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This article was researched in April 2004. Product information changes rapidly - please verify specific product facts before relying on the information below.

Why Accept Credit Cards Online?

As with any technology investment, it is important to start the process by defining specifically what you hope to gain and then validating your hopes against the available technologies. As it begins to seem that “everyone” is taking payments over the internet, it is tempting to just assume that it will work well for your organization too. Avoid this mindset, however, and think through whether accepting credit cards online is likely to make money for your organization and/or allow you to better serve your constituents.

Keep in mind that accepting donations online is considerably more expensive than receiving a check in the mail. All services charge transaction fees (anywhere from 3 – 8%) that are deducted off the top of any payment. Many services also charge ongoing fees (several hundred dollars a year is typical). If your organization has a limited, specific base of donors who are perfectly comfortable just writing out a check, accepting credit cards online may not be worth the money and effort for your organization.

On the other hand, if your organization targets a wide audience with the goal of receiving a large quantity of smaller donations, particularly younger and more tech-savvy audience, online fundraising could be very useful for your organization. To make online donations effective, you will have to create online-specific appeals, and carefully think through your fundraising strategy.

Signing up members or registering visitors for events online can also save your organization a considerable amount in staff time, as it decreases the number of phone calls and mail pieces your staff needs to handle. In addition, many organizations have found that offering online registration increases the number of registrants.

In general, taking payments through the internet is not an “if you build it they will come” situation. If you do not receive many checks, or registrants, or much interest in your shop items on your current website, slapping an online payment option will not address the problem. While this article is not about strategy, it is critical that you think through your strategy before assuming that accepting credit cards online will help your organization in the long run. See the “For More Information” section for help in thinking through your strategy.

Before we dive into the details, let's talk through some of the concepts involved in accepting payments online.

It all starts with a page on your website describing why you would like payment. This page would ask for donations (describing all the good work you do and how you use donors' money), offer a product to buy, or describe something specific for which the visitor can register. This page would have a “Donate Now”, “Buy Now”, or “Register Now” button to allow your visitors to take action. If there are multiple products or events on the page, there would be multiple buttons.

If you are selling products, you will need a shopping cart – a page which displays all the products the visitor has selected and allows them to either continue shopping or enter their payment information to complete the process. There is no need for a shopping cart for donations or simple registrations, like membership registration, but it is worth considering if visitors may be registering for multiple events at the same time.

In the next step, visitors enter their billing information, shipping information (if applicable), and any other information you need. In more complicated payment processes, the visitor may be taken to a second form which displays tax, shipping costs, and the like. When they click “Submit” to start the payment process, the backend payment process begins.

A communication process takes place to first verify that the funds are available on the credit card, and then charge the card. The money received is deposited into a specific account, called the Merchant Account (similar to an offline merchant account, but specifically approved for online transactions). The Merchant Account may be in your name, or it may be in the name of the payment vendor. The whole communication process is moderated by a service called the Payment Gateway. The Payment Gateway is in charge of the actual nuts and bolts of verifying and moving funds.

When the payment transaction is complete, additional things will happen. The visitor will be shown a confirmation page with a receipt, and sent a confirmation via email. If you are tracking inventory of products or the number of available seats at a conference, the numbers will be updated. At this point, a record of the transaction – who paid what – should be available for your reporting purposes.

This, in a nutshell, is an online payment process. Depending on your needs, you may not need to worry about most of it – you may not need a shopping cart, shipping costs, or inventory, and your payment vendor may take care of the entire backend process invisibly.

What You Should Ask a Payment Vendor

For most situations, the easiest and most successful route to talking payments online is to partner with a vendor that specializes in such things. Payment vendors come in a lot of different shapes and sizes, however. It is important to understand exactly what you are getting, as different vendors can offer quite different packages. Some of the shadier vendors may try to hide their own fees or the additional services you will need to buy to use them. As you investigate vendors, ask them the following questions:

• Do you handle my specific functional needs? Always a good question to start with. If you want to take online donations, you will want to check on tax-ready receipts, ability to setup recurring donations, tributes, and the like. For events, make sure they can track how many seats are available, and give you an attendance list. If you are selling items, check support of inventory, taxes, shipping costs, etc. All of these, of course, will depend on your specific needs.

• What are the transactional and ongoing fees? Transactional fees are deducted from each payment made on your site. Every vendor has some transactional fees but they vary considerably in amount, from about 3% to 8%. Some charge a flat fee (say $1) per transaction instead of a percentage. Many vendors also charge ongoing fees – a set amount that you pay each month or year ($15 - $40 is typical). Those who charge ongoing fees typically charge lower transactional fees. Trying to assess the actual cost to you can be quite difficult, as a vendor who is cheap when you only take a few donations can be much more expensive than another when you take a lot. We highly recommend estimating the number of payments you expect per year and the average size of the payments, and then calculating out what you would pay for each vendor based on the quoted transaction and ongoing fees.

