Payments are a critical aspect of any business. It's what delivers the revenue you need to sustain and grow your business. When it comes to payment acceptance, technology has led to new ways to accept payments that go well beyond the traditional methods of cash and paper checks. Now, you can accept payments like debit and credit cards online and via mobile device plus there are peer-to-peer (P2P) payments that can be made with just an email address or phone number. Even checks have gone electronic with ACH/e-check payment acceptance.
With the evolution in technology that has led to the development of online payments, consumers and businesses are becoming more accustomed and comfortable with the idea of electronic payments rather than using traditional payment methods. This growing acceptance has created a world of opportunities for businesses to reach a much larger audience as well as acquire and retain many more customers.
As Web payments are seemingly becoming the standard for businesses, including small business owners like freelancers and startup founders, it's important to understand the available online payment types, their benefits, and any issues that you need to be alert for to achieve the greatest level of success.
There's also new forms of payments like Bitcoin, also known as cryptocurrency. That's why, when we talk about payment acceptance and what to look for in a payments company, there is an extensive list of factors and related elements that go into creating the right formula for your business.
We have put together a periodic table of online payment acceptance elements that can create success for your business, helping you to attract and retain a larger customer base, ensuring regulatory requirements and compliance, maintaining the highest level of security for both you and your customers, and generating greater efficiencies within your business to keep the cash flowing while you focus on your core business needs.
Each chapter breaks down a specific factor related to online payment acceptance, including the needs and requirements of everyone involved in the transaction process -- from customers and regulatory bodies to a payment processing companies partner to you and your own business objectives. The elements related to that business factor are listed within each chapter, detailing how these elements play a critical role in your online payment acceptance success.
At the base level, there are many elements involved in the online payment process that you will need to consider as you construct the online payment process that works for you. These elements are:
Accepting payments typically has involved some type of equipment when you have a physical location, including point-of-sale equipment and terminals that handle credit and debit cards. However, when you are accepting payments online, there is no equipment necessary because everything related to payment acceptance is done from your computer or mobile device.
This is an immediate benefit for you as a small business owner because you can realize a cost savings by not having to lease or purchase equipment to accept payments. While you may hear the term, virtual terminal, as part of online payment acceptance, this is not physical equipment but relates to the next element listed and actually is software. Here are some things to think about related to the equipment element:
Instead of equipment, the basic of online payment acceptance relies on software, including a virtual terminal or payment gateway for payment processing. This provides a way for the money to flow from the customer through the payment system and to your bank account.
You will have to learn how to use the software in order to conduct online payments, but typically your payment processing partner walks you through the process and helps you install the software and prepare you to start accepting online payments. With some processing companies, this set-up can take jut a few minutes while other providers may require a longer time period to establish your payment processing software.
Consider these tips related to the element of software:
While you may think online is the only channel that relates to online payment acceptance, there is another very important channel that is vital to your business today: mobile. Everything you do online should be intuitively positioned to work efficiently on a mobile device for customers that prefer to research, shop, and buy on the smaller screen.
This means you'll have to think about the possibility of having an app that handles your customer accounts or a website and any e-commerce store that functions quickly and securely on a smartphone or tablet. Plus, if you have physical locations and an online presence, you'll have to think about how these can work together so you are always current on what is available and the payment systems integrate.
Here are some tips related to channel:
Your business type is a component of payment basics because the model you use determines what platform you will use or how you can use it. For example, there are low risk and high risk industries that have different options for online payment acceptance. While all online businesses can be considered risky to a certain degree, some are now positioned as greater risk due to the type of business they operate and therefore are faced with the inability to access online payment acceptance platforms or pay a much higher cost in order to accept credit and debit cards.
For example, these industries include online gaming, pharmaceuticals, medical marijuana, auction websites, and international commerce sites just to name a few. If you run a high risk business, you'll have more to consider when it comes to online payment processing.
