter the number of transactions per month and the average transaction amount and it will work out the monthly cost for all the main payment gateway options and list them for you in order:

Step 3 – check out the reviews online and read real users’ opinions!

So at this point you now have a complete list of options that can be integrated with your shopping cart and you have full information on the fees for each one of those options.

But of course, cost isn’t everything so it’s now time to check out the reviews online and read real users’ opinions on forums and blogs etc.

This way you can uncover any problems or issues that it would be impossible to predict without first trying the service!

But please bear in mind that like with a lot of such online business services, the average ratings on review sites are very poor. Don’t expect 4.7 out of 5 or anything like that; 2 or 3 star ratings are more realistic!

The main thing is to compare between different payment gateways and don’t just judge the reviews in isolation as this isn’t a service where people generally come to leave a review when everything is going well…

I’ve discussed this phenomenon before in my hosting provider article so won’t delve into it again now.

Step 4 – Consider the specifics of YOUR business.

By now you should have narrowed down your options to a handful of companies that:

a) provide all of the features you need,

b) charge reasonable and competitive rates &

c) get decent reviews online.

The last step that will allow you to make a final decision is to consider your own business and exactly what you require.

For example, let’s say a lot of your sales come from recurring subscriptions, then you need to focus on providers who offer built-in subscription payments at no extra cost.

If you have a large percentage of international sales, then look over your chosen options for the service that provides multiple payment currencies at no additional cost (WorldPay charge a fee per new currency added whereas Stripe don’t charge anything at all, as an example).

Where do most of your customers come from? If you’re customer base is mainly built up from eBay sales, then it would make sense to use PayPal Payments Pro as it will be familiar and easy to use… the same applies if a lot of your customers are from your Amazon business.

Do you sell in a niche that is open to abuse from credit card fraud and chargebacks? Then look through your options for the one that offers the most rigid and up to date fraud protection and payment security.

Did you also sell at market stalls or car boots? Then maybe the added benefit of PayPal Here means you should go with them…

Etc. etc.! I hope you get my point here.

This last step is very important in ensuring you get the perfect fit for your business. After all, what’s best for others may not necessarily be best for you.

Ok well, I’ve covered pretty much everything that I wanted to today!

I hope this has given you a clearer idea of what you need to consider and look for when choosing a payment gateway for your ecommerce store.

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Until next time!

All the best,
Andrew