The online payments
topic is treated dismissively even though it is very important. Merchant
services are not exclusively responsible for quality mediation and safe money
transactions, this is precisely why when choosing a provider the type, size and
future perspectives of a business should be taken into consideration.
Therefore, it's worth our time to get to know the characteristics of different
types of payment providers so that our decision would be made fully aware of
the facts and figures aiding our business.
E-Wallet
E-Wallet, or in
layman's terms "electronic wallet", serves as one of the easiest
payment solutions and frankly one of the most popular payment method. The idea
behind it is that service providers create virtual accounts that can be loaded as
pleased (like a pre-paid cell phone). Finally, a customer can use this
e-wallet's virtual money to pay in every online store that accepts such a
payment method. Our service providers role is to actually take the e-wallets
funds and transfer them to the web store's account.
We can ask ourselves
why would a customer want to trouble himself with loading an account, since
usually he can just pay with real funds? Some people still find it uneasy (at
least in some web stores) to type in their card or bank account information.
The availability of e-wallets makes people feel safer and surer of the fact
that no one will be able to obtain access to their bank account. Furthermore
customers don't have to fill in their data every time they choose to pay with
this method.
The most popular
e-wallet is PayPal.
IPSP
A service provider
opens a merchant account in an acquiring bank, which he then "leases"
this account to individual entrepreneurs.
All things aside, what
are the benefits of using this type of IPSP?
First off, all the formalities are simplified. Every business has to gain the
trust of an acquirer and prove that it is not a high-risk business that could
potentially bring in more loss than actual income (typical high-risk markets
consist of gambling, pharmaceutical, or erotic businesses). This is tied to a
number of requirements that must be met. In this case a e-payment gateway alone
goes through security checks, while taking responsibility for allowing his
clients to choose different online payment methods. In other words, if an
e-business begins to generate losses, the consequences (brought on by the
acquirer) fall on the payment service provider that ‘leased' the merchant
account. This type of approach is convenient for small and mid-size
e-businesses.
PSP – Payment Service Provider
A PSP is
a payment model that directly represents acquirers. The fundamental difference
between the two is that PSPsupports
merchant accounts that belong directly to e-businesses.
What does this mean?
First and foremost it means that having a merchant account is mandatory. Part
of the PSPs spares their clients troubles in a sense that it provides them with
merchant accounts, other PSPs only help with creating these accounts, while
other only accept clients who already have a merchant account – this is
something that should be looked into when choosing a PSP.
The process of opening a merchant account requires the fulfillment of certain
guidelines and formalities in order for an acquirer to accept an entrepreneur,
this process usually last from 3-4 weeks. However, if this inconvenient start
is overcome, and e-business will not only gain more payment possibilities but
will also have solutions with greater prospects.
What makes this
solution the most prospective? A business owner who has a merchant account is
in closer contact with institutions like Visa, MasterCard, acquirers, issuing
banks, and others. Whereas an IPSP is
blocked by a barrier composed of a mediator who has his own account and is in
contact with said institutions.
We're still left with a
question of how this actually looks in practice. Well, an e-business now works
on its own account and builds an online payment processing history, which can
certainly come in use in future if a business will decide on negotiating better
conditions or changing an acquirer. A PSP with
which a business is cooperating may be changed, in this case this
"switch" to another payment provider is quick and easy since the
business already owns a merchant account.
Summing
up the pros and cons, what solutions suit your e-business
Looking back what we
discussed above, an e-wallet doesn't really make sense if it is they only
payment method you offer. However, it is good to add one as an option just for
the sake of it, because the more payment methods you have, the more customers
will find one they will like. Consequently this is mean that the chances of a
followed through purchase increase greatly.
IPSP is
a more useful solution. In this type of a payment solution the focus is on
making the process of creating a merchant account, registration, and
integrating as easy as possible for sellers. The drawback of this solution is
the fact that payments are essentially not very convenient for customers as
they are redirected each time they pay and are required to fill in their
information every time.
Entrepreneurs that have
prospects for a large income, expansion to other markets, need more merchant
accounts, or they just believe that it's better to start off by creating a good
name for their business and a good credit card processing history, should think
about getting a PSP.
#awepay #paymentgateway
#paymentmethods # onlinepaymentproviders #ewallet #psp #ipsp
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