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Online payment methods, types of merchant account, setting up a merchant account, fraud and security, eCommerce

About electronic payments

Before your business can accept electronic payments using the internet, it’s important you understand the payment options on the market, the process involved in getting these products and services, and the common terms you will come across time and again.

In a nutshell:

  • If you want to accept online payments you must apply for an ‘internet merchant account’ (IMA) from an ‘acquiring bank’
  • You will also need a ‘payment gateway’ which is the online equivalent of a PDQ machine and a ‘payment service provider’ (PSP) who takes and distributes the payments into the bank account
  • The criteria for obtaining internet merchant services will vary from provider to provider based on things like sector, trading history and commercial risk
  • If getting your own direct internet merchant account is not a viable option, then like hundreds of thousands of other small businesses or start-up companies, you can use what is known as a bureau service that provides a simpler, one-stop application effectively allowing you to piggy back on the providers acquiring bank.

Essentially, an IMA is a specific type of bank account for accepting online credit or debit card payments. If your business can already take card payments (eg in-store using a PDQ machine), then you will have a merchant account, but the two types of account are separate and very different.

The fundamental difference in accepting online payments is that a) the ‘customer or cardholder is not present’ (CNP). So the potential risk of fraud is greater and criteria for obtaining an IMA tougher. And, b) you need a ‘payment gateway’ (a virtual ‘till’) to authorise the transaction instead of a PDQ machine.

If your business does not have an eCommerce website you can still take and process payments for orders made by mail order or telephone orders (known as MOTO), and for these you will still need a merchant account and the use of a virtual terminal which is like a secure online PDQ terminal accessed via a web page.

Many IMAs come with a free MOTO account included as payment service providers recognise that some customers will still feel more comfortable speaking to a ‘real’ person – this can be an important consideration for small businesses whose brand is unknown and website may not be very professional.

If you are unable to obtain an IMA (your business may be considered too high-risk), then a payment processing company, payment bureau or joining an online mall offers alternatives.

There are multiple options on the market, but whichever option interests you, www.electronic–payments.co.uk will help you find the best prices available and make the best choice for your business.

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