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A Guide to ePayments

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The UK is currently Europe's largest e-commerce economy with two-thirds of consumers having shopped online.

With so many customers choosing to buy products over the web it is prudent to enable your business to process electronic payments.

With electronic payments you can take payments with a credit or debit card face-to-face or you can implement the facility to carry out transactions online. Many people actually now expect this type of facility to be present on a website as a matter of course.

All in all, it's a much quicker service but you'll need to make further arrangements apart from those already in place for your traditional business banking.

To get set up, you need an acquiring bank, one that offers both credit and debit card processing.

The bank gets the money from the customer and then deposits it in your account. If you want a bank to do this for you then you'll need to apply for a merchant service or, if you want to process transactions over the web, then you have to get an internet merchant account.

Currently businesses can open a merchant account with the following acquiring banks to receive electronic payments: Alliance and Leicester, American Express, Bank of Scotland, Barclaycard Merchant Services, Diners Club, HSBC, Lloyds TSB Cardnet, NatWest/Royal Bank of Scotland Streamline and Ulster Bank.

However, bear in mind that these banks have stringent requirements and it's possible that even the bank you use for your business current account might refuse you. They will want to see your business plan, details of cash flow, your website address, descriptions of your service and your estimated average online transaction value and turnover. They may also do a credit check.

Obtaining an internet merchant account from an acquiring bank is quicker and easier if you already have 'face-to-face' card-processing capabilities established with the bank. If this is the case then you just need to ask your bank for an additional internet merchant account ID for use with internet transactions. This process is normally quick, especially if the risk to your business does not change.

This course of action is best suited to a business which expects to have a fairly high number of online transactions, most of which will be simple and low risk; you will probably want flexibility in operating your business and your cash flow is critically important.

If you don't meet the requirements for a merchant account or it's not cost-effective for your business, you can consider using a payment service provider (PSP). These companies obtain payment from your customers' credit and debit cards on your behalf and forward the money to you.

They are an alternative for businesses who have a smaller turnover from card transactions or who can't get a merchant account with an acquiring bank. They also suit firms which have not been trading long and cannot provide a well-documented operations history.

Your choice of PSP will depend on its cost. WorldPay (part of Royal Bank of Scotland) and PayPal (owned by eBay) are the two best known. They are slightly different in that with WorldPay the customer gets a fully integrated solution consisting of a transaction system to deal with the card details and an internet merchant account, whereas PayPal operates more on a transaction-by-transaction basis.

WorldPay charges for the initial set-up of a merchant account, with a further monthly fee and a charge on each transaction that varies according to the method of payment.

PayPal is more straightforward. It does not need any set-up fees, only a fee per transaction that depends on volume.

These are only two of many companies who offer the service - so it's worth shopping around for the best deal.

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