Let’s say you’ve decided to start selling tea pots that have clever slogans on the side of them for all of the hipster tea drinkers out there, and you want to sell those tea pots on your website. You’ve got everything planned out – inventory, branding, the whole deal. During the process of building your online store you will, at some point, have to face a pretty important decision: how are you going to accept payments for products?

There are a few major options to consider. Obviously, the step where your visitors are deciding that they want to complete an order with you and purchase products from your store is important. You want that last step as simple as possible and you need those users to have a completely hassle-free experience. So, with that in mind, what are your options?

Option 1: PayPal Website Payments Standard

PayPal is by far the most popular money-transfer service on the Internet. It makes accepting payments downright easy and takes care of a lot of technical legwork. The standard service they offer allows for online merchants to calculate an order total on their end and then transfer the customer to PayPal so that they can complete their payment in a secure environment.

The pros are that this option is simple and easy. Customers have the option to pay using their credit card, but they also have the option of paying for their purchase using a PayPal account, which will provide them with greater consumer protection and also allows for them to pay for something directly from their bank account. Since PayPal is handling the process of gathering your customer’s credit card data, you don’t need to secure your site with an SSL certificate, which carries a yearly cost.

The downside to this option is that during the checkout process, customers will need to be transferred away from your site to enter their payment information on PayPal’s site, which will likely look entirely different from your site. The PayPal payment pages can be customized with your company’s logo, but that’s about it. I would also argue that PayPal’s payment pages are, surprisingly, not the best examples of a simple and easy user interface. So while your site may be a breeze to use, users may find some difficulty in getting through PayPal’s payment process, particularly if they aren’t overly familiar with how PayPal works.

With those strong points and difficulties in mind, PayPal’s Website Payments Standard is a great option to inexpensively test the water before moving to a more advanced solution like PayPal Website Payments Pro.

Option 2: Merchant Account & Gateway

Having a merchant account and using a gateway provider is one of the most popular options among higher end e-commerce shops, or shops that are processing a high volume of transactions on a monthly basis. This option will allow you to accept credit card payments directly on your website. Of course, with this ability comes the responsibility of having to ensure that the server is secure, which will include (in the very least) having to purchase an SSL certificate to encrypt the connection between the server that your site is hosted on, and the customer.

A “merchant account” through a member bank (a bank authorized by the card companies to provide merchant accounts) allows you to accept credit card transactions, and without this type of account, you would not be technically authorized to accept credit card payments by any of the popular credit card brands such as Visa or Mastercard. Typically, these merchant accounts are held through a bank, but different online providers will offer merchant accounts at varying rates. Once you have a merchant account, you will need to set up an account with a gateway provider. The gateway provider is the company that will actually process the payments and deposit the funds in your merchant account.

The process of selecting a merchant account and gateway provider can be arduous. Different providers will offer different levels of services at varying rates and, in my experience, will all have different ways of marketing their products using different terminology. Be careful and shop around before signing any contracts or making any decisions. With this option, you can expect to pay per transaction fees and fees that are based on the transaction amounts. (ex. A $0.25 fee per transaction, plus 2.5% of the transaction amount). Some companies will charge a monthly fee for using the service. Others may go further and charge additional fees for things like statements or batch orders.

Option 3: PayPal Website Payments Pro

Website Payments Pro is another service offered by PayPal. With this service, you can keep customers on your site to make payments. They enter their card data on a secure form on your site and that data is then sent, behind the scenes, to PayPal for processing. As with the merchant account/gateway option, your site will need to be sufficiently secure to accept credit card numbers, which means purchasing an SSL certificate to encrypt the customer’s session with your site.

Website Payments Pro is a bit more expensive than Website Payments Standard, carrying a monthly fee of $35.00, a $0.30 fee per transaction, plus a fee that is based on the total transaction amount, anywhere from 1.9% to 2.9%. In addition to allowing you to accept payments directly on your website, you will also have access to a “Virtual Terminal”, which will allow you to manually key in card numbers if you receive orders by phone or fax.

So how does PayPal Website Payments Pro differ from having a merchant account and using a gateway? For one, it may be significantly cheaper depending on volume. Secondly, Website Payments Pro acts as a merchant account and a gateway provider in a single service. PayPal not only processes the transactions (acting as a gateway), but stores your funds for you until you wish to withdraw them to a bank account of your choosing.

Choosing an Option

There are a number of different factors to consider when choosing a service to handle customer payments. The most viable (and economical) option for small businesses with low volume is likely PayPal Website Payments Standard, which makes integration easy and shifts the risk of accepting credit card numbers to a third party. Deciding to go with a merchant account or even PayPal Website Payments Pro puts that risk back in your lap, creating a situation where you need to ensure that those payments are being made in the most secure fashion possible. This can carry additional costs in terms of implementing security-related technical requirements, but can also carry some additional administrative headaches as well, particularly with strict new guidelines and requirements set out by the credit card industry and the PCI DSS (Payment Card Industry Data Security Standard), which all merchants who directly accept cardholder data must comply with.

As a summary, here is a chart with what each option discussed here offers:

	PayPal Website Payments Standard	PayPal Website Payments Pro	Gateway & Merchant Account
Users complete payment on your website
SSL Certificate Not Needed
PCI Compliance Not Needed
All-in-one service
Virtual Terminal Capability			Depends on Service
Contracts Not Needed
Price	2.9% + $0.30 per transaction	$35.00/month and 1.9%-2.9% + $0.30 per transaction	Depends on Service

No matter what service you choose, be sure to consider your options carefully and discuss your goals with your website developer, who should be able to help you make an informed decision about what payment options are right for your needs.

Read more about the new security requirements and guidelines mentioned above, which are part of the Payment Card Industry Data Security Standard (PCI DSS).