PCMech gets a lot of traffic. The online store, however, is linked in the top menu but is otherwise a completely separate system. Being that there is already so much going on on the main PCMech site, the store gets lost. While the main site sees thousands of people every day, the PCMech store sees only a few daily. That definitely affects sales.

So, the idea is to bring the store into PCMech itself. Into Wordpress. The traffic to the store would most definitely increase. Also, being inside a blog means I can use all the standard blog features for the store, including the flexibility that Wordpress allows. And trust me, Wordpress is infinitely more flexible than X-Cart (the store software I’m using).

Two store options that have gotten my attention are:

• 1ShoppingCart. Has a wide following and offers a nice, integrated package of store, affiliate management and email list. I would not move my mailing list into 1ShoppingCart, but it would be nice to have a better system of automated followup.
• E-Junkie. I cannot find any evidence of large mainstream blogs using E-Junkie, but the service looks pretty good. It is nowhere near as powerful as 1ShoppingCart, but their setup for integrating with another website (such as a blog) is much more automatic.

I will, then, probably set up a new category in Wordpress for the online store. Perhaps I will use static pages. It will be more manual labor at first, but since I’m not managing a large catalog, I think it would be fine.

So, that’s my ramble on what I have in mind. Blogs are powerful mediums. Hosting ads seems to be the de-facto way to make money with a blog, however there are MUCH better ways to do it. Integrating it with a store and shopping cart system is definitely one of those ways.

I will follow up as I proceed with this concept. Stay tuned.

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Now, when I spoke about this, I was talking more about REAL tradeshows. The kind where you have to travel and you rub elbows with real people. But, I understand that that makes it harder to attend. I mean, I have a few shows I would like to hit by the end of the year, but I can’t because of other obligations (a baby on the way being a biggie). What makes eComXpo different is that it is virtual. You don’t have to GO anywhere. Sweet!

It is an online tradeshow for online marketers and those interested in affiliate programs and ecommerce. Sounds interesting. It is a 3 day tradeshow, running from October 9-11. It’s got all the makings of a normal conference: keynotes, booths, etc. But, in Second Life style, you are doing the whole thing virtually. Watch this video of how it works.

It is free and you don’t have to go anywhere. So, I thought it was worthy of bringing to your attention.

As a concept, these virtual expos are a really cool idea. It will never replace actually meeting with real people, but these kinds of shows definitely have a role.

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There are already those who question the use of Paypal for business. We used to hear of horror stories of frozen accounts. Personally, I have been using Paypal for some time now and have had no problem with them. Of course, just to be on the safe side, I also have my own merchant account and do process cards regularly through Authorize.Net. But, some people prefer Paypal when making online purchases and that’s fine with me. I’ll allow it. Money is money, right?

Anyway, first it was Skype. Now Paypal. I guess Ebay is having a bad couple weeks.

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The software itself is pretty powerful, but I’m finding that, like X-Cart, it can be a bit cumbersome to use. Installation was easy – pretty typical for a web-based system. But, here is the annoying part:

• Set up after the fact is confusing. Settings are all over the damn place and there is really nothing walking you through it.
• Email and page templates are simplistic and contain multiple spelling/grammar errors
• As of this writing, their company server is frickin’ SLOW! I’m sure its temporary, but its pissing me off when I’m trying to write a blog post about them.
• After install, all emails coming from the system had blank headers. In fact, the email headers were IN the email body.

Despite the annoyances, don’t be hating! The software is still pretty good. Its pretty well documented and the support is definitely there. What’s good about it:

• Good support
• They offer some cool freebies in the members area when you buy a license
• Some helpful video tutorials of how to use the software
• Pretty capable software, once you iron out the annoyances

For today, I’m kind of at a stand-still because of the problem with out-going emails above. I’m running the most recent version of the software and the emails just don’t look right. I’ve brought it up with Support and they said they would try to get a patch up tomorrow. We’ll see what happens.

