Payment gateways – what are they and how do they work?
To operate an e-commerce component of your business, you will need a way for customers to make payment. Electronic methods of taking payments are referred to as ‘gateways’.
The most common forms are EFTPOS and credit card merchant facilities at a store, but these can be expensive to run and payments need to be entered manually.
Internet based payment gateways offer the convenience of being available 24 hours a day and can be a far more cost effective and easier option for many small business operators.
Usually, payment gateways are embedded into a website by way of a ‘widget or button’ which links to your account. Customers fill in billing, delivery details and other key information before making payment with a debit or credit card.
The system then emails a sales receipt to the customer and an order notification to you. Funds are held in your business holding account, ready for you to ‘draw down’ into your regular business bank account at any time.
Fees and charges are payable and depend on which plan you choose. You will need to weigh up the benefits versus the costs to see if it is right for your business.
There are many online based payment gateways so make sure you do your research.
Another payment gateway that is becoming more popular in Australia is payments made instantly via a smartphone. A business using this type of system will be issued with a card reader and can accept EFTPOS or credit card payments by using an ‘App’ anywhere, just as long as they have internet or mobile phone coverage.
These sorts of systems are cheap and easy to set up and are perfect for those who may be selling at markets or have a mobile based business.
Like any merchant facility there are costs that will be incurred. Usually fees are broken down into a flat fee for each transaction along with a separate percentage based fee.
Typically fees start at around 0.30c per transaction and 2.4% of the value of each transaction. Fees are taken out before funds are transferred into your gateway holding account.
Whilst the individual transaction fees are higher than those offered by standard merchant facilities, they do not require a person to be present to take payment, nor do you need to lease the actual machine, so they do offer excellent value for money for those wanting mobility, flexibility and a range of payment options.
Other costs associated with selling products or services will be increased website hosting due to the larger amount of space and speed your website will require than information only based sites.
There will also be costs associated with the shipping or freight of your products. Some or all of these shipping costs may be passed on to the consumer, but be wary that this does not make you expensive compared to your competition.
Security for both you and your customer must always be paramount. Reputable payment gateways offer the same type of security as a major bank.
Your account is subject to both seller and buyer protection systems and policies and is monitored on a regular basis for unauthorised or strange activity. Plus, funds paid via credit card are insured by a consumer’s bank under fraud protection.
Before you sign-up to an online payment gateway, read the conditions and security information before proceeding.
Delivery of products or services sold via the internet
Depending on the type of product you are selling, there will be many different options available to you in order to get your product delivered to your customer.
The most common method of shipping products to consumers is by Australia Post using a pre-set package based on size or weight.
You may choose to send items more quickly using express post as an option. This method is not only cost effective, it is Australia-wide and international, meaning you can deliver your product just about anywhere!
For larger items or higher volumes, consider an arrangement with a logistics company who specialise in freight delivery. Make sure you ask about their ability to deliver within your preferred timeframe and to any destination you wish.
If you wish to sell fresh produce such as meats, dairy products, seafood or fruit and vegetables, there are a number of health and quarantine regulations that will need to be observed.
Compare other providers of fresh produce to see what methods others are using.
Arrange to speak to your local government authorities’ health standards officer to ensure your product is stored and moved in accordance with law.
Enquire with Australia Post or industry bodies to see if there are packaging and freight solutions suited to your type of produce.
If this seems too great a challenge, there are a number of online national farmers’ markets that you may be able to join as a vendor.
There will be membership fees and other associated costs, however they can be a great platform to use as they have national exposure and they will be able to provide advice regarding packaging and shipping for your product.
Consumer obligations for online selling
Whether you sell your goods or services face to face, by telephone, at markets or events or via the internet, you must abide by all fair trading and consumer laws.
When selling online, you should clearly state your exchange/refund policy on your website or provide a link to a policy document where possible.
You are responsible for providing a good or service that does what it has been designed to do.
You will also need a policy to handle any matters that arise from damage to items whilst in transit.
Utilising the internet to sell your products or services is challenging but can be extremely rewarding when done well.
By doing some research as to what is happening in your given industry you can look to establish new channels to access your consumer.
The internet has made its way into nearly every aspect of life, so to be successful, be innovative, make your product available to all potential customers and back it up with excellent before and after sales service.
People will always buy on experience, not just price so you need to make sure your customer has a great experience every time.