I was asked by a friend from Singapore to setup an online e-commerce website.

I am new to e-commerce. Based on what I've read, in order to process credit card payment, I will need a merchant account with a bank. The initial setup fees is rather high and have to commit a large amount to transaction every month. This is no good for a newly start up business.

The other option is to use third Party Payment Service such as PayPal or WorldPay. This Sounds like an ideal solution but the problem is it would take a long time to process the payment and actually get the money. Further more Paypal has a really bad reputation nowadays and not to mention about the high transaction cost rate.

I am wondering if there's any other cost effective/free solution for such newly startup business?


There is no such thing as free credit card payments so let's start by ruling that out. (Actually it is possible to get free payment processing from Google Checkout if you are a non-profit and jump through a few hoops but that doesn't apply here and is the exception to the rule).

You're going to find that your options are limited and when you do the math that they all work out to be just about the same. I wrote an article that compares popular payment options and a true merchant account and Paypal workout to be about the same (Paypal is cheaper most of the time but not by much). You can compare quotes you get from merchant account providers and Paypal using the calculator included in the article.

Paypal is a great processor. They are fast and efficient and very reliable. The main reason why you hear bad things about them is they are not afraid to freeze an account if they see suspicious activity. Sure, there are some false positives, but most of the time they are able to reduce fraud which benefits everybody. Not to mention once you reach the size of a company like Paypal you are going to see complaints about them no matter what they do. There's no way to make millions of people happy without upsetting someone.

If you are getting quotes with high start up fees from merchant account providers then you need to keep shopping around. There are no hard costs related to setting up an account so if a provider says they have one then tell them, "no thank you". There a lot of merchant account providers out there so if you shop around you will eventually find a good deal. You can compare providers using this rate comparison calculator.

Disclaimer: I wrote the article and calculators

  • Thanks John. PayPal charged 3.4% + SGD0.50 per transaction for monthly sales SGD0 ~ SGD5, 000. Google Checkout would charge 2.9% + $0.30 per transaction for monthly sales under $3,000. Not sure if Google Checkout trade with SGD though. Instead going through all the trouble setting up the website with the appropriate cart system and purchasing a SSL and hook up with the bank/merchant account or signing up with Paypal or Google Checkout. wouldn't be better if I just go with an all-in-one hosted solution such as shopify.com or solidshops.com?
    – Jeno
    Jul 31 '11 at 5:42
  • That's a decision every company needs to make. Offloading a lot of the work to companies like Shopify can make your life a lot easier by handling a large portion of the technology needed to run an ecommerce site securely. Usually this comes at the cost of limited control/customization and/or higher fees. Basically a cost/benefit analysis should be done to see what's the best choice for your specific situation. If you're new to ecommerce then Shopify would be a great way to get started. Then once you see how things work you can always "upgrade" to a custom solution.
    – John Conde
    Jul 31 '11 at 6:28
  • Yes, the interface / template is very limited in term of what I can customize. Some of the similar services even charged me on top of every transaction I made with their supported merchant. I guess the reason why I would go with such solution is not having to worried about getting a local merchant account (usually expensive to start with) and a hosting provider that support it.
    – Jeno
    Aug 2 '11 at 9:17

I was looking into something similar lately and found Fee Fighters. It appears to be a reverse auction type site for collecting bids from different payment processors. I haven't tried the site yet but will sign up in a month or so when the site is ready.

  • Still see no sign of them supporting Asian currency.
    – Jeno
    Aug 2 '11 at 9:18

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