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• “Submit” is NOT a good marketing word, so having buttons on your site that simply say “Submit” can be highly ineffective.
• What they did to test this was to do a traditional A/B split test on an e-commerce site. One site was your typical database-enabled site and the other site was completely static. The two sites looked the same, however the second site simply collected the order information and the staff manually ran the orders in order to see how the site responded. What they found was that about 22% of customers could not buy due to some technology-related issue with the site. It was not a matter of programming bugs. Instead, it was problems with the built-in technical and business features that were part of the website. Therefore, the traditionally assumed business rules built into the technology were acting as friction to the buying process.
• The most common problems were (1) invalid credit card where the customer was not clearly presented a solution for getting around it, (2) Potential customer had previously registered for a free newsletter on the same site but could not remember their username and/or password, (3) Potential customer had taken a free trial already and was thus ineligible for the offer without any clear next step for them.
• One potential solution to lost orders is to simply call the customer and see if you can rescue the order through personal contact.

The top 7 solutions to making your site not drop your customers under it’s own weight are:

1. Place an order every now and then in your own store as if you were your own customer. Take note of any and all confusions.
2. Call your own customer service line (or have a “secret shopper” do it).
3. Make use of your “forgot your password” feature. Is it easy to use?
4. Post an 800 number to your store. This can be a rescue line when your customers run into problems with your store.
5. Monitor your conversion funnel and find where people are dropping out.
6. Monitor the credit card errors from your credit processor. Does your site clearly outline the next steps for customers whose cards are denied?
7. Temporarily remove form validation and credit card address verification. Does your conversion improve?

This overall motto here is that we can build in all kinds of great features into an ecommerce store, but sometimes it is those built-in features that can present barriers to your customers. And face it, most customers are not loyal enough to spend much of their time trying to get around any barrier. So, test your site and make any barriers provide clear solutions. Have people test your site (other than you) and you will find where your bottlenecks are.

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So, having Dazzle installed on the local computer, we want a quick way to export USPS orders from X-Cart (the store software we use) and import them into Dazzle. Luckily, Dazzle supports printing postage labels directly from an XML file. You need to have the premium service with Endicia to use this service along with Dazzle Designer. You can find the PDF document here that describes the XML fields needed to make this work. With that as your reference, let me give you a big head start here on getting this done for your X-Cart store:

1. Here is the source PHP code for the export. Note that I had to make this code a little more generic than the one I am using because I use my own database abstraction layer, etc. However, this is the logic I am using.
2. In the source code, you may want to modify the $shipfromlocal variable. I used this because I have some products in my store which are not shipped from my office but are shipped from a supplier in California. I obviously don’t want to export those because we don’t ship them. If you ship everything in your store, then you can comment out that variable. If you do, make sure you modify the queries that use it otherwise you will get an SQL error.
3. Also in the source code, you can modify the $customdesc variable. These are the item descriptions used on US Customs forms. Since I did not want these to be the same as the actual product names, I used this array to define names which are more vague for the purposes of customs.
4. Finalize your PHP file and upload into your X-Cart admin directory.
5. Next, log into your X-Cart store and go to the orders.tpl template in the “main” folder of your active skin. In that template, you can add a button next to the order search buttons that will directly call this new PHP file. When you are done, you can click that button and you’ll get an XML export of any new USPS shipments.

This script essentially looks for any orders with USPS specified as the shipping method where the order is in “Processed” status. You may need to modify this to suit your needs, but I couldn’t find anything that did this. Hopefully this can give you a head start.

To use it in Dazzle, you would go to File > Print From > External File. Select the XML file. Dazzle will immediately import the XML file, verify all the addresses, and begin printing postage labels. You will, of course, want to make sure you have any templates set up before doing this. Dazzle just begins printing.

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Use testimonials

More specifically, use testimonials which address specific points of customer anxiety. For example, if you know that speed of shipping is a concern, post a testimonial that talks about how fast your shipping was. If support is a concern, post a testimonial which talks about how great your after-sale support is. Really pay attention to the purpose of each testimonial rather than simply posting anything that says good things about you.

Use language and tone in your copy

Pay close attention to your audience and what their state of mind is. Use language on your website that specifically caters to your audience. For example, if your intended audience is a younger one, your typical corporate speak is probably not going to sell anything. The presenter of the seminar also alluded to the importance of matching the tone of the customer and said a future report of their journal would discuss how to make a site actually cater to the particular mood of the customer. Now that will be very interesting, if it is some kind of real-time thing.

