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What is the most cost effective way to process card payments online?

About six week or so ago I posted this question on the Linkedin Website:

I’m looking into setting up an online shop and although I’m well versed in the technologies etc. I’ve less experience (and not for some time) of the banking and payment service providers. Does one still need a payment service provider and a merchant account or can you trade online and take major credit cards just through a single provider and a standard bank account? What sort of fees should I be looking paying?

Followed by these two clarifications:

  • just to clarify – I understand that the expected transactions after the 1st years are about 1500 per month with an average value of £20 inc VAT.
  • The market is to be the UK only at first and then EU after that.

The Response

I had 23 responses giving a variety of advice. A lot of support for Paypal, some against. Some suggested Worldpay and others, Protx, etc. In fact there was no really conclusion. After looking at this carefully myself, I have come to the conclusion that PayPal is the easy option (and therefore not surprisingly not the most cost effective). A serious on-line business needs to take its overheads seriously. A couple of people pointed out Google – thank you for that.

My Conclusions

The criterion by which I have chosen, in the end two suppliers, are: cost, quality and brand (in that order). The two providers that I concluded offer the best deals are:

  • Google Checkout at 1.9% of the transaction.
  • HSBC Secure ePayments at 2.0% of transaction (set-up £200, monthly of £20). Rates negotiable over £50K per annum.

The two options represent a reliable cost effective option for an on-line business taking a larger number of smaller transactions.

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