Choosing a merchant account provider for your e-commerce website

If you’re setting up an e-commerce shop and need to accept credit cards, what’s the best solution?

1. Merchant account/real-time gateway?
2. Paypal?
3. Google Checkout?

There are many factors to take into consideration. First, which method will make your customers feel most comfortable in making a purchase from your website? Recently, I took a poll on LinkedIn to gauge how people feel about various methods of payment.

Poll Question: When buying something online, which method of payment do you prefer?

Here are the results:
Take poll and see results

In addition to how your customers may feel about the process, you should understand how each process works and how it will tie into your website, to your accounting practices, to your budget and to your sales expectations.

Integrating payment processing into your website:
Most “off the shelf e-commerce shopping carts” will integrate easily with merchant accounts and real-time processors such as authorize.net, or with Paypal or Google Checkout.   But check with your web developer to see which method they recommend for your particular application.

Accounting and costs:
Merchant account costs seem to be increasing substantially these days with the  challenging economy.  Plus providers are requiring merchants to undergo an annual PCI DSS compliance that adds another expense to the annual costs.    PCI DSS compliance usually requires a subscription through a company like Trustwave.  Trustwave measures your risk factors through a questionnaire about your practices and through security tests of your server.

With the merchant account/real-time gateway process, merchants can expect to pay a monthly fee for the account, a monthly fee for the gateway plus the transaction fees for any charges put through to your account.  It can be about $40/month before you take an order.  Add in the cost for PCI DSS compliance and it’s a substantial monthly fee for some business models.  For small businesses–especially  start-up businesses with low-budgets–Paypal or Google checkout might be a more cost-effective solution.  Both solutions have no-monthly fee plans and both have competitive transaction rates.  And they are both PCI DSS compliant.  In my opinion, both are also well known brands that most customers will feel comfortable using for payment.

Based on my poll, Paypal seems to have a slightly greater acceptance factor than Google Checkout. I suspect Paypal is more familiar to more people than the relatively new Google Checkout.

Whichever method you choose, make sure your client’s credit card information is encrypted as it is transmitted and that you safeguard the information.  One of the advantages to using a realtime gateway  like Authorize.net, or an outside vendor like Paypal or Google Checkout is that the credit card is processed and you are never in possession of the credit card number.  By limiting access to your customer’s credit card information, you are limiting your liability of being involved in any sort of identity theft scenario.  Plus, the transaction  is automatically processed and deposited into your bank account thereby minimizing your workload.