Use Credibility Indicators

Use badges and certifications from trusted groups to show that your business is legit. These might include:

• BBBOnline
• Trust-E
• Verisign Secured
• Hacker-Safe

Include Site Ratings

Ratings from third party, trusted sources are good for credibility. Such as:

• ResellerRatings.com
• Bizrate.com
• Pricegrabber.com
• Dealtime.com

Doing this obviously means being registered as a merchant with these sites and having good customer feedback.

Offer a Guarantee

Assure the customer that they are not stuck with whatever it is they are buying if they don’t like it. Offer things like 90 days risk free, 100% satisfaction guarantee, 100% money back guarantee. Many smaller operations may not be keen on openly offering refunds, although experience usually shows that making it available brings in a lot more business than it will cost by way of actual returns.

Enhance your Visible Reputation

Include anxiety-reducing site features like an About Us page and Support. Make a very clear option to contact your staff, and provide a contact phone number. Don’t hide behind the anonymity of the internet. People want to know that they can call and talk to a real person if they have to.

Pay Attention to Design

Use site colors and themes that match the nature of your product and audience. Pay attention to size, color, shape, motion and position. The speaker said one of his methods was to print a website and then literally draw on the print-out what things grab his eye. It is all about eye path. The ultimate goal is for the person to click the “Buy” button. You want your website to direct the eye path directly to that buy button, with good copy and items to reduce anxiety guiding them down the page. And you want the page designed more as a vertical path – do not make too much use of the lateral path (as in making the person look side-to-side or key bits of information. The natural tendency is to move DOWN the page.

Have you ever seen one of these marketing sites whose homepage is designed TOTALLY to sell you something? You see a lot of these with sites trying to sell you some guy’s money-making system. Here is an example I found in a quick Google search: www.realwebmoney.net. Now sites like these I find a little funny, because these guys are making their money on selling the system. Trust me, it isn’t the charity of some guy who made millions and then just feels like showing you how to do it. The selling of the course IS their system. That said, these guys really now how to do ad copy and design a site. You will notice that this guy’s site is littered with highlighted phrases specifically designed to hit the key buttons of the audience, show the benefit, and alleviate anxieties about whether it will work. The page is also designed vertically – with no sidebars. It contains testimonials. It provides the sense of a good deal by showing the huge price deduction (which trust me, is ALWAYS there). Lastly, at the point of sale (the big “Order Now” button), there is a big box underneath with a signature of the author and a 100% satisfaction guarantee with a big seal to show off. The signature is a good point, because it is important to realize that people buy from people, not companies. Giving a site the big corporate look and hiding your staff behind a veil of the contact form is not a way to sell things.

This is classic ad copy and it applies many of the points addressed here and in the seminar. And, reading vertically down the page, it reads very much like a TV commercial might. It hits them with a big headline to get attention, peppers them with key points, testimonials. Then, right when you’re thinking that it might be good, he hits you with some items to alleviate doubt. See the “Want Proof?”. He even throws in a little javascript test to see how much money you can make. The test is bull crap (and doesn’t even work right), but I admire the effort because people love interactivity.

Lastly, the speaker provided a formula which, quite frankly, appears to be very arbitrary, but I thought I’d pass it on anyway. It is:

C = 4M + 3V + 2(I-F) - 2A.

That is…

Conversion = 4(Motivation) + 3(Value) + 2(Interest - Friction) - 2(Anxiety)

He calls this the MEC Conversion and apparently covers it in one of their online certification courses. Now, it seems to me that a customer’s motivation and interest are pretty much dictated by them. However, site design and ad copy can do a lot to increase value, reduce friction and anxiety. Value would be the perceived value of your offer. Friction would be the degree of how hard it is or how long it takes to make the purchase. And anxiety is the whole point of this post, the worries the customer might have.

To sum all this up, I want to make a point that conversion is a process, not an event. There is no single point where one can sit back and say “My site is perfect”. One must constantly measure conversion rates and work the site to keep conversions up and look for improvement. One should begin actually measuring conversion rates in their online stores. Even if you are not doing e-commerce. For example, perhaps your goal is simply for a visitor to sign up for your newsletter. Well, start tracking conversion rates based on the number of people who sign up daily. Any business will tell you that it is a lot easier to sell the people whose attention you already have than to get the interest of newbies. Even at PCMech, we make ecommerce sales in our store. In the past, I have made high use of the mailing list in a sort of brute force attempt to drive more people to the store. However, it is equally important to pay attention to the elements that will increase the conversion rate of people who walk into the store already. So, it’s a two-pronged approach.

