It’s always a good thing to know that you have choices!  With that said, choosing the best online payment processing solution for your website can be a complicated decision to make.  Let’s take a look at two of the most popular options—Authorize.net and PayPal.

The 30 Second Version…

Using Authorize.net as a payment gateway will make your site look more professional and it scales really nicely with even the largest e-commerce shopping cart deployments.  PayPal is generally more complex to integrate and use, but it does offer a baseline solution to those just offering one or two products for sale on their website.

But There’s More To The Story!

First of all, we need to discuss exactly how both of these systems work.  Authorize.net, a payment gateway, provides the integral link between your website, your customer’s credit card, and your merchant bank account.  You’ll still need to have a traditional merchant account to use it—it’s just what enables your traditional merchant account to work with your website.

On the other hand, PayPal is a third party payment processor.  No merchant account is required on your behalf—they accept just accept payments directly from your customer, take their percentage and allow you to withdraw the remaining funds from your PayPal account at your convenience.

Side-By-Side Benefits & Disadvantages:

Authorize.net

Payment gateway that connects your website’s e-commerce software to your credit card merchant account.

Fees:

Per quote.  Using a payment gateway and a merchant account will involve both transactional fees and monthly fees.

Benefits:

• Offers fraud protection.
• Allows you to use the merchant bank of your choice (or your existing merchant account) and receive all of the benefits of doing so.
• Simpler & fewer steps for the customer to complete a transaction.
• Plug and play integration with most top line e-commerce software.
• Negotiable fee structure becomes more and more attractive for higher volume sellers.
• Many customers are more apt to trust merchants with their own merchant accounts (because of the requirements merchants are obliged to abide by).

Disadvantages:

• Certain financial requirements (such as having good credit) are a must for being approved for a merchant account.

PayPal

3^rd party processor collects payments on your behalf for a fee.

Fees:

There is no monthly fee to use PayPal, just a per transaction fee.  This amounts to $0.30 plus 1.9 to 2.9% of the transaction amount.

Benefits:

• Offers fraud protection to both buyers and sellers.
• Gives your customer a trusted name to process their payments—those familiar with the service can assume that PayPal will stand behind them in specified circumstances.
• There are very few restrictions on who is allowed to create an account and begin accepting payments.

Disadvantages:

• Processing a customer’s payment through PayPal adds an extra step to the checkout process—and the opportunity for the customer to click away from finishing the transaction.
• Extra steps are required to claim, transfer, and account for money that’s been paid to you.

In the end, we definitely recommend going the Authorize.net route whenever possible.  You’ll certainly benefit from the professional image that corresponds with its seamless integration into your website’s e-commerce platform!

Tags: authorize.net, E-Commerce, payment gateways, payment processing, paypal, shopping cart

This entry was posted on Thursday, September 24th, 2009 at 4:00 pm and is filed under E-Commerce. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.