Dipping your toes into the waters of e-commerce does not have to be terrifying – or expensive. There is more than one way for your business to take advantage of online payments, and it is probably easier to do than you might expect.
The idea of accepting payments online is appealing, but can also seem like an intimidating project to approach. Part of the issue is that, at first glance, there appear to be many parts and pieces to puzzle through. Although e-commerce can indeed appear complicated, in reality there are only three components to an e-commerce website.
In this article we are going to explore ways that business owners can begin accepting online payments with a very small amount of work to put up a simple online payment page. Complexity does not necessarily equate success. Sometimes the simplest of implementations can provide huge benefits and efficiency improvements for your business.
We’ll explore how a small leap into the world of e-commerce can help your business, reduce processing costs in the future, and perhaps, most importantly, can help you be better prepared if you someday implement a full-scale e-commerce website.
What Are the Components of an E-commerce Website?
When it comes to e-commerce, the first thing that any business owner should understand are the 3 main components to an e-commerce website:
Shopping cart software – Shopping cart software runs on your website. It is the software that powers the “add to cart” buttons and keeps track of what folks want to buy as they browse through your website. When an customer is ready to complete the order the shopping cart adds the items together to determine the subtotal, and adds any relevant tax or shipping fees. Ultimately, it’s job is to keep track of what you want to buy, and to total everything up when you want to complete your order. An example of shopping cart software can be seen at www.canadacart.ca.
Payment gateway – Once the shopping cart has figured out how much money the customer will have to pay, it’s time to collect payment details, and this is where the payment gateway kicks in. The payment gateway is kind of like a POS (point of sale) machine. In a real-world scenario such as at a gas station, you pay by entering your credit card into the POS machine. The machine reads the credit card and sends the information to be processed. The payment gateway is the same, except that the customer types in the information instead of entering the card into a POS machine. Aside from that difference it’s mostly the same. The credit card information is sent over the internet to the payment gateway. Behind the scenes, the payment gateway receives the info, then sends the card number through Visa/MasterCard to the card issuing bank to seek out an approval and find out if the customer has sufficient funds.
Merchant account – The merchant account is the banking component of the transaction. This is the part that handles the actual money. When the order is approved by the card issuing bank, money has to move from the customer to yourself. This is where the merchant account comes in. The funds are moved from the cardholders account with Visa or MasterCard, and are deposited into your merchant account. A merchant account is just a bank account, except it’s specifically made to receive and hold funds captured from credit card sales. Once per day (or once per week if you prefer) the funds are sent from your merchant account and are deposited into your regular business bank account.
David Goodale of Merchant Accounts.ca has put together a video that explains the components of an e-commerce transaction in great detail.
Starting With a Simple Online Payment Page
What is interesting, and something that a surprising number of business owners don’t consider, is that you don’t have to go from zero to full throttle in one giant step. The process of building and launching an e-commerce presence for your business can be done in stages so that it’s more comfortable and less stressful. Not only that, but the lessons learned along the way in a small controlled e-commerce deployment can help make your future e-commerce website more effective.
One of the ways that you can begin is by setting up a simple online invoice payment page. By allowing customers to pay their invoices online it offer a huge efficiency improvement from a resource standpoint, and reduces the wait time to receive your money when compared to cheque (or even just waiting for the customer to call in with their card number during business hours.)
It doesn’t need to be complicated, and you don’t need any software to set it up. Most importantly, you can continue invoicing exactly the same way as you always have. You don’t need to change any of your processes. The only thing that you are doing is giving customers an option. You can setup an online payment page that you customer can go to, they can type in an invoice number and an amount they want to pay, and on the following screen they type in their credit card number. When they process the order you get emailed a copy of whatever the customer typed into your invoice payment page, and the customer gets a receipt. (For clarity, you aren’t sent a copy of the credit card number, as the sensitive information is removed before being returned to you). It’s beautiful in it’s simplicity. You don’t do a thing, just check your emails and if a customer has submitted a payment online you will get emailed notifciations, and the money is automatically deposited into your bank account.
To recap in a nutshell, all you have to do is give your customer a link to your payment page. If they submit a payment on your online invoice payment page you’ll get an email notification, and the money is deposited into your account. It’s probably even more simple than it sounds. You can see an example of a very simple online payment page at: https://www.merchant-accounts.ca/payment.htm.
As you’ll see, the page is intentionally minimal. There is no logic to it. A customer can come and type in anything they want, and when they submit the payment you will get a copy of whatever they typed into the form. The reason that this is a good starting point in terms of an entry into e-commerce is because it does not require a lot of functionality or coding effort. It’s vastly less complicated than setting up a full shopping cart software (albeit it’s obviously an apples to oranges comparison as an invoice payment page is very simple, and hugely limited when compared to shopping cart software).