With a high-risk business keep these recommendations in mind:
The next section of the periodic table of online payment success deals with what you require from your online payment process in relation to running your company and staying focused on your customers while seeking out new prospects.
The elements includes scalability, speed, variety, reliability and security as described below:
Your ultimate goal is to grow and continue expanding, so you need tools and platforms that will scale with you. That includes your online payments system, which needs to be able to handle a much higher volume of payments as you add customers or even expand into international territory. Some online payment systems may get bogged down with too many payments to process.
When you are seeking an online payments provider, consider the following in relation to scalability:
The faster you can process payments, the more transactions you can tally up plus you can keep your customers satisfied with the speed at which they can purchase products or services from you. Speed also is critical to your business in other ways, including the speed at which your processing partner can get the funds in your bank account to keep the cash flowing at optimum levels.
Here are some tips related to online payment processing speed:
The more features you offer, the better value you can get for your small business that is more than likely on a limited budget. These features include various tools that help you with the payment process and include things you can even pass onto your customers for a better service experience.
This variety can include assistance beyond just the actual transaction like estimates, invoicing, automated reminders and acknowledgements, expenses, file sharing, dashboard features, time tracking and reporting. Not only can you realize more value for your investment in a payment processing service, but you will also position yourself in a more competitive way with customers.
Remember these tips about features as an element:
If you can't process payments for customers, you will lose credibility in their eyes, which could then mean fewer customers who have turned to your competition because they have a more reliable online payment system. Your online business never sleeps. That's why it's important to ensure 100% uptime where your payments system is working around the clock so customers can make purchases on their time.
Here are some tips related to reliability:
Security essentially tops everyone's list when it comes to online payments and has its own section of the periodic table for online payment success. Briefly, security is crucial for small businesses that want to offer online payments because you absorb the risk and the liability should anything go wrong with an online payment. That includes a data breach, chargebacks, and any other type of fraud that has permeated the online environment.
While we will cover this topic in further depth in Chapter 5, here are some things to ponder in relation to security and your business:
An issuing bank is the bank that issued the credit card to a consumer or business customer. They take on a big role in the online payments processing by providing customers with credit cards plus they are integral in setting the rates that businesses like yours have to pay in order to accept those cards for payments.
Examples include Bank of America and Chase.
An acquiring bank is a bank that maintains merchant accounts for businesses.
Examples include HSBC Bank and Wells Fargo.
Card brands, also known as card associations, include Visa and MasterCard. They oversee issuing and acquiring banks and are in charge of the entire credit card processing system. While they don't directly issue credit cards or merchant accounts, they do have a significant say in what goes on with credit cards and processing them for payment, including setting rates, maintaining the computer network that handles the transactions and routes the money to the appropriate business and bank, and making money by encouraging people to use the cards.
Another element is the merchant service provers that can include acquiring banks, agents, independent sales organizations and payment processors. They often handle many aspects of the payments process, including sales and service as well as the processing of transactions from the customer through the card brand networks and to the business bank account.
The last element is customers, which can be consumers or businesses, depending on the industry and segment you serve with your business. They make the purchases and provide you with payment. Their expectations are listed in Chapter 9 as another section of the periodic table of online payment success.
The next section of the periodic table involves compliance and regulations that impact how you can process payments online and what you need to know in regards to ensuring you follow all the set guidelines when you handle transactions.
Regulations and compliance focus on Payment Card Industry Data Security Standards (PCI-DSS), which is a standard that frames how to secure cardholder data when dealing with it during the online payment process. All stakeholders must adhere to these standards because everyone has some role in storing, processing, and transmitting this cardholder data. There are a number of elements here that make up this part of the periodic table related to security management.
Security management includes: policies and procedures, software design, network architecture and overall data handling.
Regulations state that you must install and maintain a working firewall as well as ensure your security patches are updated on a frequent basis. The data you receive during these transactions is what fraudsters want to get their hands on, so you must protect it at all costs.
PCI compliance is very restrictive about the type of data that you can store on your systems, including any type of cloud-based platform. Under no circumstances are you to store any sensitive data on your system after a transaction is complete.