1. Drive more people into the store.
2. Perfect the store so that a higher rate of those who go to the store actually buy.

With that, happy selling. I hope this post has proven useful for you in your online selling endeavors.

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The Basics – How Funds are Collected

Ecommerce simply refers to the practice of shopping online. From the site owner’s perspective, it entails collecting funds from sales transactions on their website and depositing that money into the bank. In order to collect funds, you need to have a merchant account and a payment gateway (discussed below). Basically, when a person enters their credit card number on a website, the card number and buyer information is sent to a payment gateway. This is done securely. The payment gateway will interface with a payment processor to check availability of funds as well as any other criteria set for accepting transactions. If the funds are available, the payment processor will then deduct the funds. The payment gateway will then report back a successful transaction to the merchant, at which point the merchant’s shopping cart system will respond by displaying a “Thank You” type message to the buyer. Funds will sit until the transaction is settled, which means the funds are collected and deposited to your bank account. Until a transaction is settled, the transaction will not post to your bank account and the corresponding debit will not post to the buyer’s credit card account.

Merchant Accounts

A Merchant Account is a special type of account specifically for online retailers. They are designed to allow non-POS (point of sale) transactions using credit cards, or transactions where you don’t have the person’s credit card in hand. In other words, you don’t have a card swiper. A merchant account is not the same as a bank account. It acts as a go-between between your payment gateway and your bank account, accepting funds from credit cards which are then deposited into your bank.

A merchant account is a relationship based on trust between you and the issuing bank. The bank takes funds from the buyer’s account and deposits into your account. A payment processor takes care of checking for availability of funds and debiting from the credit card account. The bank issuing the merchant account is trusting that you will fulfill your end of the transaction by providing the product or service that the buyer purchased. In case where this does not occur, the buyer can dispute the transaction. This puts the issuing bank on the line because they are then obligated to return the funds to the buyer’s card (a chargeback). Therefore, merchant providers are taking a risk in allowing a merchant to take credit cards under their name.

The organization providing your merchant account will do underwriting on the account when you apply to check your credit. If you have a history of too many chargebacks, you may be denied. In fact, too many chargebacks can result in you, as a merchant, being put on the Terminated Merchant File (also called The Match File). This is a blacklist which will effectively prevent you from ever receiving a merchant account again.

Payment Gateways

A payment gateway serves as the front end to your merchant account, allowing you to manage funds, transactions, and the like. It also serves as a connection between your website and your merchant account. It takes data submitted via your secure order forms and presents it to your processing bank. The processing bank then approves or declines the transaction and sends its response back to the payment gateway. The payment gateway then turns around and provides this data back to the merchant for appropriate handling of the transaction. A payment gateway, then, does not offer services such as merchant accounts or shopping carts, although some of the larger-known gateways do provide such options as value-added services.

Some of the better known payment gateway services are Authorize.Net, Verisign, 2CheckOut.com, Linkpoint, Paysystems.com, Worldpay.com, and MerchantCommerce. Some of the things to look for in a payment gateway are compliance with CISP, SDP and DISC (security initiatives put out by the major credit card companies), virtual terminal (to be able to accept transactions over the phone by typing in their data rather than only relying on your website), fraud prevention, recurring billing, methods of integration, cost and whether they can accept e-checks or not.

Fraud prevention is a big one because, as stated above, too many fraudulent transactions will result in chargebacks which could end up putting you on the Match List and your merchant account closed. Some of the common fraud detection mechanisms are Address Verification (AVS) which compares the customer’s address with that on file with the issuing bank, CVV2 which makes use of the 3-digit security code on the credit card (4-digit on American Express cards).

Most gateways will provide instructions on how to interface with their servers from your web store. Most gateways offer two methods of integration.

One method is to have your site POST a form to the gateway’s server which is pre-populated with your customer’s information. At that point, the customer will provide the customer with the payment form which allows them to type in their credit card number in a secure environment. After processing occurs, the customer is then routed back to your website along with the results of the transaction. Your site again takes over the process. This method is usually easier to set up for site owners and it also means the site owner does not need to purchase their own SSL certificate (allowing secure transactions on the site itself). The tradeoff is that you do need to send your customers off of your website for payment collection. Many gateways offer ways to make the payment form look like your website using customized headers and footers, but the fact remains that the visitors are leaving your website.

