14 Online Payment Options

Canada's digital roadways move billions of dollars in online transactions every year, and that number is growing. At Moneris Solutions, Canada's largest processor of credit and debit-card payments, online transactions are growing by 25 per cent annually, and online credit-card transactions showed positive double-digit growth every month last year with the exception of February. 

Moneris predicts the value of all 2003 e-commerce transactions processed by Canadian companies will total $4 billion, said Kevin Taite, senior manager of communications. Corporate Web sites that cannot process dollars are obviously losing out on a potential revenue stream.

As e-commerce solutions become increasingly available and consumer confidence in online shopping increases, more small and medium enterprises (SMEs) are looking to the Web to boost sales. However, getting this boost is tough if an SME does not have a credit-card merchant account or has only a credit-card-present account, which restricts a company to selling only to consumers who physically present their credit cards in person. Because credit processing companies are concerned about online fraud--both by criminals posing as consumers and charlatans posing as merchants--it can be difficult and costly for SMEs to obtain merchant accounts that allow them to process credit cards online.

Credit card companies take fraud seriously and expect processing companies to closely scrutinize prospective merchant accounts. "The majority of our customers are small and medium enterprises," Taite said, adding that Moneris works to assess risk and, where it makes sense, work with businesses of all sizes. However, Taite agreed Moneris is less likely to grant card-not-present accounts to SMEs, even those willing to pay hefty security deposits, because fraud is more prevalent when credit cards are not physically presented.

Outsourced options

Some Moneris clients, such as DVD Box Office in Richmond Hill, Ont., use the company to process online transactions and reconcile invoices. Others, however, like NicLyn Consulting president Lynda Morris, find the $5,000 security deposit required to secure a card-not-present account too big a cash-flow bite. So Morris, who runs an Internet-based computer network troubleshooting company from her offices in Toronto, went looking for more affordable third-party credit-card processing options.

Third-party online processing companies generally, but not always, charge set-up and monthly fees, take a bite out of each transaction (a discount fee and a flat rate per-transaction fee) and hold about five per cent of each payment in reserve for up to six months. This "rolling reserve" replaces the standard security deposit. From the reserve, credit-card processing companies deduct monthly fees and any service fees for charge-backs (when customers dispute credit-card charges and refuse to make payments).

However, unlike companies such as Moneris, these accounts do not require a large security deposit and they accept most merchants after conducting due diligence to ensure the companies are legitimate.

Since Morris was using Intuit's QuickBooks accounting software, she decided to register with the QuickBooks credit-card processing service. It wasn't perfect--all transactions had to be entered manually in QuickBooks and she had to set up her own secure Web forms to capture customer payment information online. "It was there, it was free in the sense of no monthly fees, and it was easy," she said. 

Morris stayed with QuickBooks for two years until the company introduced a $35 monthly fee in addition to its per-transaction fees. "The monthly fee didn't make sense for us, considering the amount of credit-card payments we process."

Morris looked at half a dozen different processing companies, comparing processing costs associated with each company, and settled on PaySystems, a Montreal-based company that provides payment processing and merchant services to companies around the world.

Founded in 1998 to provide third-party intermediary services that ensure buyers and sellers fulfill online business agreements, PaySystems was itself refused a merchant account. Today the company offers payment processing solutions and fraud verification to merchants in 79 countries and is doubling its revenue every year, said company president Philip Fayer.

"PaySystems was among the first companies to enable multi-currency, non-signature online credit-card transactions," he said.

PaySystems users do not have to open up accounts before paying for goods or services online, unlike users of the PayPal payment system which accepts credit-card orders and consumer-to-consumer or consumer-to-business e-payments and is popular with people who buy online and buy and sell on eBay.

PaySystems charges a US$49 set-up fee and deducts either 3.95 per cent plus one dollar per transaction or 5.5 per cent and 35 cents per transaction. Morris found it cost-effective to pay the set-up fee and then only pay additional fees when she sells services by credit card.

PayPal does not charge a set up fee but charges the merchant 2.7% to 3.4% (depending on the type of account) per transaction, plus a 55-cent fee.