This rule includes customer data like credit card numbers, CCV, and bank account or routing numbers. It is okay to store data that includes customer name, address, and contact information as most businesses maintain a database for marketing purposes.
To ensure that data is not vulnerable to a breach, current regulations related to PCI standards that all data must be encrypted across public networks. There are numerous security tools that asset with encryption that can help you meet this requirement.
It is in your best interest to find out just how many layers of security you can add that provides the highest level of encryption possible.
One of the best ways to maintain security is also now a requirement under the PCI standards. Updating all software on a regular basis helps to keep the bad guys out because they have yet to figure out how to break into software that has been updated, but they know the ins and outs of older software and have figured out how to manipulate it.
Therefore, you must regularly update all software, including anti-virus, operating system, processing gateways and virtual terminals, shopping cart tools and any other type of platform that may be part of how you run your business.
The platform doesn't even have to be directly related to your online payment processing to be vulnerable if you haven't updated the software recently.
Access is another critical element for the security portion of the online payment success periodic table. There are a number of requirements related to access that you must follow. Access should be restricted to a "need to know" basis where only certain people who have cleared a certain access level can use the payment processing platform.
In terms of the overall computer access in your company, each person should receive a unique ID and be provided with guidelines on what they can and cannot access. The same process should exist for data, providing unique IDs to those who can access any data so that any actions related to the data can be tracked at all times.
Testing all of your systems needs to be an ongoing process within your company to assess how the current security systems and processes are working and if there are any vulnerabilities that have been detected.
It is a good idea to bring in a security specialist to do this assessment at least once a year. Since they stay current on the types of regulatory changes and security updates that are enacted, these specialists could conduct a much more thorough investigation.
Implement and maintain an information security policy for your business that helps you maintain a formal structure about how security and data are handled. Not only is this a requirement under PCI standards, but it is also key to your online payment success, helping you to avoid vulnerabilities and not be hit with fees, penalties, and other problems that could lead to the demise of your reputation and business.
Having a security policy also helps to educate any employees or outsourced staff you have on your team to ensure they follow all the prescribed regulations and compliance standards.
The next section of the periodic table involves a number of threats to your online payment process as well as security features that you must consider to protect your customers, your reputation, and your business.
Now that criminals see the enormous opportunities that online shopping and payments present, they remain focused on exploiting this action to their benefit. Numerous data breaches with businesses of all sizes speak to their creativity and determination to steal the information they need to get money and free merchandise.
Your customers and prospects look to you to keep them safe throughout the online payment process plus banks and card brands hold you accountable should anything go wrong.
While that puts the pressure on you, it should also be the impetus to be proactive and have a strategy in places that addresses the threats and proactively leverages the available security to discourage them from even trying.
Each element is described and includes some key tips that can benefit your online payment process:
A data breach involves the theft of data from a computer network that, in the case of online payments, would involve credit and debit card numbers, names and addresses, and bank account information. This data can then be resold or used to make fraudulent purchases or even drain a bank account.
Any type of a data breach can do great damage to your business as you would then become liable for this data breach for not doing more to protect the customers' data. A compromised system may even mean you lose the ability to process payments, which then would have an adverse impact on your business. It's not a risk you want to put your business in.
Here are some tips to avoid a data breach:
All types of fraud have become an increasingly worrisome aspect of accepting online payments, including working with international customers and putting yourself at risk for dealing with money laundering, terrorist activity, and fraudulent schemes to get money and merchandise.
Of course, even domestic transactions can be risky, especially in relation to certain industries. The most important thing is to stay alerted and vigilant in relation to fraud:
Chargebacks are increasingly becoming a tool for criminals to use to get free merchandise. What happens is that they contact the bank or credit card company that provides them with their statement to let them know that they don't recognize a charge, never received the merchandise, or did not authorize that the item be purchased.
