Alternative Online Payment Options-E-Check and (ACH)

Electronic Check Payments-Automated Clearing House (ACH) payments

Electronic check (e-check) is another alternative online payment method used by many businesses. Usually if you have done some purchasing over internet, e-check is offered in some sites as an alternative option with other major options like credit cards. Business owners can accept e-check payments either directly from their website automatically or manually through the Virtual Terminal. Customer who wishes to pay with an electronic check can select the e-check option on the merchant’s webpage and enter the requested information on bank account. The system debits the consumer’s account via Automated Clearing House (ACH) and transfers the funds to the merchants account. It also notifies the merchant if the customer’s account does not have sufficient funds to purchase an item and also invalid/incorrect account information.

Even if the merchant does not have an e-commerce enabled website, he can also use e-checks to process payments. This is done manually. Accounts information is manually entered by the business owner, customer’s approval is always recommended and the merchant must sign a separate e-check (ACH) agreement to perform this type of transaction.

Draw backs

Usually a transaction takes about 48 hours to clear. A merchant should wait for about five days before shipping any purchase because it takes two days to debit the customer, two days to deposit into the merchant’s account and another one day for the bank to post the transaction. Usually merchants should not use e-checks with quick downloadable items such as software and digital products.

Customers choose e-check as a payment method if they do not have any other option. This method is not very popular because of the delay, and also people do not wish to give their bank account details often.

Alternative Online Payment Options-Merchant accounts

Credit card payments

An internet merchant account allows a merchant to accept payment for their services or product sold over the internet. Once you have decided to accept credit cards over the internet, you must obtain a payment gateway /virtual terminal and a processor or bank to process your credit card transactions. We need to know what a payment gateway, virtual terminal and a processor means.

A payment gateway is a secure internet bridge between the merchant’s website and the credit card processing network. A merchant can perform online credit card processing or other alternative payment processing methods. A website owner can perform online credit card and other payment processing using two methods. One method is the Virtual Terminal and the other is Weblink. Without knowing these terms there is no use preceding further, so let us identify what these terms mean?

Virtual Terminal
This allows a merchant to manually authorize and process credit cards and check transactions form any computer with and internet connection. We can say that a Virtual terminal is a replacement of an authorization terminal. Business owner only need the necessary information from the credit card/check and consumer to input to a computer connected to internet.

Weblink
WebLink allows Internet-based businesses to authorize and process credit card transactions without the business owner entering customer and credit card information. When customers are online and are ready to purchase products or services from the web site, the customer inputs the credit card information and WebLink captures the necessary information from the site's own secure transaction page or displays a standard WebLink transaction page. When the authorization process is complete, the customer and the business owner receive the notice of approval or decline of transaction. Transactions are automatically settled each day and funded within 2-3 days to the business owner's bank account.

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About Merchant Accounts

Alternative Internet Payment Options

PayPal

PayPal offers a secure service through which funds can be transferred from one PayPal account to another. Technically no funds are actually transferred, because PayPal is just a running total of how much one account was given from another. When some one “cashes out” that money is actually moved. PayPal is not a bank. Thus, their accounts are not federally insured in the same way as a traditional bank account; however they do offer their own private insurance.

Money transfer from PayPal is immediate. Buyer has to prove that he has a credit line or an amount in his bank account to make the transfer, otherwise PayPal won't transfer funds. Usually the money is transferred from one PayPal account to another, rather than right to the user.

When you set up an online merchant account, you have to get and pay for an SSL certificate from Verisign. This will help you to set up a secure server, and have a shopping cart. People find even this process more cumbersome. Now PayPal has acquired Verisign and functions as a one entity.

With PayPal you do not have to go through all those steps. You just can sign up free using three steps. When you sign up and start the process, this is how it goes. Buyer sends an e-mail requesting to buy an item. The Seller approves the sale. The buyer then goes to PayPal and makes a secure transfer of funds. An e-mail is sent to the seller with the text “You’ve Got Money!” The e-mail provides a link. The seller clicks on the link to make sure the correct amount of money has been transferred from one account to another. If all is correct, the seller can download the payment into a credit card, into a bank account, or request a check. The transaction is finished and the product is sent to the buyer.

