Alternative Payment Systems-Merchant Account Alternatives

The two main alternatives to having your own merchant account are Bureaux services and person to person services (PayPal).

Bureaux services

Before we talk about what bureau services are it is important to realise that today you very rarely choose a bureau service provider directly!

 The approach today is that you choose a web hosting provider ecommerce package and that comes with built in support for various payment systems. The supported payment systems usually include a bureau service and almost universally include PayPal.

What Is a Bureau Service

A Payment Bureau e.g. WorldPay collects and processes the card details on behalf of the business. This means that the business doesn't require its own Internet Merchant account or a separate PSP. Bureau services are a popular choice for online payments and an ideal solution for small businesses.

The bureau collects funds via credit or debit cards using its own Internet merchant account. Usually the only requirement of being accepted as a merchant by a bureaux service is the basic requirements of having a business bank account and an address that confirms the identity of the business.

A bureau reduces the risk of accepting almost any type of business mainly by holding the collected funds for a minimum of 30 days and often up to 60 days in the initial period of accepting a business. In addition a bureaux service will normally charge higher fees for card payments.

 Most Web Hosting providers that offer ecommerce web packages offer direct integration to one or more bureaux services.

Advantages of using a bureaux service

• These services will accept most types of business
• Trading record or length of trading are not usually an issue
• Fast turnaround for applications, can take as little as a few working days compared to weeks for new merchant acquiring applications

disadvantages:
• Merchants’ funds are held for minimum of 30 days and maybe up to 60 days
• Transaction charges are higher, in the range of 4-8%

Person to Person Services

This type of payment service has grown considerably with online auctions and the main provider of this service PayPal was bought by the online auction leader Ebay in 2002. They were designed to transfer money between individuals but many can be used for business on the Internet.

The main advantages are:

• They are extremely easy to use,
• Setup is done in minutes. -The service providers provide the necessary HTML that is simply pasted onto the Web site to provide the link with the service provider.
• All confidential information entered by the customer is stored on the service providers’ servers making it very secure and usable for any Web site without the need for SSL or scripting support.
• Payment can be made from one membership account to the other without using credit cards or debit cards.
• Free to setup.
• Transaction costs are low.

The main disadvantages are:

• They usually accept either credit cards or debit cards not both.
• The customers also need to be a member to pay using the service. -Not really a problem as most are already and you only need an email address to be a member.

They are ideal for small businesses making their first steps into online sales as they are totally free until you actually start using them which of course is when you have sold something.

Even though your Website supports other payment methods due to their popularity and hence instant recognition PayPal should be included as one of the payment options on any web site.

For more information regarding PayPal then see PayPal review