The bank or credit card company will then open an investigation and issue a temporary credit while they look into the matter. What that means for your business is that you will most likely be assessed with chargeback fees and then also lose the revenue on the item that you had shipped out.
It can become very costly, but there are ways that you can combat it:
Criminals are using malicious software and phishing to get the data they need from consumers, but they are also trying to use this method on businesses to see if they can get the data they are after. As a business, you can also receive emails with links or downloads that are actually malicious software intent on stealing what they want.
Here are tips designed to keep you safe:
As noted in the previous sections of the periodic table, compliance continues to be a critical element throughout many factors related to online payments. In this section of the periodic table, it serves as a proactive element that can discourage criminals from even attempting to break into your system or commit any type of fraud. Maintaining PCI compliance is a way to work within a certain standard and set of protocols designed to keep you and your customers safe.
Here is what you can do:
Biometrics is one of the latest security tactics to combat fraud and help verify the identity of the person thin the other end of the online transaction. It often works in conjunction with verifying a fingerprint, which companies like PayPal, Capital One, and ApplePay use to protect people who want to make purchases from their smartphones.
Numerous other forms of biometric security are under development related to iris scans and facial recognition. While this is still a development area for online payments, it's something you should continue to follow and consider as an additional layer of protection.
Tokenization is another technology that is commonly being used for online payments to keep the data secure during a transaction. The credit card data is transformed into something that would mean nothing to a hacker and then changed back when it reaches the other side of the transaction to maintain the highest levels of data security.
Tokenization is often used in conjunction with other security measures like two-step authentication, which is part of the next element.
When it comes to tokenization, here is what you can do:
Other forms of verification are becoming a key way to thwart criminals. This includes a two-step authentication process wherein customers must answer two questions or verify their identity with a code that is sent to their phone to ensure that you are dealing with the customer they claim to be.
Other types of verification include asking for the CCV number that is typically located on the back of the credit or debit card. Typically, criminals only can get access to the credit card numbers and rarely actually have the credit card in their possession so they would be unable to answer this question and you could stop them.
Another way is Address Verification Services (AVS) that require that the billing and shipping address match what you have on file or the credit card company has in its records. If for any reason it doesn't, you can call the customer to verify in case they are sending it to a different location because it is actually a gift.
Here's what you can do to increase your security related to these verification strategies:
A relatively new tool is the development of what is known as a fraud network where online payment processors have created a network that links consumers, issuing banks, credit card associations and merchants together to serve as watchdog groups and advocates, searching and monitoring for suspicious activity.
These networks can then share their findings and information on what they have uncovered. This helps build better walls to keep the criminals out, especially if they attempt a fraudulent transaction and can then be discovered and reported, helping shut down that criminal from trying the same type of activity with others in the network.
Any identifiable inconsistencies can be shared, helping everyone become more alert to the current tactics being used, such as:
As the last element noted, it's really the idea that knowledge is power and it is what can help shut down any type of fraud related to online payments. It's worth the investment of time for you and any staff you have that might be involved in handling online transactions to learn about how criminals work online, what to look for, and how they can be stopped. You can't wait for people or organizations to tell you what is happening; it's up to you to go find the information.
Here are some ideas:
The last element for security related to online payment success is location-enabled tools that can stop criminals. This includes using tools that identify the IP address of the person making the online purchase to confirm if they are really who they say they are.
While it's true we all travel to different states and countries and still do our shopping, it's the IP address that travels with us. It's only when that IP address starts to identify another country where you can investigate further by contacting the customer to verify it's them.
However, criminals have also caught onto this security measure and have developed technologies that can make their location and even their identity. Yet again, though, security experts are coming up with their own weapons, including identification technology designed to decrypt the source of the person trying to make the purchase.
This transparency can help you to ensure that you are not the victim of a fraudulent transaction.
Online payments come in many flavors, which also is an excellent way to attract customers who may have different preferences or ways in which they would like to pay for their goods or services.
