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Guide to Online Payment Acceptance - Part 4
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Digital Cash & Micropayments
My recommendation is to stay away from these services for now: they still haven't really caught on. However we have put them in this guide due to the enormous amount of hype that surrounds them, and because in time they'll become a viable method of accepting payment online.
The concept of Digital Cash systems is that a person has a digital wallet, which they fill up using their credit card. They can then spend that money either via a digital wallet program that runs on their computer, or via a special PIN number. The future of these systems is in micro-transactions (Micropayments), where a user might be charged 5 or 10 cents to read an article or access a Webpage. At the present time charging people a few pennies to view content is impractical, but hopefully Digital Cash will solve this problem within a few years. Another downside to Digital Cash is that only a small number of merchants actually accept these payments - so digital cash acceptance is not even close to being as common as credit card acceptance.
At the moment, some of the biggest Digital Cash service companies are:
Micropayments have been around for quite some time, but they aren’t widely used by online merchants. This has caused several micropayment service companies to close up or halt further marketing of their services until the demand increases. As previously discussed, micropayments are particularly good for sites that offer online products (documents, music files, etc.) whose prices range from a few cents each, to a maximum of around $10. Micropayment solutions work in the same way as typical credit card acceptance, except that the amount taken per transaction is much smaller, so the merchant keeps a larger portion of the profit.
If a Micropayment service is what your company needs, check out these sites:
- eTelCharge - Adds charges to your phone bill
- iPin - Puts charges on your ISP (Internet Service Provider) bill
- microCreditCard
- Cardis - Click on "The Ultimus Solution" once you reach their homepage
Escrow Services
Escrow services act as middleman for a payment transaction. They ensure that the buyer is happy with the product they've received, and that the seller gets paid accordingly. This solution provides the security and trust that are essential for high ticket items (e.g. domain names, company buy-outs, etc.) and many auction Websites.
Here's a step-by-step explanation of how Escrow services work:
Step 1: The Buyer pays the Escrow service for the order with a credit card, money order, check (business, personal, certified), wire transfer, or direct deposit.
Step 2: Once the Escrow service receives the Buyer's payment, they notify the Seller to go ahead and ship the merchandise to the Buyer.
Step 3: After the Buyer receives the merchandise, he/she then let the Escrow service know that they are happy with the purchase.
Step 4: The Escrow service then pays the Seller by either check or wire transfer into their bank account.
If the Buyer is not satisfied with the merchandise, he/she can notify the Escrow service that the item(s) has been returned to the Seller. Once the Seller receives the returned merchandise, they are given a period of time (usually about a week) to inspect the returned item(s). The inspection period allows the Seller time to ensure the merchandise was returned in the same condition in which it was shipped. After this inspection, the Escrow service will refund the Buyer the amount paid, less the Escrow service fee (usually around $5 or so).
If you’re interested in Escrow services, check out these companies:
More Information
The search to find the Merchant Account Provider that best suits your business needs can be a long and tedious process. One service that practically does the searching for you is MerchantSeek, who provide a free service that allows you to search for a Merchant Account Provider that suits your needs and budget. The site also contains some very detailed and informative content on payment acceptance, including a lot of what we've discussed through this series, and more. The service can be a time- and money-saver, and is certainly worth a look.
Special thanks to Robb Hanisee of ECHO Inc. for his assistance in writing this guide.