Development

4 Options for Accepting Online Payments

By April 22, 2014 No Comments

Accepting payments online through your website or mobile app is becoming more and more common. In fact, customers expect your business to provide an online payment option to purchase your products or services. Additionally, after submitting an online payment they expect immediate confirmation that it was successful, along with some indication their product is on its way or their service has been activated. The credit card processing network is a complicated beast, and one that is best left to companies who specialize in this area. Such companies are referred to as Payment Gateways, Payment Processors or Merchant Accounts. These three terms are not synonymous, but you’ll often hear them used in conjunction with each other. In this article I’ll give you an overview of some of the most popular companies that provide online payment processing.

Popular options for accepting online payments:

Authorize.Net (plus Merchant Account)

http://www.authorize.net

Authorize.Net is probably the most popular payment processor/gateway. Practically all e-commerce software and online storefronts support the Authorize.Net gateway. They have been around a long time and offer many features such as e-Check (electronic check) acceptance, automated recurring payments/subscriptions, hosted payment forms and extensive developer documentation. Authorize.Net does require a merchant account, but you can sign up for one as part of their new account process. Authorize.Net does charge a monthly fee. The required merchant account will also likely charge a monthly fee and may have a multi-year contractual agreement.

PayPal

https://www.paypal.com

PayPal is also a very popular payment processor/gateway. It is well supported by e-commerce software and online storefronts. You don’t need a merchant account to accept payments via PayPal. However, you will have to manually login into your PayPal account in order to transfer the money because funds are not automatically transferred into your bank account.

Stripe

https://stripe.com
Stripe is a relative newcomer in the payment space, but is gaining popularity due to the ease of use and simple fee structure. Stripe does not require a merchant account. You simply connect it to your regular checking account, and Stripe deposits funds every seven days. Stripe also supports subscriptions (automated recurring billing) so you can easily sell subscriptions to your products or services and let Stripe handle the automatic payment collection. Stripe is the most developer-friendly payment processor out there, which makes it easy to integrate into your existing website. Stripe does not charge a setup cost or a monthly fee and no contract is required, just a simple per-transaction fee.

Balanced

https://www.balancedpayments.com

Balanced is perhaps the most interesting payment processor/gateway of the bunch. In addition to processing credit card payments, Balanced can also handle automatic “payouts” to multiple parties for each transaction. For example, if you wanted to collect $150 from a customer, but you wanted $40 of every purchase to go to Bob, $10 to Sally, and the remainder to you, Balanced can handle that for you automatically! If you have a tiered or commission based payout structure, or if you give your vendors a % of each transaction, then Balanced is definitely worth looking into. Balanced can also hold incoming payments in escrow until you’re ready to pay them out. Like Stripe, they also have a very simple per-transaction fee structure, with no setup costs and no monthly contracts.

Comparison Grid

Authorize.Net PayPal Stripe Balanced
Merchant Account Required Yes No No No
Setup Fee $99* 0 0 0
Monthly Fee $20-40* 0 (Standard)
$30 (Pro)
0 0
Transaction Fee 10 cents/per
+ Merchant Account Fees*
2.2 – 2.9%
+ 30 cents/per
2.9%
+ 30 cents/per
2.9%
+ 30 cents/per
Batch Fee 25 cents/batch* 0 0 0
Fees vary by card type (e.g. Visa, MC, Amex) Yes No No No
Settlement Period 1 – 7 days, automatically 1-2 days, manual deposits 2-7 days, automatically 1-2 days, manual deposits
 Contract Monthly/Annual* None None None
Subscriptions/recurring billing Yes Yes (Business/Premier accounts only) Yes Yes
 Electronic Checks (eCheck) Yes  Yes No No
Customer stays on your website Yes Yes (Pro only) Yes Yes
Hosted payment form Yes Yes Yes Yes
Escrow Funds No No No Yes
Payouts to multiple parties No  Yes No Yes
 Setup Time Varies – depends on merchant account (1-14 days) “Instant” setup, then verify bank deposits (1-2 days) “Instant” setup, then verify bank deposits (1-2 days) “Instant” setup, then verify bank deposits (1-2 days)
 * Authorize.Net is typically sold through their reseller network, which can affect prices and terms a fair amount.  In addition your per-transaction fees can vary significantly between resellers, and also depending on your business type, industry, sales volume, etc.  One of the downsides of using Authorize.Net and a Merchant Account is the pricing can vary and be difficult to comprehend sometimes.

 

Conclusion

There are so many factors involved in choosing a payment processor that it can be a daunting task. If you have a high volume of credit card transactions in your business, then Authorize.Net along with a merchant account may be the best choice for you, since you can often negotiate more favorable rates and terms. However, the tiered fee structures and multiple fees from multiple providers can be a little overwhelming when you’re trying to determine what it actually costs you to accept credit cards. Here at Web Ascender, we started years ago with Authorize.Net and a merchant account, and I can tell you that looking at our statement can sometimes make my head spin with all the various fees, charges and percentages.

If you have a lower volume of credit card transactions or you prefer the simplicity of an easy to comprehend per-transaction fee with no other hidden fees, then Stripe or Balanced may be the right choice for you. We often recommend Stripe for our custom development projects due to its simplicity and ease-of-integration.

In general, I would not recommend PayPal. Although still widely used, PayPal’s popularity is somewhat declining due to some of their policies regarding access to your funds. They have some policies in place that are intended to prevent fraud, but they unfortunately affect legitimate usage as well. For example, they have been known to “freeze” your funds or lock your account if you have a sudden increase in sales. Some business owners have been unable to transfer money out of their PayPal account and into their bank account for months due to these policies.

There is a lot more to accepting credit card payments online than I could cover in this one article. Keep your eye out for some future posts regarding online payments, where we’ll dive into more detailed topics on things like PCI compliance, managing subscriptions, recurring payments and more.

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