• What are the setup fees? Many vendors have a setup fee – that is, a fee that you pay when signing up. This fee may cover customizing the product to your needs, or simply their own setup which is invisible to you. The fee may range from nothing to $1500, with most in the couple hundred dollar range.

• Do I need a merchant account? Can I use the online merchant account I have? Be sure to ask whether the vendor provides a merchant account, or whether you will be expected to have one in your name. Setting up your own online merchant account (generally through a bank, like Wells Fargo) has a number of benefits – your name will appear on your visitors' credit card statements, as opposed to the vendor's name. You will also receive payments directly into your bank account, as opposed to periodic checks. On the other hand, you will be responsible for dealing with any fraudulent charges (for most donation situations, this means simply responsively refunding money to anyone concerned about the charge). Smaller nonprofits, international organizations, or organizations without a good credit history may be charged higher rates, or may have difficulty getting a merchant account at all. Note that you cannot simply use the same merchant account you are using for offline credit cards – the account must be specifically approved for online and other “card not present” transactions.

• What will appear on my visitor's credit card statement? If you are not using your own merchant account, check what will appear for the charge on your visitor's credit card statement. Often it will be the name of the vendor, but some organizations have unusual arrangements to display something else (for instance, charges through Entango - described below- are displayed as “Nonprofit Trans”).

• How do I receive my money? How frequently? If you are not using your own merchant account, you will need to receive your money by way of the payment vendor. Most send checks once or twice a month.

• Do you support international payments? Other currencies? Because of international fraud issues, some vendors do not allow payments from outside of North America , or charge additional fees (sometime substantial) to do so. Only a few will accept international currencies – if this is a key requirement, make it one of the first questions you ask.

• Can the payment process forms be customized to match my site ? In most of the online payment methods described below, the forms in the payment process are not actually part of your website, but rather hosted by the payment vendor. However, many vendors provide customization services to make these forms look like they are part of your site. This allows your visitor to feel that they are paying on your site rather than leaving to go to another. Make sure to ask whether your navigation bar can be included.

• Can I ask my visitors questions specific to my organization? Some vendors allow you to ask questions in regard to donation allocation, demographics, preferences, or the like as part of the payment process.

• How does my visitor get a receipt? Make sure they get both an online and email receipt. Confirm that you can customize the text of the email.

• How do I know who has paid what? Look at the reports offered and ensure that they meet your needs. If you will need to upload the information into a fundraising or accounting system, verify that this can be done.

• Do I need a payment gateway? A payment gateway is the mechanism described in the “Online Payment Overview” section that facilitates communication with the banks. If you need your own payment gateway, you will need a programmer to integrate it - which would put you into the “Build your Own” category described below. Some of the sketchier payment vendors require you to have a payment gateway without making the implications clear. As a rule of thumb, unless you are familiar with payment gateways and have programming resources to deal with them, steer clear of vendors that require you to get your own.

• How do I know it is secure? Every credible payment vendor will be secure, but if you have your doubts as to credibility, it doesn't hurt to ask. To be secure, every vendor should have an SSL certificate and be able to describe to you how they either encrypt or discard credit card numbers.

• How do you use the names and emails you collect from my visitors? Vendors should have something in writing that confirms that they will not use your visitors' information in any way.

• How long have you been around? Make sure the company seems stable. As is the case with any other online vendor, you will have to go through the setup process all over again if they go out of business.

Types of Online Payment Vendors

As mentioned above, there are a plethora of different payment vendors who offer a number of different types of services. Below, we step through some of the major types of vendors, and describe some of the more prominent players.

Although we have tried to list most of the top players in each area, please note that this is not a comprehensive list of payment vendors.

Simple Donate/ Pay Now Button

 A number of vendors offer a straightforward and relatively inexpensive way to accept credit card payments. These services provide a “Donate Now” button (or for store items, a “Buy Now” button) for you to simply paste into the appropriate places on your site. When your site visitor clicks on the button, they are taken to another site to enter their credit card information. These services generally offer only very minimal functionality: just the ability to charge a credit card for a particular amount. There is no need for a merchant account with this type of service.

Benefits of this method:

• Requires little lead time or technical knowledge to setup (just the ability to paste a piece of HTML code into the right place on your site).
• Generally no setup fees and no monthly fees – you pay only when you receive a payment yourself.
• Low transaction fees – typically 3-4%.

