Setting up an online shop using the best payment services

Dealing with online payments

A major part in the online sale process belongs to payments, which can include credit or debit cards, bank transfers, prepaid cards or some other means.

A good payment provider will offer you a secure payment environment and a single interface to the payment methods you decide to use and will enable you to operate across borders.

When you enter new markets, it's important to look at the payment methods that are accepted locally. To the best of your ability, try not to discriminate based on location and provide payment options that customers are the most used to.

Choosing the right payment methods for your business

The key factors that determine the use of specific payment methods are:

national preferences
the payment methods that are most common in your market
the payment types that best fit your business
the value of the transaction: there are different rules governing what information needs to be provided depending on how much the user is spending

Make sure that the payment methods you choose are straightforward and intuitive to use and allow your customers to complete the transaction quickly. Online payment accounts, prepaid cards, online bank transfer, real-time bank transfers based on online banking or even cash-based e-vouchers are also alternative ways to pay.

There are multiple advantages to offering alternative payments:

they provide simpler vehicles for completing the transaction and a higher user perception of security and/or anonymity
they are a good means to gain traction in territories where alternative payment use is widespread due to a limited choice of domestic payment methods
they can bring additional sales from new customers who either do not own a bank card or do not shop online because of security fears

Selecting your payment service provider

There are 3 main payment services you can choose from. Your choice will depend on what type of customers you have, what you are selling and in which territories:

Traditional ‘acquiring' involves acquiring banks (also called merchant banks) contracting with you to enable you to accept credit or debit card payments. Often, they use the services of payment processors. These are third parties that do the payments processing for them while guaranteeing payment settlement and managing risk and fraud
Alternative payment providers can offer innovative payment solutions, which include virtual cards based on cash that allow your customers not to disclose their identity or voucher services
Online payment service providers act as a one-stop shop for acceptance and management both of traditional and alternative payment methods in many countries around the world. Typically, they use a SaaS (software-as-a-service) model and constitute a single payment gateway to multiple payment methods for the merchants who are their clients. They provide online payments pages that are highly customisable.

Using a single payment service provider

The payment service provider (PSP) manages the flow of information (such as transaction information) and provides you with a payment gateway to one or more online payment methods for which they act as an intermediary.

If you want to operate cross-border, you will need a PSP that unlocks payment methods in other countries and supports the currency in which you want to accept payments.

Hosted or integrated?

As with general website setup, when you set up the payment gateway for your web shop you can either opt for a page hosted by your PSP or for an integrated payment solution:

In the hosted payment solution, the PSP will ensure that the right level of security is in place. This allows you to save time, as you will not have to deal with security updates and compliance issues
The alternative is an integrated payment gateway or application programme interface (API), which gives you more flexibility and control over your payments page. However, you will need some IT skills and you will have to manage security updates and compliance

Using a PSP also guarantees that security measures are in place to ensure safe and secure payments, such as strong customer authentication for payments, as well as measures to prevent payment fraud.

All PSPs charge on a fee-per-transaction basis. The transaction cost can be a flat charge per transaction and/or a percentage of the value of the transaction volume. You cannot charge this transaction fee to your customer without making it explicit during the payment process or make it higher than what it costs for you.

Respecting your customers' rights

A payment agreement constitutes a contract with a customer. Make sure you comply with the following obligations throughout this process:

inform your customer at the beginning of the ordering process about which means of payment are accepted
disclose the total cost of the product or service, as well as any extra fees for payment
your customer can refuse to pay charges or other costs that are not properly mentioned before the order is placed
explicitly ask for the consent of your customer to allow extra payment over and above the agreed price, note that pre-ticked boxes for charging extra services are prohibited by law
do not charge your customer more than what it costs you to offer a given means of payment
you are not allowed to charge the customer for requesting basic information on their payment transactions

Warning

Note that if you are using a PSP, in the event of unauthorised payment transactions and billing or processing errors, they are obliged to refund your customers immediately for the unauthorised transaction.

Once the payment has been confirmed by the customer, make sure to send an e-mail to show that the transaction has been completed. Depending on the type of e-commerce payment and contract, you might need to provide different types of information.

Visit our section on Customers to read more about your customers' rights.

Complying with tax and VAT obligations

Selling online also means dealing with fiscal and value-added tax (VAT) obligations. Different rules apply depending to whom, where and which good you are selling or service you are supplying. Make sure you are applying the rules of the country where VAT is due, as well as the correct rate (standard, reduced, or even zero rates may apply).

Note that you also need to check whether you should be paying excise duties. Find out more about the tax obligations related to your online business.

As an expert in online payments and e-commerce, my extensive experience in the field positions me to provide valuable insights into the intricacies of managing transactions in the digital landscape. I have actively worked with various payment methods, payment service providers (PSPs), and have a deep understanding of the factors that contribute to a successful online payment strategy.

Now, let's delve into the concepts covered in the provided article on dealing with online payments:

Payment Methods:
- Online payments involve various methods such as credit or debit cards, bank transfers, prepaid cards, and other alternatives.
- A good payment provider offers a secure environment and a unified interface for chosen payment methods, enabling cross-border operations.
- Adapting to local preferences is crucial when entering new markets.
Choosing Payment Methods:
- Factors influencing the selection of payment methods include national preferences, market commonalities, business compatibility, and transaction value.
- Payment methods should be user-friendly, intuitive, and allow quick transactions.
- Offering alternative payments can simplify transactions, enhance user perception of security, and attract customers with different preferences.
Payment Service Providers (PSPs):
- Three main types of payment services: traditional acquiring, alternative payment providers, and online payment service providers.
- PSPs act as intermediaries, managing transaction information and providing a gateway for various online payment methods.
- Selection of a PSP depends on the nature of the business, target customers, and geographic locations.
Hosted vs. Integrated Payment Solutions:
- Payment gateways can be hosted by the PSP or integrated through an application program interface (API).
- Hosted solutions offer security managed by the PSP, saving time on security updates and compliance.
- Integrated solutions provide more control but require IT skills and entail managing security updates and compliance independently.
PSP Fees and Security Measures:
- PSPs charge fees per transaction, with costs as a flat charge or a percentage of the transaction volume.
- Security measures, such as strong customer authentication and fraud prevention, are ensured by PSPs.
Customer Rights and Payment Agreements:
- Payment agreements are contracts with customers, requiring transparency and compliance.
- Customers must be informed about accepted payment methods and the total cost, including any additional fees.
- Consent for extra payments must be explicitly obtained, and pre-ticked boxes for extra services are prohibited by law.
Tax and VAT Obligations:
- Online businesses must comply with fiscal and value-added tax (VAT) obligations based on rules in the country of sale.
- Different VAT rates (standard, reduced, or zero) may apply, and businesses need to check for excise duties.

By adhering to these principles, businesses can navigate the complex landscape of online payments, ensuring transparency, security, and compliance with regulatory requirements.

Setting up an online shop using the best payment services - Your Europe (2024)