Learn How To Accept Payment Online From Your Customers
You're a small business owner and you don't have the budget for expensive POS terminals. You have your heart set on modernizing your business with a website so that you can receive credit card payments, but without this expensive piece of hardware.
Well, luckily, there's an alternative - payment gateways!
With the rise of ecommerce, there's been a corresponding increase in demand for third-party payment gateways that offer software packages billed to monthly fees so you don't need to install pricey POS systems or invest in costly equipment.
For many small businesses struggling with tight budgets and manpower issues it would seem like an ideal solution.
In this article I'll detail what exactly an online payment gateway is, its benefits and disadvantages so you can be sure about what will suit you best.
What Is A Payment Gateway?
A payment gateway is simply a piece of software that allows your customers to pay for their products or services online using any credit card or other payment method they wish.
There are two types of gateways - the hosted gateway and the SaaS (Software as a Service) gateway, which I've written about previously .
As you might have guessed, the hosted gateways are "hosted" on websites owned and operated by companies such as PayPal, Stripe, Dwolla etc. They have their own servers and operate as a marketplace where businesses can register their credit cards for customers to use instead of them having to set up an entire website just for this purpose.
The SaaS (Software as a Service) gateways require no initial investment from you, instead they charge a monthly subscription fee that allows you to sign up for the service, activate your account and start accepting payments.
There's also another type of payment gateway known as CyberSource. This too is typically used by small businesses but it works in a slightly different way than the rest (more information here ).
Benefits of Using A Payment Gateway
There are many benefits to using a payment gateway, one of my favourites is that you can accept card payments without having to set up a whole website for this purpose.
Another benefit is that there are companies out there that offer capital discounts on their hosting packages in exchange for your business signing up as their customer.
Finally, you don't need to install any software on your own server. This is a major advantage if you're operating out of a shared server or are otherwise unable to install new programs.
The disadvantages are as follows:
Depending on just how many refunds you're allowed to make in a month, you may need to set aside some funds each month for these expenses. Otherwise, your fee will become extremely high and it could even negatively affect your payment gateway provider's reputation.
In some instances, it can be hard for businesses that sell internationally or in markets where exchanging currencies gets complicated. Every transaction needs to be taken care of in the local currency.
You need to also keep in mind that if you're an authorised reseller, you will need to pay a membership fee.
Who Is A Payment Gateway Suitable For?
Well, if your business is on a fairly tight budget and needs very basic payment capabilities then a payment gateway may just be right for you. Businesses that accept payments across multiple currencies or around the world may want to look for other solutions as it's not as easy as using PayPal or Stripe.
The software is best suited for businesses that sell goods and services online with no inventory involved because you won't need any extra software set up on your server for this purpose.
Conversely, if you're selling physical products or services that require in-depth inventory management, the payment gateway obviously isn't right for you. Unless they offer other solutions as well.
How Much Do Payment Gateways Charge?
It really depends on what type of payment gateway you go with and which features you need. Typically, a hosted solution will be very affordable and often free although CyberSource's monthly fee is fairly high compared to the others.
It's also worth noting that accepting credit cards online comes with considerable risk when it comes to chargebacks . This means if for some reason you receive a lot of chargebacks, you could end up losing a lot of money.
Best Paying Online Business List
As a business owner, you need to be aware that just because your online business accepts payments using an online payment gateway, it doesn't mean that you'll be able to get rich overnight.
Some of the most popular businesses on the internet are netting less than $1,000 per month in revenue but these do require a huge amount of work and dedication (this is why I wrote about how it's possible to start making money from ANYTHING here ).
You should also be careful when choosing a gateway that you aren't overcharged. If you're selling physical goods or providing an actual service (such as a concierge) and don't use any virtual servers, it's often more cost effective to go with a more traditional ecommerce solution such as Shopify or Magento, rather than paying through the nose for a payment gateway.
For this reason, before purchasing your payment gateway subscription make sure that you contact them directly and ask them what your "per sale" cost will be because otherwise you could end up finding yourself short of cash due to unexpected charges later on.
Seen it before? This is a list of the very best earning online businesses that accept payment. If you're a business owner, this may be a great place to start looking for example ideas and inspiration if you want to start your own ecommerce website.
This article was written by Your Online Success Coach - a team of expert virtual assistants who have launched an award-winning website and offer an innovative virtual assistant service which is designed to help you achieve your online goals (click here for more information).
Disclaimer: The information in this article should serve as a general guide and is not intended to take the place of professional advice. We always recommend that you seek professional financial advice before entering into any transaction or investment.
Conclusion
I hope that you enjoyed this article and that it has helped you gain a better understanding of what a payment gateway solution is and what it enables your business to do.
In summary, using this type of payment gateway will enable your business to accept payments online without setting up a whole website or even without having any software installed on your own server.
To do so requires just one monthly subscription fee and all you need to do is sign up for the service, activate your account and start accepting payments.