4 MIN READ
5 Questions to Know the Answers to When Choosing Payment Solutions for Your Online Store
The PayBright Team
December 02, 2020
You have finally found the right market, picked your keywords, and built your website. The foundations are laid, and all that’s left to do is pick the right payment solutions to get your store’s checkout process up and running.
Not only is it important to make the checkout process easy, but it’s also important to make sure that you are upfront about your costs.
Cart abandonment is a significant business killer, and the payment solutions that you offer are critical to ensuring you get the sales your business needs to stay afloat. Here, we walk you through five important questions to ask yourself when choosing a payment solution for your website or app.
But first, for context, we’ll explain the difference between a payment processor and a merchant account. Knowing the difference between the two is critical.
Merchant accounts are retailer bank accounts that permits payments from either the debit or credit cards of their customers. Merchant accounts can securely authorize e-commerce payments from customers for a retailer's website. Merchants usually partner with a bank who accepts payments on your behalf and deposits them into the merchant account.
Payment processors make transactions by transmitting data between the merchant, the merchant's bank, the consumer's card, and their bank. Choosing a payment processor is important for any new ecommerce business. You should also choose one that: has PCI compliance; compatibility with other technology and software; and, prevents credit card and identity fraud and suspicious transactions.
The Guide: Know These Answers When Choosing a Payment Solution
Choosing the right payment solutions comes down to the method of payment but it also comes down to the amount of fees you’ll be paying each time you process a transaction. Here are five questions you should ask yourself when choosing a payment provider or processor.
What are the interchange fees?
Interchange fees are transaction fees that a bank or similar entity has to pay whenever a customer uses a credit/debit card to make a purchase from your online store. The fees are paid to the card-issuing bank to cover handling costs, fraud and bad debt costs and other risks involved with the transaction. Based on the costs of moving money, interest rates and other factors, these rates can vary. Rates can vary by business type. On August 9, 2018, Canadian Finance Minister Bill Morneau announced a new voluntary agreement from Visa and Mastercard, to lower credit card processing costs for business owners. This would be accomplished by reducing interchange rates to an effective average of and keep them there for a period of five years.
What are the assessment fees?
The credit card association (Visa, MasterCard, etc.) also charges a pre-negotiated percentage fee, called an assessment. Fees can vary between 0.08 per cent and 0.40 per cent.
What about markup fees?
Your bank will take a cut of each sale by charging you a markup fee. This is an amount that also varies by industry, how many sales you make, and your monthly processing volume as well.
What are the processing fees?
How much do you get charged, whether it’s a sale, decline or return? That’s a question you should ask the bank when it comes to processing fees. Banks will often charge a fixed-rate fee for setup, monthly usage and even account cancellation.
What’s best for my customers?
Having all these extra fees will only be made harder if you don’t have any sales, or can’t close at checkout. We can stress enough how important it is to make the checkout process as simple for the user as possible. Delayed or hidden shipping costs; requests for too much information; bad website design: these are all reasons why your business could fail. Remember, you get paid for what you do right which is making sales but you also have to pay for what goes wrong, by way of fees.
Asking about all of these fees will help you better make a decision when it’s time to choose a payment solution. It’s important to know about you get fees back for refunds; if there are other gateway fees; or, if there’s a limit on how much you can process. Sit down and have an extensive conversation with the payment solutions you choose. It could make or break your business.
Take the time to study how your company will make money through a merchant account or through another payment processor. Find how more about your credit card options and what you should accept from customers based on the fees. Learn more about how to handle payment disputes to avoid negative customer service experiences. Study your options when it comes to international payment options and explore more about consumer financing.
This article is provided for informational purposes only. It is not an exhaustive review of this topic. The content is not financial or investment advice. No professional relationship of any kind is formed between you and PayBright. While we have obtained or compiled this information from sources we believe to be reliable, we cannot and do not guarantee its accuracy. We recommend that you consult your personal finance professional before taking any action related to this information. PayBright is a provider of Buy Now, Pay Later (BNPL) solutions. BNPL providers offer plans with a variety of terms and conditions, including interest rates, fees, and penalties, and have different standards for qualifying for loans. Laws and regulations governing BNPL providers vary by jurisdiction. We recommend that you compare and contrast plans, read the fine print, and conduct detailed research into any BNPL provider before using their services.
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