So you want to run an online store. Congratulations — and best of luck to you.
One of the more important things you need to do is figure out how you want your shoppers to pay for the products they buy on your site. In short, you need to find a payment processor, the company responsible for moving the money from your customer’s bank account or credit card to your business account.
Many companies are out there vying for your business.
Choosing the best payment processor for your business is an important choice. Many sellers gravitate toward the lowest bidder. Keep overhead low and the profits will roll right in, right?
When it comes to choosing a payment processor, focusing on the lowest bidder can be a big mistake — but only one of several mistakes. When choosing a payment processor, there are seven mistakes you should do your best to avoid:
1. Not Watching Out for Hidden Fees
You found an attractive payment processor that offers the lowest rates you have ever seen. The only problem is payment processors typically charge different rates depending on several factors, like the type of credit card your customer uses and how you process the transaction.
The lowest rate you’ll pay is the “qualified” rate, which only applies to certain types of cards physically swiped through a card terminal. The highest rate, deemed “non-qualified,” generally applies to online transactions and credit cards that offer customers rewards. These typically are the ones most attractive to your shoppers because they offer givebacks, in airline miles, loyalty points or cash bonuses.
Payment processors tend to tout the lower “qualified” rate in their advertisements, of course, in order to catch your roving eye.
Also take into account the fact that credit card processors may charge special fees they won’t go out of their way to highlight. There may be fees related to things like cancellations, withdrawals, and batch processing.
2. Not Picking a Processor That Gives You Fast Access to Your Funds
A sudden need to investigate suspicious activity may mean you can’t touch your own money for up to several weeks. In the early days of e-commerce, this was common.
Today payment processors need a good reason to freeze your money. Also, clearing any valid sale that somehow triggered an anti-fraud response should be a simple process. It shouldn’t lock you out of your account.
Look for a provider that gives you quick access to your money.
3. Getting Stuck with Responsibility for Data Security
Fraud is one of the great concerns of all online merchants. But for you to install your own fraud protection system can be an expensive and time-consuming undertaking.
Choose the most secure and reliable payment processor you can find. When evaluating potential payment processors, be sure to eyeball their menu of fraud-protection services.
Does the processor flag or deny transactions considered risky? Is data securely stored and encrypted? Look specifically for a very secure provider — or it could cost you big in problems.
4. Not Getting Enough Fraud Protection
While mainstream shoppers generally visit your store, fill their shopping carts and happily pay, a tiny percentage will try to rob you. They may, for example, pay you with money stolen out of a hacked credit card account. Some may complain they never received their product when they did.
Most online merchants refund the stolen money and reship the “missing” product — deeming these events as general business expenses. But over time, these transactions can add up.
Find a processor that will work with you to alleviate the burden of accumulated fraudulent activity.
5. Overlooking the Need for Setup And Support Assistance
When choosing your payment processor, it’s nice to pick one that has a simple setup process that requires that you have very little technical know-how. Around-the-clock support from a real person should be included.
Look for a provider that offers support for any problems related to your sales transactions.
6. Taking on Responsibility for PCI Compliance by Yourself
The PCI Data Security Standard is a U.S. industry standard governing how you secure your customers’ credit card data. These rules touch on how you process and store cardholder data.
Instead of spending your own time and money to build a system that complies with the rules laid out by the PCI Standard, you can simplify your role by partnering with a payment processor that is in compliance and helps reduce your PCI compliance workload.
7. Not Offering Multiple Payment Options
Some consumers are still afraid to use their credit cards online. Some will disappear before purchasing their items because they can’t find the payment option they want.
By offering multiple types of payment options, you can dramatically raise the number of your customers who will complete their purchase.
Also, today, you may want to offer your customers an extended payment plan. Now you could go out and laboriously create all those financing arrangements and integrate them into your website. Or you can choose a payment provider that has an easy-to-implement payment plan for your customers in a few clicks, like PayPal Credit, which enables you to offer your U.S. customers a six-month payment plan on certain purchases, while you get paid the total price of the product up front. PayPal says that by providing this option and letting your customers know about it, you can increase the size of your average sales order by 15 percent or more.
As you can see, how to choose a payment processor is a key consideration, and there’s more to it than meets the eye.
Each payment processor offers a unique set of features, meaning you need to compare what each one offers, including fees. Choosing the right payment processor can mean the difference between success and failure. For a list of 10 specific questions you should ask when choosing a payment processor, see 10 Important Questions to Ask a Payment Processor.
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