Small companies thinking of using their web site to sell products and services will find that integrating credit card transactions has become a relatively simple process which can help them to expand their sales presence beyond their local territory.
But although there are options for most types of businesses, selling over the Web may not be suitable for all.
With most providers, small businesses need to set up a merchant account with a bank before they can start trading online. It’s important to bear in mind that the merchant account does not have to be with your existing bank. A point made by Colm Lyon, managing director of Realex.
“The merchant account does not have to be with the bank you’re banking with,” he stresses. “Any bank can process credit cards for you, so you can shop around.”
The bank will charge for the account in much the same way as it charges for a normal business account but Lyon says it’s worth trying to negotiate the rate a company will have to pay. “The rate the bank charges is down to the level of risk but you should try to negotiate a rate that’s equivalent to what you’d pay on an overdraft of one month’s turnover.”
Realex’s charges vary from less than 20 cents a transaction to 50 cents depending on volumes. It sets a monthly minimum charge of €49 which Lyon claims is “not unreasonable, it’s not that cost prohibitive. Some people think that’s still expensive and if you’re only selling once a month, it’s not worth doing.”
Alan Wyley, CEO of Eurocommerce, argues charges from the bank and the web payment provider “aren’t going to be a huge issue as the benefits are tremendous”.
As with Realex, the transaction fee reduces as the volumes go up. Initially, customers would commit to a minimum monthly amount of transactions but “if you don’t think you can do those volumes, you can always rethink your online strategies”.
Wyley stresses that for Eurocommerce the minimum value is flexible from customer to customer. “It depends on the industry you’re in and the growth pattern you have.”
PayPal, which is owned by Ebay, has a slightly different model. There are no monthly fees but it charges a transaction fee and a percentage of the transaction cost. The percentage varies from 1.9-3.4 per cent depending on monthly turnover.
Most providers can process credit cards, debit cards and local payment cards in different countries, such as Laser in Ireland and Switch in the UK. Wyley says businesses can “save a lot of money by taking local payment in different countries” because they don’t have to pay the bank to convert the currency “and we have a lot of experience doing that”.
Realex has an option to redirect customers to a secure server within its own domain to a page that is branded the same as the rest of the small business’ site, for companies that do not want to collect card details on their own server.
Security can be a concern, especially as the liability for fraud lies with the seller. The latest bids by the banks to tackle this issue are Verified by Visa and Mastercard Secure Code. Both involve the bank prior to authorisation because when the customer completes the online checkout, a pop-up box appears from the bank that issued the card asking the cardholder for a password to confirm his or her identity.
Visa quotes research by Gartner showing that although the average e-commerce transaction is worth less than €73, the average Verified by Visa transaction is worth more than €138. Visa’s own research in Germany, Spain and the UK shows that 84% of people who do not shop online would be more likely to do so if they could use Verified by Visa and 71% of confirmed Internet shoppers would shop more frequently.
Visa claims the new system can reduce repudiated transactions, reduce fraud losses, reduce administration of disputes, lower screen errors, increase a seller’s reputation, increase sales and transaction values.
It claims three quarters of all disputed transactions happen when the cardholder rejects the transaction by claiming he or she did not take part in or authorise the payment. “Retailers who use Verified by Visa are not liable for chargebacks relating to this type of dispute,” it states.
Web sites like Dabs.com, opodo.com and johnlewis.com already use Verified by Visa.
Lyon says Realex has close to 40 merchants using this technique. “It’s still relatively new, but as time goes by, more and more will implement it,” he predicts.
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