Accepting online payments

Payment-processing companies obtain payment from your customers' credit and debit cards on your behalf and forward the money to you.

They offer a useful alternative for businesses who have a smaller turnover from card transactions or who can't open an internet merchant account (IMA) with an acquiring bank. Examples include PayPal, Shopify and Worldpay.

Advantages of using a payment-processing company

Some of the potential benefits are summarised below:

• Payment-processing companies relieve you of the administrative burden of managing customers' card details and running an IMA.
• They save you from having to set up secure payment systems.
• They have less strict application procedures than an IMA requires. For example, you'll not usually be required to supply the same level of detailed information about your business plan, trading history and suppliers.
• Your application can be processed much more quickly than for an IMA.

Disadvantages of using a payment-processing company

There can be drawbacks to using a payment-processing company - consider the following:

• Customers can see that the payment is not going directly to you even though they may be conducting the transaction through your website.
• Payment-processing companies may hold payments for a settlement period of 30-60 days before the money reaches your account.
• Charges are generally higher than for an IMA. However, costs are falling and the market for these services is competitive.
• If a card is used fraudulently, the value of the transaction will be reclaimed from your business. However, you may be able to get insurance to cover this risk.