Using the E-Commerce Internet ...getting paid PAYMENT METHODS There are now Internet services that will support just about every payment method ever used in the brick and mortar world. The main mechanisms include credit card, debit card, checks, EFT (Electronic Funds Transfer), money orders, on account, micro payment, and even cash. All other schemes are variations on the basic methods. This article is directed toward the small business merchant. Some of these methods aren't particularly viable for use by the Internet merchant and some arent viable for the small business just starting out. For instance, don't look for a check or cash in the mail except in a few very few special situations where the customer and merchant have a trusted personal or social relationship. Money orders fall into this same 'in-the-mail' group. The problem with mail methods is that payment requires the customer to make a special effort to get you your money. There was a time when this was accepted practice for mail order but, on the Internet with the expected immediacy and convenience, it rarely works. Micropayments have always seemed like a good idea but have never caught on in any significant way. It would be nice to pick up a daily financial report for a buck and only when desired rather than subscribing for a year for two hundred dollars. Unfortunately, the cost of electronically processing a small payment usually exceeds the amount of money involved. Electronic Funds Transfer, such as a telegram money order, can be very expensive and has the same drawback as the in-the-mail group of mechanisms. The viable choices for getting your money then come down to taking credit cards, debit cards, checks cleared by ACH (Automated Clearing House), and/or charging amounts due to a customer account for subsequent settlement. ON-ACCOUNT On-account is actually a excellent method of payment and is frequently used in B2B transactions. The method requires that the customer have an open account with the merchant. When a purchase is made, the amount charged is added to the account balance. At some subsequent time, frequently monthly, the account is settled by payment of the balance. A significant advantage of this method, as well as being convenient for both the merchant and customer, is that small, frequent purchases can be made without incurring multiple processing charges. This is one of the few micro payment schemes that actually makes sense. Finding a low cost software or service solution for on-account processing, however, isn't easy. These systems are often developed in-house or are a part of a larger, and very expensive, automated inventory, accounting, order processing, and customer relations management package. ImagineNation is one of a few service providers to offer the on-account capability at low cost through their BakPak service. CHECKS Taking checks over the Internet is a viable payment alternative and processing a check will cost less than a credit card for the same transaction amount. Usually the processing cost will be a dollar or less. This is half the cost of processing a credit card at a 2% discount rate on a $100 purchase. The processing is done through the ACH (Automated Clearing House) system of the US Federal Reserve to which most banks and many credit unions belong. The Federal Reserve charges about 2 cents for a transaction to maintain the system. An intermediate gateway service onto the Federal Reserve network will charge about 30 to 50 cents for the transaction and the service provider that interfaces your storefront to the gateway will add on another 30 to 50 cents. Using checks for Internet payment in the US, however, has never been a popular choice of the customer. For one thing, checks do not have the fraud protection safeguards of credit cards. There is no zero to $50 liability limit for reported stolen checks or, in the case of the Internet, stolen check numbers. Additionally, check account numbers are confusing, leading to entry errors and the merchant will usually require some form of identification, such as a driver's license number, making the method less convenient. When taking checks over the Internet, there is no signature. Verifying the customer's identity is essential. Additionally, a check payment requires that the customer have available enough cash in their account to cover the amount of the check. This makes the customer's payment decision more immediate with less chance they'll make an impulse purchase. Depending on the check processing system in use by the merchant, real time verification of available funds may not be an option. This means that the merchant may have to wait to process a batch before finding out if the check is good. The result will be delayed shipments and reduced cash flow. The alternative is to subscribe to a check guarantee service; however, the cost of the subscription may take away much of the advantage of taking checks instead of credit cards. Since payment by check accounts for less than 20% of all Internet transactions, and considering the added complexity of taking a check, the new merchant would be well advised to avoid this method until the business is established and in need of small incremental increases in sales revenue. DEBIT CARDS A debit card acts something like a check in that it's a direct debit to a customer's account. Debit cards are processed over networks different from the processing networks for credit cards. Many