5 Top Options for Online Payment Systems

5 min. read
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Things are changing in the online payment industry, and changing fast. The competition for a bigger slice of the market is encouraging start-ups to join the fray and challenge the corporate giants on their own turf. Will the Davids of online payment service beat the Goliaths through sheer flexibility and willingness to take a cut in commissions? It's too early to tell, but there are cracks at the seams, it seems.

Here 5 of the more interesting online payment systems around. Some of them are little guys that are getting noticed because, well, everybody roots for the underdog. We'll sit back and see what happens. Then we'll talk again after the dust settles.

1. PayPal

Of course we have PayPal, the eldest and largest giant of all. Once nothing more than the lowly subsidiary of the auction site eBay, PayPal has long since moved out of the shadow of its parent company to become the most recognized online payment system in the world. According to SearchEngineJournal.com, PayPal handles more than 8 million transactions a day. It's used in about 15,000 financial institutions, compatible with 26 different currencies, and…do we really have to be belabor the point?

PayPal is big, and that could be the problem.

PayPal got its start because it figured out how to transfer funds securely over the Internet. Nobody else could do that back in the day except big banks, and this allowed the company to get a foothold in the industry. It's also the only online payment system that allows users to link to their bank accounts instead of credit cards, which meant saving on fees to credit card issuers with each payment.

Like any big company, however, change slowly sets in. PayPal tries keep its dominance in the market intact by going mobile, but progress has been slow. Beyond that, users also have the transaction fees (beginning at 2.9% + $0.30 per transaction and going down as volume increase) to contend with. These are really taking a bite out of retailers' profit margins. Of course, credit cards typically charge more per transaction, and setting up for a PayPal account is infinitely easier, but credit cards aren't the only alternatives to PayPal.

Is PayPal going to be felled by a stone between the eyes anytime soon? Highly doubtful. Its grip is still pretty solid, but the footing… well, let's just say that this particular giant is standing on some shifting sands. If PayPal wants to stay ahead of the competition, it'll need to continue innovating.

2. Authorize.Net

Being a couple of years older than PayPal and a favorite for high-volume merchants and web-designers, it's a bit of a puzzle that Authorize.net didn't take more the e-commerce market initially. The fees were quite low (at one time all it would cost was a $99 setup fee, $20/month membership fee, and $0.10/transaction fee), and it's easy to integrate into online stores, especially those from Magento and Volusion. Now the fees are the same as PayPal at 2.9% + $0.30 per transaction, plus a $45 setup fee and a monthly $25.

Apparently, Authorize.net is not so great at customer service. Some merchants complain about the hidden charges with no explanations, such as “Returned Payment Fees,” and Authorize.net is known for holding back money for no reason. There's also an annual report fee they charge each account for tax purposes. Say what you will about its foibles, but PayPal is pretty straightforward in comparison, and it has excellent customer service.

It is hard to say whether these allegations are wholly true or just the rants of disgruntled retailers who didn't bother to read the fine print. The fact is, Authorize.net doesn't have as big a market as it should considering its age and size. Still, it moves more than $88 billion transactions a year, and is used by 375,000 merchants worldwide, which is why it's on this list.

3. Intuit GoPayment

The biggest advantage of Intuit GoPayment is its integration with Quickbooks and TurboTax, a major consideration for US-based merchants. These integrations make accounting easier and help to avoid getting in trouble with Uncle Sam. The costs of using the service are pretty reasonable. Merchants can choose the per-transaction plan with a swipe rate of 2.40% + $0.25 per transaction, or pay $19.95 a month with a wipe rate of 1.75% + $0.25 per transaction.

However, GoPayment is primarily a mobile payment solution, and even there it's not compatible with Windows and Blackberry devices. It does process online payments for web stores from compatible e-commerce store providers, but these are limited. If you are an independent, you may not be able to integrate it into your store. In addition, you need to open a merchant account through Intuit to use it, which is a big con.

So why is GoPayment here, exactly? Did we mention it integrates with QuickBooks?

4. Google Wallet

Introduced about 3 years ago, Google Wallet is another online payment solution that should have done really well but never really took off. However, being Google, we thought we should give it a glance. Online payments are actually easy with Google Wallet and the fees aren't bad (although a little confusing as it is 5% for purchases $9.49 and below, and 1.9% for $9.50 above plus $0.30 per transaction). Using Google Wallet is easy if you're making mobile payments, although Apple Pay is said to be even easier. However, few online merchants actually offer it as an option, so…

It's pretty much the same for Amazon Payments.

5. Dwolla

Now here is a relative newcomer that a lot of people haven't heard of yet, but one that's performing quite well. Founded in 2008, Dwolla offers web-apps and APIs for businesses to make bank transfers. It's flagship product, access API, provides a highly automated, customizable, and white-label experience for platforms to embed inside their own applications for a monthly SaaS fee. Its low-tech solution, transfer, offers out-of-the-box solutions for easily collecting payments and making payouts for 0.5% per transaction ($0.01 min fee, $5 max fee). The catch? It's for US-based accounts only.

Still, it's really gaining ground in the US. Merchants can setup an account where buyers can send payments. Its main advantage is easy funds transfer. The only requirement is that both the payer and payee have Dwolla accounts (free to sign up). Another disadvantage to its use for online retail payments, Dwolla does not provide any guarantees except that the funds will be transferred to the assigned account. If you get scammed for paying for an empty box on eBay, for example, Dwolla will not get involved.

Dwolla is a cheap, simple, and straightforward way to transfer funds in the US. It definitely has a niche in the online payment service industry.

This is far from a comprehensive list, but we these online payment options are pretty representative where the market is as a whole. What online payment services do you accept in your online store? Let us know in the comments section, and we'll check them out.

About the author
Zack Rutherford

Zack Rutherford is a freelance copywriter. A combat sports enthusiast and poetic soul, he endeavors to create beauty through syntax, sentence structure, and the liberal use of hyperbole.

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  • Alejandro Ruiz 17th of February
    What happened to stripe?
  • Cameron Po 26th of February
    I think services like 2Checkout, Payza, Paysera, Skrill are also worth mentioning, as they provide more opportunities for international merchants. Using these systems you can both accept payments and transfer money online.
  • Greg Szablewski 15th of March
    Who do you recommend for a merchant acct and payment processor for so called 'high risk" industries?


  • Carol Gerioux 27th of August
    PayPal has split off on it;s own, purchasing other online payment systems. The hugh problem I encountered was 1)customer service is either in the Philippines or India. I funded my own PayPal account. As long as payments were local, vendors were paid. If it was an online company, payment was refused because off site customer service had no access to my account. Result: someone used a declined (by me) credit card with my name on it. No one seems to know who or what for. I closed my PayPal account. Someone continues to bill that account on a monthly basis. Again, no one knows who or why.
    Carol Gerioux
  • Marlon 17th of April
    This blog is great.