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E-commerce - Options for Online Selling

Most people connect e-commerce with shopping online – using the Web to sell goods, services and information to consumers. This type of activity has had drastic growth over the last 5 years and will continue to grow in the future.

For a business to take part in online transactions there are a number of things you need and the options are wide. The options you have will be determined on whether your company processes credit cards offline.

You will need:

    1. A website
    2. Web hosting company
    3. Online Merchant Account
    4. Payment Processor (Gateway company)
    5. Shopping cart (or system) on website to make it all work together (may not be necessary for all options discussed below)

Merchant Accounts

There are a couple of types of merchant accounts.

  • Card Present

    Card Present Merchant Account is an account provided for most Brick & Mortar businesses, where the merchant does the credit card transaction manually by entering the details into a card swipe terminal and receives a signature from the cardholder. You can NOT do internet sales with this account.

  • Card-Not-Present

  • This is the type of merchant account you will need for your internet credit card sales. It is not a business checking account. It is a special account specifically for online transactions, usually obtained from a bank in Canada. It is really a facility that is arranged with a credit card clearing bank that allows you to process card transactions through their facilities. In many cases you will also have to pay higher rates than offline businesses such as shops or restaurants who obtain a signature from their customers.


Visa and MasterCard Accounts from Canadian Banks

Individual banks in Canada only issue one type of credit card merchant account per bank. However there are many bank partnerships between Visa issuing banks and MasterCard issuing banks. Therefore, for your business to be able to accept different credit cards you will need to establish several merchant accounts with separate banks. Ask your Visa or MasterCard provider for their recommendations or partner banks for the other card types.

Bank Fees

There are two bank fees commonly associated with merchant accounts. They are: security deposits and discount rates. Security deposits are often requested to insure against potential merchant losses and risks. The percentage of your sales that goes to the bank is called the discount rate. Discount rates and security deposits vary from bank to bank. These rates are separate from the payment processor (see below) you use.

If you don’t want to get a merchant account, an option is using someone like PayPal or InternetSecure.

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Payment Gateway (Transaction Processing Clearinghouse)

When you have chosen a bank, you will find that they usually "contract out" processing the credit card processing / transactions to a clearinghouse. When your website finalizes the credit card payment process in your shopping cart or online store, the Transaction Processing Clearinghouse is the organization that authorizes and validates the card (making sure the number matches the card and that sufficient funds are available).

1. Process credit cards manually

If you wish to process the credit cards manually, you will still need a company that can capture the credit card information securely for you. One such company is Mal’s e-commerce. All you have to do is add simple "Buy Now" links or buttons on any page on your website. When one of your customers clicks on one of these links they are presented with a page showing their current cart with that item added. They can choose to change any of the quantities, delete items or move on to the payments section. Credit card and check details are collected using an SSL secured server.

Once a customer places an order you are notified immediately by email. The email will contain details of what they ordered. To collect the payment details, you must log in to Mal's e-commerce and download them using an SSL secure browser. Mal's e-commerce does not charge for this service, but there are charges for real time transactions

2. Process credit cards online

If you wish to have credit cards processed in real time then you will need to use a Payment Gateway. Below are some examples:

  • InternetSecure

    • Merchant account not required as they will help you get one

    • Price in US or Canadian dollars

    • One application gets you Visa, MasterCard, American Express and Discover in both Canadian and US dollars

    • Will set up REAL merchant accounts and secure transaction processing

  • E-xact Transactions

    • need to have bank merchant accounts

    • Can process the majority of credit cards: Visa, MasterCard, American Express, Diner’s, Discover, and JCB

    • Handles U.S. merchant accounts from Canadian banks and from U.S. banks.

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There are many more payment gateways, such as Authorizenet, Cybercash, Signio, Secpay or Worldpay, but they may not do business in Canadian dollars and/or for Canadian companies. You will have to do your homework to find the best options for you and your business.

Payment Gateways with no merchant account required:

  • PayPal

    If you don't have a merchant account or can't get one, try Paypal. You require a business account with them. A downside to Paypal is that the customer has to open an account with them first before the purchase takes affect, although this is done within the course of the transaction. Paypal imposes their brand on the transaction. They have to because it’s their name on your customer's card statement.

    • No merchant account required

    • US and Non-US merchants using their Web Accept system

    • Multiple currencies

  • CC Now

    • No merchant account required

    • All transactions done in US dollars only

The payment gateway will make a telephone call to the acquiring bank that has your merchant account requesting Authorization. If approved the card may then be charged (capture of funds). The capture may take place at the same time as authorization or later, maybe when you ship the product. The timing depends on your merchant account and the nature of your product. The actual cash will then appear in your bank account some two or three days after capture.

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Below is a chart that shows you the different fees for some of the options previously discussed.

Fees and Description InternetSecure
In CAD $
E-xact
In CAD $
PAYPAL
In CAD $
CCNOW
In US $
Mal's e-com
(premium acct) In US $
Merchant account required no, will assist in getting one yes no no no
  -Prices below for package 1
-6 packages altogether
    -Prices on website in US $
-Require US checking account
-Requires integration with certain credit card payment gateways for real time payments
Set-up fee $395 $175 none none  
Monthly fee $45 $50   $ 11.95 $6
Withdrawal fee     .50 with $15 minimum withdrawal amount    
Transaction fee $0.45 1 - 200 /month = $49.99 /month

201 +/month = $0.18 /transaction
3.4% + $.55
(rate goes to 2.7% after receiving $3,000 in PayPal payments in 90 days)
   
Volume fee/month       11% of your total sales in excess of $100.00  
Payments made:       2x/month  

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