The second method is totally invisible to the customer. If the site owner has an SSL certificate, they can set up security on their own site. This means they can host the payment form themselves, totally customizing it to their website. When the customer submits payment, your site will securely and invisibly submit the information to the payment gateway. The payment gateway will do the usual processing and then invisibly send the response back to the merchant’s website, allowing it to respond properly. From the customer’s perspective, they never left your website. And they never did. This type of setup requires an SSL certificate as well as access to the CURL library.

Many gateway providers can get you set up with a merchant account at the same time as the gateway. So, in most cases, you do not need to sign up for them separately.

Conclusion

Hopefully this has given you a brief introduction to how credit card payments are processed on the internet.

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My criteria for the store was:

• Must be PHP/MySQL based
• Must have the features one would expect of a shopping cart platform
• Must be template based so that I can change the layout without modifying the source code

I played around with a few different titles that are on the market. Let me run through the ones I have worked with and give you my impression of them.

• OSCommerce (www.oscommerce.com). This is a very well known (and free) package and it is indeed very powerful. However, the current version (as of this writing) is Milestone 2.2 and that version does not use a template system. This means all of the design elements are meshed in with the PHP code. This is annoying considering just how prevalent template systems are today. This means that, on a package this size, you need to essentially be an expert on OSCommerce to do any effective hacking. There is an industry of OSCommerce developers on the internet offering customization and templates, and my view is that all of this is due simply to the fact that the system is overly complicated and not template based. So, while the price tag (free) was attractive, I would have had to sink a bunch of money to hire a developer to make the store look like I want. MS3 is apparently being designed to use a template system, but there is no telling what that will be available (probably not anytime soon).
• Cubecart (www.cubecart.com). I have worked with this cart in the past. It is free, but you need to pay a license fee to remove the copyright notice. It is template based and the templates are pretty easy to work with. Essentially you have “skins” in the server file system and you can just modify those skins and re-upload. The store also contains all the features that one would usually need in a cart. The main reason I did not go with this store for my own store was because it was not quite as community-supported as some others. And when I used this software for a client’s site, I had to go into the code and fix a few issues with it myself.
• LiteCommerce (www.litecommerce.com). This is a nice platform offered by the same folks who do X-Cart. It is aimed specifically at people who want something easy. The template system is nice, too, because everything is editable in any WYSIWYG editor such as Dreamweaver. One issue, though, is that many of the features standard in other shopping carts require additional (commercial) add-ons in Litecommerce. For example, integrating with almost any payment gateway requires a $15 add-on. It also does not offer real time shipping quotes with UPS or Fedex. It cannot handle digital (downloadable) goods without yet another add-on. So, I really liked LiteCommerce, however when I compared costs with X-Cart, considering what I needed, it really was not a cheaper option for me.
• CSCart (www.cscart.com). I bought a license to this one and may indeed use it at some point. The interface is very clean and it contains most every feature I needed. At the time, though, I was using Authorize.Net SIM for payment processor, which this cart did not support. It worked with Authorize.Net AIM (which I am now using), however. The software is not as heavily supported as OSCommerce or X-Cart by the community.

There are a lot of other titles out there, but I specifically went for the more popular options because the whole point of my store conversion was to get something that had heavy support, both from the developers and the user community.

Ultimately, I went with X-Cart (www.x-cart.com). X-Cart is developed by some folks in Russia and they are the same people who developed LiteCommerce (and I heard from somewhere they also developed CSCart, although I have not attempted to verify that). The features of the software were about what you would expect from a shopping cart, so I won’t bore you with the feature list. But, let me address the main reasons I chose X-Cart over the others:

