How to set up an online payment system

How do I set up an online payment system?

Online payments are the monetary exchange between buyers and sellers transacting on the internet. Setting up such a method might be a little overwhelming as businesses need to facilitate transfers of funds into their bank accounts from their customers' bank or debit card accounts.

In setting up an online payment system, it is important to note its fundamentals, such as coding, security, and compliance issues. Therefore, it is best to consult with an expert. After that, set up a hosting platform and apply for a secure socket layer (SSL) certificate.

What follows next is building your payment form or payment page. This is where you allow your customers to make online purchases or pay invoices. On this page, users must fill in information such as their names, email, addresses, card numbers, card expiration dates, and CVV codes. You may make the page as jam-packed as you want, but less is usually better. Simplicity and security are the most important aspects to consider when creating a proper payment form or payment page.

Two steps remain in setting up an online payment system. After creating your payment page or form, you must find a payment processor that allows you to process multiple types of payments, ranging from credit and debit cards to bank transfers.

Lastly, you must integrate this payment processor with your payment page.

What you need to know about online payments

Now that you already know how to set up your online payment system, you may also want to know how it works and what steps to take to ensure that the entire process allows transactions to be conducted seamlessly. The entire online payment system is made possible by the combination of a payment gateway, processor, and account. More on these aspects below:

Payment gateway

The payment gateway serves as the bridge between credit card companies and payment processors. Essentially, this element takes care of the heavy lifting of the payment process and ensures the transfer of crucial cardholder information is carried out quickly and securely.

Payment processors

The payment processor is a third-party element in your online payment system. This element will manage the card transactions process by transmitting customers' card information to their banks and yours. The payment will proceed if this element determines that the customers have adequate funds in their accounts.

Payment accounts

The payment account is similar to any other banking account, except that it is tailor-made for business use, such as accepting credit or debit card payments. A payment/merchant account is crucial for your business, and registering one is recommended. Otherwise, you will not be able to process these types of payments.

How to accept online payments

There are multiple ways to accept online payments. Some do not require you to have a website or accept these transactions via prominent providers such as PayPal, while some may even allow you to process transactions without needing a payment or merchant account.

How to accept online payments without a website

Having a website dedicated to online payments may not be everyone's cup of tea as businesses must apply for an SSL certificate, a standard security measure related to online payment security.

You could use online payment form hosts that support local and international payments. For starters, there are myPOS and PayRequest. You may also accept payments from Telegram through its payment mod, or direct bank payments such as Direct Debit and Instant Bank Pay.

How to accept payments online without PayPal

Aside from fintech giant PayPal, there are alternatives you can use to facilitate online payments. Popular options are Stripe, Skrill, Square, Venmo, Payoneer, Shopify Payments, QuickBooks Payments, and GoCardless. However, it all comes down to your budget and whether PayPal or its alternatives would work with your finances.

How to accept payments online without a merchant account

If you do not have a payment or merchant account, you may have to use payment services such as the above or modern website builders such as Squarespace, Kajabi, and Shopify, which already have integration with payment service providers built in.

What is the best way to accept payments online?

The best way to accept payments online is to first accept credit and debit cards. This is essential as most, if not all, people worldwide use this method for transactions, whether online or offline.

Second, add a payment gateway to your website. Assuming you are using one, it works as a bridge to connect your site to Visa, Mastercard, and American Express, among others.

Last but not least is integrating payment processors. There are multiple types and providers, but you may resort to electronic fund transfers as this would work similarly to paper checks but online. This means it will seamlessly deposit money from your customers' bank accounts to yours as long as they fill in the banking details on your payment page or form. You may also consider integrating mobile wallet payments as user numbers have increased tremendously worldwide. You may already have heard of some platforms, such as Apple Pay, Samsung Pay, and Google Pay.

How much does it cost to set up an online payment system?

To develop your online payment solution, you might spend between $300,000 and $400,000 for a payment gateway. You should also note that there are other fees, such as licensing, monthly subscriptions, authorization, early termination, and address verification. But most of these come from payment processors.

What is the cheapest way to accept payments online?

Instead of creating your online payment solution, you may resort to providers such as PayPal, Square, Amazon Payments, or any service mentioned previously. Fees vary between these providers.

Additionally, you may also approach your bank. Most banks in the United States provide merchant-specific services, and with instant fund availability for person-to-person payments of business accounts, they may also not charge any fees.

Another alternative is automated clearing house (ACH) transfers, often considered the most affordable. ACH payments offer significantly lower transaction fees than their credit or debit counterparts, albeit, on its own, ACH is not a credit card transaction. This method also tends to be slower as instant approval or denial of card payment takes longer to process. Customers must also enter their bank account and routing numbers, which is not ideal for online businesses featuring a cart function.

Other things to consider when accepting online payments

Before accepting online payments, you must determine how you will process them. If you decide to accept credit card payments, you may want to consider the processing fees and, most importantly, whether a provider offers fraud protection and security, processes multiple payment methods, and has good customer support, which could prove valuable if serious technical difficulties arise.

Payment Security

When it comes to using third-party software in your online payments, aside from considering whether it is cost-effective, you must consider how secure it is. A secure hosting platform will protect users' crucial data and financial information from tampering or theft. This is where the SSL certificate comes in handy, as it encrypts your hosting data.

You may also try to limit online fraud by adding another layer of security by requiring customers to submit to a buyer identification verification process. Otherwise, high fraud rates could prompt credit card companies to revoke your rights to process online payments, which would seriously hurt the reputation of your business.

Protecting Customer Payment Data

As mentioned previously, there are standard security measures in online payments, such as an SSL certificate or complying with privacy and data security standards. Below are the best practices you may want to apply to ensure secure online payments:

• Encrypt data

• Use payment tokenization

• Create strong passwords

• Request the CVV for card-not-present transactions validation

• Use strong customer authentication

• Manage PCI compliance

• Continuously monitor any frauds in your payment gateway