I just check my email and wait for the money to come in?
It’s not magical! You have to tell your customers about your payment page. So, if you currently email out invoices, and folks usually send you a cheque in the mail, you can keep doing that as normal but just include a note in the email that says: “Click here to submit this payment online at our invoice payment page”.
When the customer submits a payment you get an email notification, and they receive an email receipt. The email contains whatever information the customer typed in when filing out the form, so you’ll see their contact details, and the amount that they paid you.
Once you understand that there is no logic to it, and it’s just a simple payment form, you’ll realize that a payment page like the one described can be used by any B2B or B2C type businesses that must quote out their sales. If you have any situation, at all, in which your customers are being delivered quotes, it would usually be beneficial to give these customers the option of jumping online to submit payment to finalize the order. The old marketing rule states: if you have their interest, close the sale. An online payment page lets you do this.
An online invoice payment page is certainly not the ultimate e-commerce solution, but it is a short and simple implementation that most businesses would benefit from. And it gets your toes in the e-commerce waters comfortably and easily.
A Learning Process Will Lead to a Better E-commerce Website
Even Leonardo da Vinci didn’t paint the Mona Lisa the first time he picked up a brush. Starting with a simple deployment will take away some of the mystery surrounding e-commerce. Having a good web developer or e-commerce consultant such as the folks at The GDC Group will provide a huge advantage when it comes to building an effective e-commerce website. However, they don’t ultimately understand your business as well as you do. Starting with a simple payment page will show you how e-commerce can begin to fit into your business workflows. It may help you identify ways that implementing online payments could help your business be more efficient, it may help you define clearer goals. If you can help your developers understand the ways it can best help your business, then your developers can put their skills to building a super effective website. Features for the sake of features are not valuable. Features that are applied to accomplish a goal or solve a problem are highly valuable.
The Cost Benefit of Going Live Sooner
Although it’s not obvious at first glance, there is a cost benefit to starting to accept online payments sooner rather than later, even if it’s just for a small component of your overall business.
For most merchants, credit card processing rates can come down over time. This is especially true for newly established businesses. I always say to my clients “The first day is the worst day”. So much of the problem is just getting through the door when beginning to accept credit cards.
It’s always better to have a credit card processing history than be a company that has never processed credit cards before. You will get better treatment once you’ve established a successful credit card processing history because you demonstrate to the bank that you operate a reliable business and don’t get into disputes with your customers.
In terms of rates, when you seek to establish credit card processing for the first time you should be able to negotiate a reasonably competitive rate, even if you operate a young or startup business. But no matter how effective of a negotiator you are, over time, once you become a known long term client, you should be able to qualify for a better rate. This is even more important if your business is growing and you are ramping up your trading volumes. In fact, it’s a good strategy to talk about this and ask about long term rates at the very start of discussions when researching to find a credit card processor. Tell your prospective processor that you’d like the processing rate to come down over time as your business becomes more established and the trading volumes grow. That way both you and the processor have a clear understanding of what you hope to accomplish in the future. It is basically setting you up to get a better rate at some point down the road.
I’ll reiterate the point that I’m making: the clock starts ticking once you start processing and building your processing history. Thus, the sooner the better. This doesn’t just apply to your rates, but also to security reserves on your account. In general, the more positive history you have, and the longer you’ve been established, the more leverage you’ll have to negotiate lower processing fees and better terms for your business. If you plan to accept credit cards some day it’s best to get started as soon as you can. Eventually you’ll have a good, strong processing history and with it the negotiating power to get rates that you are happy with. This will obviously be beneficial if you implement a bigger e-commerce website deployment at some point in the future.
Building and launching an e-commerce website, especially if it’s the first time you’ve ever done it, can be confusing and overwhelming. The good folks at The GDC Group are good at helping merchants sort through the options and decisions that must be considered when launching an e-commerce enabled website.
However, sometimes there is a genuinely useful, low hanging fruit type solution that you can implement in the here-and-now. It will be useful to help you to start collecting payments online, in a simple, efficient and secure manner. It will also put you in a better position to implement a full e-commerce website in the future. Most things get better with practice. Building, launching and marketing an online business is certainly no exception to that rule.
About the Author
David Goodale is CEO at Merchant Accounts.ca, and for over 15 years has been recognized as one of Canada’s specialists in the field of multi-currency credit card processing and interchange consulting. David’s expertise in the field of online payments is diverse, working with everything from airlines, to major retailers, right down to small and startup businesses. You can see their online payment page solution at www.merchant-accounts.ca/easyInvoice.htm or find out more about the payment processing services his team offers at https://www.merchant-accounts.ca.
David Goodale / CEO, Merchant Accounts.ca