Pay pal charges not from buyers, but from you. That is PayPal charges you a percentage from each sale you make and a fixed amount. Amounts and percentages may vary. According to their policy, if your sale is under a certain amount, say your sale is under $15, you pay only a quarter. When you cash out the money it is transferred and put to a credit card, bank account, or sent to you in the form of a check. If you cash your money immediately from PayPal for each sale, you may be spending a lot of money for transactions. Most merchants opt for a fixed amount to cash. Until then, PayPal holds your money. While the money is in their account they gain interest. It is a process called “float”. Because of this the transfer is not immediate. Even after you ask for your money, there is still a waiting period. So for merchants, the transfer of their money is not immediate if you allow PayPal to hold your money.

Disadvantages of PayPal

With a Real Merchant Account, your funds are directly deposited into your personal or business bank account, which you control and which is also protected by Federal Banking Regulations. With PayPal, your money is deposited into a PayPal Account, which PayPal Fully Controls. Since PayPal is NOT a bank, they do not need to follow federal banking regulations.

Paypal routinely freezes its customers' accounts for almost anything and without warning. Once an account is frozen, the funds are often held by PayPal for months leaving the merchant with No Means to Fill Orders. Those orders are then disputed by customers, creating more chargeback and the illusion of fraudulent activity on the part of the merchant.

If you run an e-business and you only accept PayPal. You are shutting yourself from all the other prospective buyers that prefer credit cards more than PayPal. Most people prefer to pay via credit than PayPal. One reason is they have to reveal all their bank accounts to PayPal before signing up. To do good business you have to have lot of payment options than PayPal to deal with customers. PayPal is only one alternative method of payment. Sometimes people will not feel comfortable with your site if you only offer PayPal as payment option.

There are other possible payment options similar to PayPal but compared to them, PayPal is a lot way ahead of them with its low charging rate and popularity. My advice is to use credit cards with a real merchant account.

Alternative Online Merchant Accounts

Many people fined that opening a traditional merchant account is cumbersome. There are alternative methods of processing payments online. With these alternative accounts, some times per transaction rates are higher than traditional merchant accounts. But the ease of opening an account with alternative payment processors makes them popular with many online merchants. Account fees vary, depending on the acquirer. Fees and charges might include: an application fee, a minimum monthly fee, a monthly statement fee, a per-transaction fee, and all acquirers charge a discount rate, a percentage of the transaction.

Always check references of any company you conduct business with online or traditional merchant accounts, you will be required to give the company access to your checking account. Therefore, be sure you can trust the company! Research your choices before deciding on a processor. Rates and features of processors can greatly vary. Always check references before signing up to any payment processor!

To accept payment by credit card on the internet, you must have an internet merchant account with an acquiring institution. The acquirer authorizes the purchases made with the credit card and ensures that the funds are deposited into the merchant’s bank account. With a Verisign, SSL Certificate, you can create a secure channel to transmit credit card information from your site to the acquirer’s processing network, receive the results, and post them back to your sit. Your online payment processing provider also facilitates the settlement of funds from the cardholder to the acquiring institution.

Secure Socket Layer (SSL) is a protocol developed by Netscape in 1996 which quickly became the method of choice for securing data transmissions across the Internet. You are required to complete a simple 3 step enrollment process to purchase a certificate and will need to provide certain contact and company information to complete enrollment.

When you install SSL Certificate on your server, your customers will be able to view the following information:

The Fully Qualified Domain Name (FQDN) for which the certificate was issued. This allows them to check that the certificate was issued for your domain (URL).

The validity dates of the certificate. This is extremely important, since it shows users when your SSL Certificate was issued as well as when it will expire.

When customers access your web server through an SSL connection, the information transmitted between the secured web server and your customer’s browser is encrypted. This ensures customer’s information is securely transmitted to and from your website. PayPal recently acquired VeriSign Payment Services and offers both an all-in-one Internet Merchant Account and payment gateway solution and the stand alone Payflow Payment Gateway solution.