• Heavily supported. The developers offer web-based support for their software and there is also a wide user base that is active in the forums. There are also companies out there who design add-ons for X-Cart (most of them commercial). So, all of this went to show me that a lot of people used X-Cart and there was thus a source of help if I had problems with it. I should note that the X-Cart guys use a point system for the web support, so you need to buy points to get support. You do get points when you purchase X-cart which should take care of all of your needs, however if you do run out of support points you will need to purchase more in order to get them to help you. I have not used their support service on this go-around, but I can say that I setup X-Cart many years ago for a client and I actually had one of their guys working on my problem (integration with Bank of America payment gateway) personally and chatting with me in ICQ. Being that they were in Russia, I had to stay up late to wait for them to get to work in the morning, but I still admired their effort.
• Lot of “Out of Box” functionality. I wanted plug-and-play integration with my payment processor, real time shipping quotes for UPS, ability to offer downloadable goods, etc. X-Cart did all this out of the box. In fact, X-cart integrates with processors and shippers I never even heard of. So, they’ve done a good job of making a fully functional store. I was seriously considering their LiteCommerce package, but I actually did a price comparison of the two and it would have been more expensive (by a bit) to purchase LiteCommerce with the add-ons I needed than to purchase X-Cart.
• Template-based. X-Cart is based on the Smarty template system. Now, I have my gripes with this, but at least it was template based meaning I did not have to modify source code (and hence worry about version control for future upgrades) in order to do something as simple as insert my logo.

Now that I have X-Cart up and running on PCMech’s store, I do have some gripes about the product. I am NOT unhappy with my choice, but every product has its pitfalls. I have not yet found the perfect software for every requirement of mine, short of doing it myself.

• Use of Smarty. X-cart is template based as I said above, but it uses Smarty as the template system. I really dislike Smarty because it completely defeats the point of a template system. To me, any good template system should almost completely separate programming and design, logic from presentation. Smarty is so interlaced with logic and Smarty syntax that the templates are barely readable as HTML. For that reason, it is a MAJOR pain in the arse to modify the look and feel of X-cart yourself without becoming pretty fluent with Smarty. I would NEVER use Smarty in one of my projects for this very reason, and it is disappointing that X-cart uses it. From the programming side of things (and I am a programmer) I can understand Smarty’s appeal, but its difficult for the end user. Long story short, I ended up purchasing as prefabricated template for X-cart and installed it and modified only a few quick things to my liking. If I had to integrate the entire PCMech.com layout into X-cart, it would have taken me forever.
• Customers/Orders not easily accessed. There is no easy way to simply get a listing of customers or orders. Going to view either gives you a search form. In order to list all, you literally have to search for nothing, and THEN it will give you a list of your orders. It would be so easy for the X-cart folks to simply put a search form on top of a listing of users or orders, but they don’t.
• No link between customers and orders. X-cart stores customer contact information along with the order itself, so the fact that that user also has a profile is really lost on X-cart. A simple way to link an order to the user profile (and adversely to link from a user profile to all of their orders) would be such a simple thing and once again I have no idea why X-cart doesn’t do it.
• No Sales Stats. The statistics area offers no sales statistics. The only sales statistics are provided on the main page after you log in, and they are not useful to me. I need to be able to enter date ranges and get sales figures. Lack of this feature meant I had to program my own script to perform this simple function.

Perhaps I can get the X-cart folks to address these simple things. I don’t, however, expect them to make a switch from Smarty as that would entail a complete re-write of X-cart.

In short, X-Cart is a powerful shopping cart platform and I invite anyone to check it out if they are needing something of that caliber. Depending on your requirements, a solution like LiteCommerce may be a simpler way to go. CSCart is also a powerful solution which offers readable templates. X-cart, though, is just about as heavily supported and discussed as OSCommerce. This means there is a lot of help out there when you need it. As usual when dealing with software like this, its a tradeoff.

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The transaction fees charged end up being the most primary consideration many merchants consider, however there is a lot more to this decision than that. Merchants need to consider information security, dispute resolution and fraud protection. Not only that, merchants need to consider the overall reputation of their business. After all, some customers might balk at the idea of Paypal being the only payment method available.

The Costs

The most common method of being charged is a flat rate per transaction plus a percentage of sale. So, for example, let’s say I am paying 30 cents per transaction plus 2.2%. If I process a transaction of $100, I end up giving up $2.50 and collecting $97.50. The fees differ from processor to processor, so you need to take a look at the fees and shop around. Obviously, you want to keep as much as your money as you can.

A solution like Paypal can save you money because it does not charge things like setup fees, gateway fees or any monthly fees. Use of their payment gateway is free, and many of the typical fees are not applied simply because, with Paypal, you do not really have a merchant account. In effect, you are using their merchant account.