of the networks are regional so that the merchant, trying to operate nationally, will have to have software or subscribe to a processing service that supports multiple debit card networks. Like checks, the cost and complexity of processing debit cards may outweigh any benefit. CREDIT CARDS The one viable and proven method of taking payment on the Internet is to accept credit cards. This doesn't mean that the actual processing of credit cards is any less complex than other payment mechanisms, just that the methods are more established with more companies providing services and competing for your business. For the retail customer, a credit card is the most widely accepted and frequently used method of payment. Combine this with the established infrastructure for processing a card and the merchant's choice is simple. This choice is especially valid for the new small business looking to get established. Introducing other payment methods can come later when looking for small incremental increases in sales. There are actually three ways in which a merchant can take credit card payments: 1) Have a merchant account from an acquiring bank to enable fund transfers and establish the processing infrastructure for connecting to the financial networks. 2) Rely on a third party with their merchant account and established infrastructure to provide processing as a service. 3) Use one of the so called person to person services. This latter person to person method is essentially a variation, albeit indirect, take off on third party transactions. PayPal(tm) holds a near monopoly on this method so, most of what the merchant needs to know about it can be gained by visiting their website. The other two methods of taking credit card payments are the most common and viable approaches. Both will be covered in some detail in our next issue of the E-ComTips newsletter. The Staff Team ....ImagineNation FURTHER READING: Other informative newsletters for small business and e-commerce can be found at iEntry.com Did you know you can take credit cards at your Internet store without a merchant account. Learn more about our IAMS  Merchant services There are lots of advantages to subscribing to an IAMS account and a couple of compelling reasons:   Everything you'll need is in one easy to use location, including free use of our award winning PeddleGold storefront. Take a look at the advantages of subscribed services. View a demonstration IAMS order management console. Tips 'n Tricks    HTML tags shown here use the caret (^) instead of braces <> for proper rendering.     Brackets are represented by the curly bracket symbols ({}). A good number of our on-line clients sell to businesses as well as to retail customer's. The question then arises, "How do we use the PeddleGold storefront and provide dealer discounts?". This is fairly easy to do because you can run multiple instances of PeddleGold with very little added effort. A second instance of PeddleGold can use the same folder structure. A link to the dealer store can be password protected so only dealers can view the discounted prices. Let us show how all of this can be done. First, make a copies of the peddlegold.htm container file, the product database db.js file, and the storefront.htm file. Change the names to, for instance, peddlegold1.htm, db1.js, and storefront1.htm and save the new files back to the original locations. Second, open peddlegold1.htm in a text editor and you will see around line 26 this entry: ^script language="JavaScript1.1" type="text/javascript" src="Files/db.js"^^/script^ Change db.js to db1.js. Around line 41 see: ^frame name="store" src="storefront.htm" ....etc. Change storefront.htm to storefront1.htm. Save the changes. Third, in the text editor open db1.js and change the prices to the dealer amounts. Save the changes. You may want to make changes to the storefront1.htm file to reflect dealer information. This is optional. Now create a link to your dealer storefront, peddlegold1.htm from any appropriate location, usually the home page. A JavaScript link can be used to open a prompt window requesting a password. ^a href="JavaScript:if (prompt('Enter your dealer password.','') == 'a_password')document.location.href = 'peddlegold1.htm'"^dealer store^/a^ Change "a_password" to any word or phrase you want to use. This isn't very secure because anyone can view the page source and see the password. However, it can serve as a mild deterrent. ImagineNation © 1996 - 2003  Products of ImagineNation!    Providing on-line stores for small and mid-size Internet businesses since 1996,   Imaginenation is a full service company meeting all of your e-commerce needs:    Storefronts     Credit Card Processing     Back Office Utilities     Merchant Accounts DO YOU NEED HELP WITH OUR PRODUCTS OR HAVE A GENERAL QUESTION? Please E-Mail specific product questions using the mail form at  ImagineNation.com For general information questions, visit our moderated public Q&A   FORUM For back issues of E-ComTips visit the   ARCHIVE Suffering from overload?  List Removal E-ComTips is brought to you by ImagineNation because you are listed as a user of one of our storefront products or have subscribed to receive the Newsletter itself. To remove your address from our list, go to List Remove and, if your correct address and service ID are not showing when you get there, enter the correct values manually. 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