Continuing our previous discussion regarding PayPal, we know that starting out with a new business, and a brand new website, PayPal is a great way to get the ‘doors open’ and begin accepting payments with very little time or financial investment. We know that there are a lot of people that like to use their PayPal accounts, and will also go out of their way to make online purchases only from shops that offer PayPal as a payment method.
But we also know that there are a lot of people that would prefer not to go through an 11 page checkout, or be redirected to a third part website to make payments. Knowing this, we conclude that it’s probably best if we offer customers a ‘choice’ of how to make payment.
So, the questions become, “When is the right time to add a merchant account/payment gateway to your store?, and “What merchant account and payment gateway is the best?”.
When to add a payment gateway depends on your business. Obviously, having a monthly fee increases your overhead, and your business needs to be robust enough to incur that. But a lot of people are under the misconception that a payment gateway has some sort of huge ‘set up fee’ or ‘application fee’. We wanted to find out what the best rates around were, and we found that vendors of the popular ‘Authorize.net’ payment gateway had rates that were at, or very near the best rates in the industry. You can find a pretty good list of auth.net vendors here. going through this list, we found several vendors that had no set up, activation, or application fees. And nearly all of them have rates similar to the ones we found at Mbankcard. Here’s what their fee structure looks like.
Gateway Fee: $20.00. This is a recurring monthly access fee for the secure server, that allows the secure transaction to take place. Merchant Accounts Fees: 2.25%, 29 cents per transaction and a $10.00 monthly Statement/Customer service fee.
So, that’s $30 per month, and 2.25% plus $0.29 per transaction. Compare that to PayPal’s at 2.29% (2.25% if you process more than $3000 per month) plus $0.30 per transaction with no monthly fee and you can see that the merchant account is going to cost you about $30 (minus $0.04 per transaction) more per month than PayPal.
Keep in mind that this $30 per month is going to save you some customers that would have left otherwise once they found out that they you only provided PayPal as your payment method. For example, when we started our first website, we only accepted PayPal, because like many other new web shop owners, we balked at the thought of that extra $30 per month. After several months of marketing, and constant advertising, we were able to get our new web store up to about 5 sales per day. Unfortunately, we began receiving a lot of emails from customers complaining about the checkout process, specifically about being re-directed, or about having to use PayPal to purchase. You can find a thread I made in the osC forums discussing this matter, and including excerpts from many of those emails here.
As a result, we decided to add a payment gateway to the store, to see if that would allieviate the issue. As soon as we did this, and without changing any of our marketing or advertising, our sales DOUBLED overnight. The increase was staggering, and much, much more than we would have anticipated.
To us, this was proof positive that you should always offer the customer a choice when it comes to method of payment.
