Selling online: What every small business owner needs to know about payment gateways

Selling goods online is a fantastic way for a small business to reach a bigger market than the local shop could ever provide — and avoid some of the overheads associated with renting premises. But says, PayGate MD Peter Harvey, would-be online businesses need to become familiar with very different ways of being paid.

“Getting an online merchant account so that you can take credit card payments directly can be a very involved and expensive process and not everyone will qualify,” he says. “Fortunately, you don’t need a merchant account to trade online. There are alternatives available like UKash, FNB Cell PayPoint, PaySum1, Mpesa, SID (Secure Internet Deposit) and more: But how do you know which one is right for your business?”

A payment service provider (PSP) should be able to help business owners answer that question, says Harvey. “PSPs specialise in making online payments happen – they are the link between sellers, customers, their respective banks and card companies. One of the first things to look for in a PSP is whether they’re able and willing to guide you in making the right choices.”

The last thing to do, says Harvey, is to leave the decision about payment methods up to your web site developer. “You absolutely cannot afford to abdicate this decision,” he says. “These are things that go to the very heart of your business: How will you get paid and when, what fees will you pay, how does your PSP talk to your bank and your customers’ banks, will they help protect you against fraud and can your business grow with them?”

At the same time, he says, “you will want to make life as easy as possible for your web developer. Find a PSP who offers plugins for all the popular shopping cart applications your developer might want to use – you don’t want to have to develop anything from scratch. Ask if the PSP has a fully functional test system so that you can try transactions on the site before it goes live. Finally, make sure they offer tech support – your developer must have someone to call with any questions.”

The relationship needs to continue long past the web development stage however, says Harvey. “Look for a PSP you can build a long-term relationship with. The costs of changing payment providers are high, especially if your business can’t afford to be out of action for a few hours or days. You don’t want to have to do it, basically – so pick someone you can rely on to meet your needs in the long run.”

Payment needs are likely to change as a business grows, notes Harvey. “For example, if you start doing large numbers of transactions you should be able to negotiate a lower fee per transaction. Don’t get tied into a two-year contract with a high minimum monthly commitment – or any two-year contract, in fact. A 30-day notice period should be the standard.”

Finally, says Harvey, “ask your PSP about their reporting system. Banks will often deposit the proceeds of many small transactions into your account as one lump sum, which can make reconciliation very difficult. Make sure you can track all the traffic through your payment gateway and that there’s a good reporting system in place.”

Online commerce can be scary for first-timers, says Harvey, “but many people have built very solid businesses online. If you’re supplying any kind of niche product or service, selling online might be the only way to build a sustainable customer base. The secret is to find the right partners to help you make it happen.”