eCommerce Demystified – Part 6: Hosted Payment

You've decided that you want an online store on your own website, but you don't want to deal with a full PCI-DSS validation. Then perhaps an online store plus a hosted payment solution is what you need. In this part of our series, we'll look at what that takes.

Overview

The distinguishing characteristic of the Hosted Payment scenario is that your website is doing all of the processing except for collecting payment card information.

This approach offers feature flexibility similar to the full Merchant store, with the advantage that you don't need to do a full PCI-DSS validation.

In-House or Out-Sourced?

As with the Merchant Store scenario, the first decision you'll have to make is who's going to develop your store. The fact that you are using hosted payment rather than handling it yourself doesn't really affect the decision, since most eCommerce software packages have built-in support for both. Whether the implementation is complex depends more on the features you want rather than the payment approach.

So if you have web development expertise and your eCommerce requirements are simple, you could consider developing your own store. Otherwise you probably ought to out-source the job.

What Is Required?

The pieces of the total solution have changed somewhat:

• Web server
• eCommerce software
• Hosted Payment provider (new)
• Secure connection with SSL Certificate
• Payment Gateway
• Merchant Account (optional)
• Privacy & Security Policies

You'll still need eCommerce software to support your store and shopping cart. The difference is that it now hands off the payment processing to your hosted payment vendor rather than handling that function itself.

For an overview of popular eCommerce packages, see Part 5. All of the comments apply to this scenario as well.

You don't need a Payment Gateway, as your hosted payment provider performs that function. Similarly, because the payment card processing is happening on the hosted payment vendor's web server, they provide the SSL Certificate.

Whether you need a Merchant Account or not depends on the type of hosted payment plan you sign up for. Some plans use your Merchant Account, while others include this as part of the package.

Popular Hosted Payment Plans

Just as with Payment Gateways, there are many options for hosted payment. We can't possibly cover them all, but in this section we/ll look at a few of the best-known services.

Hosted Payment providers usually charge a per-transaction fee. Some also charge setup or monthly fees.

Hosted Payment Plans With Merchant Account

With these plans, the Hosted Payment provider is handling payment card verification directly, so you do not need a Merchant Account.

In addition to the basic Hosted Payment fees, these plans charge a percentage of the transaction (typical of Merchant Accounts).

	PayPal Website Payments Standard	Amazon Flexible Payments	Google Checkout
Setup	None	None	None
Monthly	None	None	None
Per Transaction	$ 0.30	$ 0.30	$ 0.30
Transaction fee—% of transaction, tiers based on volume:
0-3,000	2.9%	2.9%	2.9%
3,000-10,000	2.5%	2.9%	2.5%
>10,000	2.2%	2.9%	2.2%

Hosted Payment Plans That Use Your Merchant Account

In order to use these plans, you must have a separate Merchant Account. To calculate the total cost of payment card processing, add the charges below to the charges from your Merchant Account provider.

	PayPal PayFlow Link	Authorize.net SIM
Setup	$ 179.0	$ 99.00
Monthly	$ 19.95	$ 20.00
Per Transaction	$ 0.10	$ 0.10
Plus Merchant Account fees

Note: Authorize.net is one of the largest U.S. Payment Gateway providers and works with most banks and card processors. (Disclaimer: Wine Country Web Design is an Authorize.net reseller.)

Choosing a Hosted Payment Plan

So, how do you choose a plan? We discussed a lot of the considerations in Part 4. In this case, some of the factors to consider are:

• Existing Merchant Account. If you already have a Merchant Account, you'll have to decide whether you want to continue using it or not. For example, if you have Point-Of-Sale (POS) terminals you'll need to keep your Merchant Account to service those (or choose eCommerce software that has a POS capability). In that case, you might prefer a hosted payment service that uses your existing Merchant Account.
• Branding. Hosted Payment providers differ in how much you can customize your payment screens. For PayPal, Amazon and Google, it will probably be obvious to the customer who you are using. As we discussed in Part 4, this has advantages and disadvantages. Other services (for example, Authorize.net) allow you to customize the user interface almost any way that you want.
• Additional payment options. If you choose to use PayPal or Amazon, customers who have accounts with those service can take advantage of any already-stored payment information they might have. Depending on your customer base, this could be an advantage.
• Bank vs. non-bank. As we discussed in Part 4, providers like PayPal and Amazon are not banks, and the rules applying to banks do not apply to them. For example, PayPal limits the amount of your revenue that you can withdraw each month unless you go through a "verification" process. If this is a concern, then you might lean toward a plan the uses your own Merchant Account.
• Cost. Of course, cost is always a consideration. You should use your expected transaction volumes and other costs (for example, a Merchant Account) to estimate you annual cost.

Summary and Next Steps

That ends our brief overview of the Hosted Payment scenario. It offers most (if not all) of the features of the Merchant Store scenario, without the need to do a full PCI-DSS validation. This is a big advantage.

In Part 7, we'll take a look at our next scenario—Hosted Cart.

Note: When you're ready, I have the skills to help you implement your online store.

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