There is no monthly fee with either PaySystems or PayPal, although PayPal charges merchants 50-cents to move money from PayPal into the merchant's bank account. PaySytem's Canadian customers pay $2.50 per cheque when they receive settlement payment from PaySystems. Payments are sent weekly, but low volume customers can establish a minimum settlement value so they receive settlement cheques less frequently. PaySystems plans to offer a free direct deposit settlement service to Canadian customers, as they currently do for American customers, but the company is vague on the timing.

PaySystems recently re-branded its online credit-card processing service as MyPaySystems and offers a premier service that allows merchants to integrate MyPaySystems with a number of electronic shopping carts on the market for a monthly fee. [14 Online Payment Options]

QuickBooks' decision to implement a monthly fee was driven by competitive offerings, which average about $45. In addition, several competitors have higher per-transaction fees, said Eric Gauthier, general manager of QuickBooks Retail Solutions for Intuit Canada in Sherbrooke, Que. "There continues to be no set-up fees, no upfront deposits and no need to purchase or use any hardware (such as a swipe terminal)."

In addition to the monthly fee, QuickBooks charges a discount rate of 3.5 per cent and a per-transaction fee of 35 cents. Once credit-card data is entered into QuickBooks, transactions are processed through TerraPayments (www.terrapay.com ) using an encrypted Internet connection.

Success at stake

Delivering a solid online payment process is critical, especially as "too many small businesses are selling themselves short," said Kevin Severy, president of IQNetCom Corp, a Web site design and electronic business development company based in Burlington, Ont. Businesses often use third-party systems that drive traffic off their site to pay, which can confuse the consumer, or use systems that require each order to be manually entered before processing, which is time- consuming.

SMEs should spend time integrating electronic shopping cart and catalogues with payment systems, he said. Third-party payment systems such as PsiGate and Beanstream use SSL (Secure Sockets Layer) technology to allow the secure processing of payments on a seller's Web site.

"The more complete and seamless the shopping process is on the Web site, the more people are likely to use the system," Severy said. And that leads to increased sales that can pay for the cost of fully e-commerce enabling a Web site.

14 Online Payment Options | Back to Top 

Options abound for collecting dollars online

Don't have a credit-card merchant account? Can't afford the security deposit required to acquire one? Want to explore Web-based sales? A multitude of companies charging a variety of fees are willing to process credit cards or otherwise take payments on your behalf. 

In terms of cost, here's what you should assess: set-up fees, monthly fees, discount rate (per transaction), flat rate (per transaction), charge-back rate and any other applicable fees. Also factor in the cost of setting up your electronic shopping cart and securing your Web site if you want to process transactions on your site.

PayPal (www.paypal.com): Accepts both credit-card orders and consumer-to-consumer or consumer-to-business payments. It is popular with people who buy and sell on eBay.

PaySystems: This Montreal-based company provides electronic payment processing and merchant services to companies around the world. It charges set-up and per-transaction fees, but there are no monthly fees other than for premium services.

UseMyBank: A debit-based payment system similar to INTERAC. Charges activation fees and per-transaction fees of one to 3.5% with a $1.50 minimum per transaction.

hyperWALLET: This B.C.-based company lets consumers fill an electronic wallet and transfer funds upon receiving an invoice from a hyperWALLET merchant.

E-mail Money Transfers (www.certapay.com): Allows CIBC, ScotiaBank, Bank of Montreal, Royal Bank and TD Canada Trust customers to transfer funds electronically to the bank account of a business or another consumer.

Qchex: An American service that lets North Americans send and receive cheques securely over the Internet for a per-cheque fee.

2Checkout: Similar to myPaySystems, charges a one-time set-up fee of $49, and 5.5 per cent commission plus a 45-cent charge on each total sale.

CCNow: Charges an $11.95 monthly fee plus 11 per cent of total sales in excess of $100.

InternetSecure: Offers a wide range of set-up, monthly and per-transaction fees.

PsiGate: Has a range of set-up, monthly and per- transaction fees.

Beanstream: Offers a range of set-up, monthly and per transaction fees.

TerraPayments: Has a range of set-up, monthly and per-transaction fees.

QuickBooks: Charges monthly and per-transaction fees; electronic payment is only small part of QuickBook's payment processes.

Moneris Solutions: A private merchant account company owned by the Royal Bank and Bank of Montreal; Canada's largest processor of debit and credit-card transactions, includes online credit card transaction solutions.