While you don't need to offer all the payment elements listed below, it doesn't hurt to offer as many as possible to grow your customer base:
You can accept credit or debit cards like Visa, MasterCard, American Express or Discover as well as numerous branded cards and bank issued cards. These are the most commonly used ways to pay for goods and services online.
This is one of the newest ways to make online payments, allowing you to make a payment or accept payment with just an email address or phone number.
There are some that don't have any fees while others just have a very small fee.
Replacing the use of traditional checks, ACH, also known as the Automatic Clearing House payment system, has been used for payments, typically as a direct deposit way to pay employees or for consumer to use to pay their bills like utilities, tuition, auto loans, and mortgages.
However, some businesses are also adopting e-checks for other types of purchases.
Wire transfers have typically been used for sending and receiving large amounts of money or with dealing in foreign currency. In this case, two financial institutions have to be involved in the process. While it used to be that you would have to handle these transactions in person, they've become an online payment option as technology and regulations have changed.
Gift cards have become quite popular, including store-specific gift cards and those issued by major credit card brands. Not only is this a way to get paid online, but it also can stimulate more business for you as the cards are given as gifts and people tend to spend more than what they are given and it's a way to build brand loyalty.
A growing area of online payments that has yet to hit mass adoption is Bitcoins, also known as a cryptocurrency or digital currency. Online retailers like Overstock and others are now accepting Bitcoins as a payment method. The advantages of accepting cryptocurrency are that there are no fees involved and funds transfer is instantaneous.
Bitcoin has also been verified as one of the most secure ways to make payments online because of the anonymity it provides and verification system it has in place to ensure the identity of the payee. You may want to consider this online payment method as a way to differentiate your business as well as work with a global customer base and not have to be concerned about exchange rates.
The last element on the periodic table under payment options is digital wallets, which are growing in popularity thanks to ApplePay, Samsung Pay, and Google Pay as well as other payment processing companies that have developed their own digital wallet feature.
Both consumers and businesses like using digital wallets because they can securely store all their payment methods as well as loyalty, membership, and reward cards electronically so they can pay directly from their mobile devices rather than carrying a wallet full of cards that they may misplace or have stolen.
The security on mobile devices keeps the digital wallet more secure even if the smartphone or tablet is taken. For the merchant, they can process the payments in seconds and reduce a number of resources involved in each transaction.
A huge concern with online payments is a number of costs that may be incurred in the form of fees tacked onto each transaction and to your merchant account. While it's true some processing companies can be less transparent than others about what they are going to charge you, it's up to you to familiarize yourself with the following elements so you know what you can negotiate or eliminate from the expense column for online payment processing.
Below are the elements that go into the expense of offering online payment processing:
Flat fees vary by type, value, and applicability and show up on your monthly statements. There are numerous flat fees and the list here only includes some of the possibilities. These include payment gateway fees, PCI Compliance fees, annual and month fees, early termination fees, network knees, IRS reporting fees, online reporting fees and statement fees.
Incidental fees only happen when an event or situation trigger them. These type of fees can include Address Verification Service (AVS), retrieval request fee, chargeback fee, batch fee, and non-sufficient funds fee.
Many of these fees can also be avoided by negating with your processing partner or taking on a different strategy in how you conduct your online payment processing.
These are non-negotiable fees also known as base fees that are the wholesale cost of your transaction. Wholesale fee amounts are decided by the credit card associations and issuing banks and are consistent no matter which provider you work with so it doesn't pay to shop around in relation to these particular fees.
These are negotiable fees that a provider adds to make a profit from doing business with you. While some may be transparent and charge you an acceptable amount of fees -- after all, they are in business to make money -- others are all about the hidden fees and try to charge you for everything. These fees are where it pays to shop around.
There are a number of pricing models you can use for your online payment processing. The Interchange Plus Pricing model is the most transparent and easy to understand. Your monthly statement will show an itemized list of wholesale fees and markups.
A Tiered, or Bundled, the Pricing model is one of the most common models and can be difficult to understand because it breaks down cards into three categories of qualified, mid-qualified, and non-qualified each with different prices.
