Setting up an online shop

Dealing with online payments

A major part in the online sale process belongs to payments, which can include credit or debit cards, bank transfers, prepaid cards or some other means.

A good payment provider will offer you a secure payment environment and a single interface to the payment methods you decide to use and will enable you to operate across borders.

When you enter new markets, it's important to look at the payment methods that are accepted locally. To the best of your ability, try not to discriminate based on location and provide payment options that customers are the most used to.

Choosing the right payment methods for your business

The key factors that determine the use of specific payment methods are:

• national preferences
• the payment methods that are most common in your market
• the payment types that best fit your business
• the value of the transaction: there are different rules governing what information needs to be provided depending on how much the user is spending

Make sure that the payment methods you choose are straightforward and intuitive to use and allow your customers to complete the transaction quickly. Online payment accounts, prepaid cards, online bank transfer, real-time bank transfers based on online banking or even cash-based e-vouchers are also alternative ways to pay.

There are multiple advantages to offering alternative payments:

• they provide simpler vehicles for completing the transaction and a higher user perception of security and/or anonymity
• they are a good means to gain traction in territories where alternative payment use is widespread due to a limited choice of domestic payment methods
• they can bring additional sales from new customers who either do not own a bank card or do not shop online because of security fears

Selecting your payment service provider

There are 3 main payment services you can choose from. Your choice will depend on what type of customers you have, what you are selling and in which territories:

• Traditional ‘acquiring' involves acquiring banks (also called merchant banks) contracting with you to enable you to accept credit or debit card payments. Often, they use the services of payment processors. These are third parties that do the payments processing for them while guaranteeing payment settlement and managing risk and fraud
• Alternative payment providers can offer innovative payment solutions, which include virtual cards based on cash that allow your customers not to disclose their identity or voucher services
• Online payment service providers act as a one-stop shop for acceptance and management both of traditional and alternative payment methods in many countries around the world. Typically, they use a SaaS (software-as-a-service) model and constitute a single payment gateway to multiple payment methods for the merchants who are their clients. They provide online payments pages that are highly customisable.

Using a single payment service provider

The payment service provider (PSP) manages the flow of information (such as transaction information) and provides you with a payment gateway to one or more online payment methods for which they act as an intermediary.

If you want to operate cross-border, you will need a PSP that unlocks payment methods in other countries and supports the currency in which you want to accept payments.

If you are a small trader, it is best to use a single PSP if you operate across different countries with divergent national preferences. The PSPs have expertise on national markets and established relationships with most of Europe's traditional and alternative online payment systems.

PSPs are governed by a specific set of rules and regulations. They must be registered in their home member state and the European Banking Authority (EBA). You can verify the validity of the PSP you choose to work with in the national registries.

Hosted or integrated?

As with general website setup, when you set up the payment gateway for your web shop you can either opt for a page hosted by your PSP or for an integrated payment solution:

• In the hosted payment solution, the PSP will ensure that the right level of security is in place. This allows you to save time, as you will not have to deal with security updates and compliance issues
• The alternative is an integrated payment gateway or application programme interface (API), which gives you more flexibility and control over your payments page. However, you will need some IT skills and you will have to manage security updates and compliance

Using a PSP also guarantees that security measures are in place to ensure safe and secure payments, such as strong customer authentication for payments, as well as measures to prevent payment fraud.

All PSPs charge on a fee-per-transaction basis. The transaction cost can be a flat charge per transaction and/or a percentage of the value of the transaction volume. You cannot charge this transaction fee to your customer without making it explicit during the payment process or make it higher than what it costs for you.

Respecting your customers' rights

A payment agreement constitutes a contract with a customer. Make sure you comply with the following obligations throughout this process:

• inform your customer at the beginning of the ordering process about which means of payment are accepted
• disclose the total cost of the product or service, as well as any extra fees for payment
• your customer can refuse to pay charges or other costs that are not properly mentioned before the order is placed
• explicitly ask for the consent of your customer to allow extra payment over and above the agreed price, note that pre-ticked boxes for charging extra services are prohibited by law
• do not charge your customer more than what it costs you to offer a given means of payment
• you are not allowed to charge the customer for requesting basic information on their payment transactions

Once the payment has been confirmed by the customer, make sure to send an e-mail to show that the transaction has been completed. Depending on the type of e-commerce payment and contract, you might need to provide different types of information.

Visit our section on Customers to read more about your customers' rights.

Complying with tax and VAT obligations

Selling online also means dealing with fiscal and value-added tax (VAT) obligations. Different rules apply depending to whom, where and which good you are selling or service you are supplying. Make sure you are applying the rules of the country where VAT is due, as well as the correct rate (standard, reduced, or even zero rates may apply).

Note that you also need to check whether you should be paying excise duties. Find out more about the tax obligations related to your online business.