Typically, if your website is not going to be running many transactions, Paypal can save you some money. You only pay for what you collect and the ease of setup is attractive.

Getting Your Money

All merchants want to have access to their money as quickly as possible. They also want to know what the process of getting that money from the customer to them is solid and secure. With this in mind, the merchant account is really the best way to go. By having a merchant account, you are making use of a well-established system which is backed by the FDIC. There is a whole banking process behind the scenes which gets the funds transferred from the customer and ultimately directly into the merchant’s bank account. This process is automatic and usually the merchant has direct access to the funds within 2-3 business days. Merchant accounts basically collect funds from credit accounts then make daily settlements. A settlement is the process of transferring the credited funds to the merchant bank account. It usually happens on business days only, so typically any sales which occur on Fridays or over a weekend will not be settled until Monday.

Paypal works completely differently. With Paypal, you have an account with Paypal. When a customer buys something, you have immediate access to the funds in your Paypal account. Since Paypal is not a bank but a private company, it is not required to follow federal banking regulations. To get your money into your checking account, you need to manually transfer the money to your bank from Paypal. Paypal does have additional services like Paypal debit cards, but a Paypal account is not a checking account. The transfer process usually takes about the same amount of time as a settlement, but it is not automatic.

There are horror stories on the internet of people losing their entire Paypal accounts because of Paypal simply cutting off access. Usually this is because Paypal, for some reason, suspects the merchant of fraud. However, they don’t always get it right. Similar to Ebay itself, sometimes merchants are flagged and there is no reason for it to be flagged. I think these types of incidents are pretty rare, however the fact that Paypal has this power to freeze funds is definitely something to bear in mind when considering your options.

Privacy

Customer data is not distributed to any third parties when processing a credit card using a merchant account and traditional processor. The security of their information between your website and the payment gateway is, of course, your responsibility. However, the information is secure through the approval process. Paypal, on the other hand, does provide secure processing. However, Paypal is a private company and they openly state that they may share customer data to third-party marketing research companies. They will also share information with their parent company, eBay. Paypal will not share your bank account or credit card information, however everything else is essentially fair game.

Fraud Protection

When merchants set up a merchant account and select a payment gateway, usually they have access to a whole range of customizable solutions for fraud protection. The merchant, in this case, has control over the settings used for fraud detection. They can set up very stringent settings or they can be a little more loose about it. When using Paypal, Paypal has total control over the fraud detection. For example, Paypal will automatically decline any transaction which results in an AVS/CCV mismatch. Sometimes Paypal will decline a transaction because it is international. Paypal does not offer a range of fraud settings for the merchant to control. They take control over it. This is understandable being that it is their merchant account on the line.

Reputation

Reputation is important on the internet. Since customers are not in person when they are about to buy something, it takes perception of trust to get them to whip out the card and type in the number. It is very important, then, to consider how your business will look to your users depending on the payment solution you employ.

The credit processing system has been around for more than 40 years. It is tried and true and people are totally used to it. From the merchant perspective, it is a very reliable system. Having a traditional payment gateway and merchant account means you are taking advantage of this trusted system.

Paypal is very popular on the internet and many people have accounts with Paypal. However, it is a private company who makes their own rules on how payments are processed. This is not a bad thing, however a merchant needs to decide whether they want to play in that arena. Paypal is chiefly thought of as an auction payment system, mainly due to its popularity on eBay. It is sometimes thought of as a medium for people to exchange money in small, personal transactions. It simply does not have the solid reputation of a merchant account.

Having a payment gateway and a merchant account means you are doing business in the same way as solid, trusted businesses throughout the world. Your website can directly accept credit cards and you won’t have the potential distractions of sending a customer through Paypal.

So, What’s The Decision?

In my e-commerce ventures, I usually accept both options and I give the choice to the customer. There are a lot of internet users who keep funds in their Paypal accounts. For them, having the option to use those funds easily to buy something online is a real convenience. There have been a few times that I, as a customer, have moved forward with a sale because they accepted Paypal and it kept me from having to get up and find my credit card. If I like it from time to time, others will, too. However, when I first got a merchant account and a payment gateway for my websites, my web-based sales skyrocketed. There is simply no replacement for a traditional credit card processing account if you are serious about doing business on the internet. I certainly would accept Paypal, but NOT as your only payment option.

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