Since this process can get confusing, some processors use this to their advantage by adding in more fees that are difficult to decipher.
Subscription, or Membership, Pricing is a relatively new model that is similar to interchange-plus because the actual cost of the transaction is charged separately from the markup. The only difference is that you do not pay percentage markup and only have to cover a small transaction fee.
The last model is known as the Blended Pricing model that is like tiered pricing but with no tiers. All transactions cost the exact same percentage and transaction fee, which makes it clear but also much more expensive.
Integration is another important set of elements on the periodic table of online payment success because it enables you to do more when you have a set of tools and platforms that can work together to handle more of the workflow and duties that don't necessarily make you money but give you the time so you can focus on that critical aspect of running a business.
It's important to determine if the online payment processing solution can seamlessly work with your existing technology and website framework, including your shopping cart program as well as all other applications that help run your business, including everything from accounting software to invoicing to collaboration and project management to sales and marketing tools.
When everything works well together, you can achieve a much more efficient operation that saves time and money as well as provides a higher level customer experience.
Here are some integration elements to consider:
One of the directions you can take to ensure integration is hosted checkout, which is an efficient and quick way to start collecting payments online without having to seek out technical support to get up and running.
Buyers go from your website to an externally hosted website to complete the payment process. Many small and medium-sized businesses turn to this integration model because of the way it helps them get going quickly without too many technical details.
The main issue with this integration model is that customers can sometimes feel less comfortable with the idea of leaving your website to complete the payment, not knowing who they are dealing with and how and if they will be redirected back to your site to confirm the entire purchase.
Another integration model is to us an application programming interface (API), which can create tighter integration and keep your buyers on your site to finish the payment process.
For you, it requires more technical knowledge and effort to complete the integration process. A real benefit to this option is the deep level of customization and seamless feel that results from the integration.
Other considerations related to integration the ability of the online payment process to integrate with your other software, tools, and platforms. Many online processors are beginning to understand the value of offering integration with hundreds of tools and programs, including account software like Quickbooks and project management tools like Basecamp.
With all these aspects working together, more tasks can be automated and there are far fewer cases of duplicate tasks or data entry across your business. Besides the time and money savings, this will also reduce the risk of human error.
The last section of the periodic table is about customer expectations and what they want to see from a company that offers them online payment methods to purchase their products and services. Many of these correspond to existing elements already on the periodic table of online payment success because you and your customers are often focused on the same priorities.
Here are some elements that are essential to a meeting -- and even exceeding -- customer expectations:
Customers want a great experience when they buy from you online, and that includes the payment part of the process.
Make sure you give your customers the best experience possible:
The scariest part about paying online is not knowing who has your personal and payment data and how it might be kept safe from being stolen and used to make fraudulent purchases.
Help customers feel confident that they can pay you online:
More shopping carts are abandoned from a slow and cumbersome checkout experience so don't lose customers because they can't pay you quickly and get on with their day.
Here's what you can do to increase online payment processing speed:
The more payment options you can provide, the happier you will make your customers and target audience.
Not everyone wants to shop with a debit card so make sure you add as many online payment methods as possible to your offering:
Since the online world is often devoid of personal interaction, customers are seeking some type of communication and support if they are being asked to share their personal information online to make a payment to someone that they cannot even see.
Worse still is when something goes wrong with the online payment system or there are any errors with the transaction. That's when you need to have a clear communication and support channel in place.
Consider these tips for enhanced communication:
Every factor related to online payment acceptance on this periodic table are important, but those that are marked three carry more weight than those that are indicated by a one or two.
There is no single element on this periodic table that can yield success on its own. These elements have to be combined in such as a way to optimize your online payment success, helping your own business grow and thrive while also delivering on all stakeholder expectations.
Those elements shown in red are those that harm your chances and can reduce your level of success with online payment success so be sure to address these immediately with other elements that can neutralize the risk they were creating for your business and customers.