Drawbacks of this method:

• The look and feel cannot be integrated with your site. The experience for your site visitor is more one where the visitor leaves your site to pay and then returns, rather than actually paying on your site.
• Does not include the more sophisticated functionality of other methods, such as recurring or tribute donations, or sales tax.
• The name of the vendor, as opposed to your nonprofit is name, appears on your donor's credit card statement.

Some vendors offering simple “Donate” or “Pay Now” buttons:

• Network for Good (www.networkforgood.org): Provides an excellent “Donate Now” functionality for a very reasonable price.
• PayPal (www.paypal.com): Provides both a “Donate Now” and a “Buy Now” button, as well as a useful shopping cart functionality. This service is an excellent value for the money, especially if you are selling a number of shop items, but it is particularly unintegrated. Not only is the payment process strongly PayPal branded, but the visitor is not returned to your site when the payment process is complete – rather, they are only presented a link to return.
• Other vendors: JustGive.org, ClickandPledge, MakeADonation.com, many more.

Specialty Payment Services

 Many vendors offer more sophisticated functionally specialized in particular ecommerce areas – such as donation handling, sales of shop items, member registration, or event signup. While these services also direct your visitor to their own site to take credit card information, many will customize their pages to your look and feel to make the transition invisible to your visitors.

These services are more expensive than those in the Simple Button option, often requiring a setup fee, a fixed monthly fee, and a percentage of the transactions. However, they provide functionality that would require thousands of dollars to build. Some of these services process payments through your merchant account, while others use their own merchant account.

Benefits of this method:

• Generally easy to setup (most of these services charge a setup fee and do the setup for you).
• Less upfront cost than the “Build Your Own” method.
• More functionality, integration, support, and reporting than “Simple Button” vendors.

Drawbacks of this method:

• Functionality is limited to that supplied by the vendor.
• Ability to match the look and feel to your site may be limited.
• May have the highest ongoing cost of any of the options.

Some vendors offering specialty payment services:

• Groundspring Donate Now (www.groundspring.org/services/donatenow.cfm): An excellent donation processor. They customize the payment pages to the look and feel of your site, can collect custom information in the payment process, handle recurring and tribute donations, and provide useful reports. They use their own merchant account. They charge minimal transaction fees with a fixed monthly fee, making them cheaper for those taking a lot of money.
• Entango (www.entango.com): Another excellent donation processor. They can handle basic registration and shop item needs as well, but with limited functionality. Similar to Donate Now, they customize the payment pages to the look and feel for your site,handle recurring and tribute donations, and provide useful reports. You can use your own merchant account or theirs. They charge higher transaction fees with no fixed monthly fee, making them cheaper for those taking in only a small amount of money.
• Yahoo Merchant (http://smallbusiness.yahoo.com/merchant/): Yahoo (the same one with the web directory) offers very powerful functionality for those selling fixed price items (such as memberships or shop items). It dominates the hosted ecommerce space, with surprisingly reasonable prices. While it does not have the donation support offered by Donate Now or Entango, it allows non-technical users to maintain a full catalog of products integrated into your site look and feel, with sophisticated handling of sales tax, inventory, and the like. You will need someone with a advanced knowledge of HTML site building, and ideally experience with Yahoo Merchant experience, to set it up. Requires your own merchant account.
• Acteva (www.acteva.com): An event registration vendor used by many nonprofits and companies. It is particularly good for handling large events with complicated registration needs. Can be integrated with your look and feel for a setup fee; after setup all fees are transaction based. They use their merchant account.
• Sporg (www.sporg.com): A solid event and membership registration vendor with good international support. Their reasonably priced package includes setting up a merchant account for you – so they take care of the legwork, but credit card charges are shown in your name and money is deposited directly into your bank account. Fees are primarily transaction based.
• Other vendors: Contribute.com (donations), CharityWeb (donations, events, and shopping cart), Donate.net (donations, events, and shopping cart), 123Signup (event and member registration), GiftTool (tools for membership organizations), many others.

Building Your Own

While building your own payment solution from component parts is not something to be casually taken on, it is not as infeasible as many nonprofits assume. If you have specific transaction, integration, or reporting needs that cannot be handled by the specialty vendors above, or have more than basic requirements in several payment arenas (for instance, if you need to process complex donations, event registrations and payments for shop items), it is worth considering building your own system.

Building your own payment solution involves putting existing component parts together, likely with a database and code. The key pieces you will need include:

• A shopping cart, if you want to allow visitors to purchase multiple items at the same time. There are dozens, if not hundreds, of pre-built shopping carts available for use, both open source and for a fee.
• Forms to allow the user to enter their credit card and other information. Shopping carts often include these.
• A secure server to prevent hackers from eavesdropping on transactions. Many hosting providers will provide secure environments at an additional charge.
• A payment gateway, to connect your server to a credit card processor who can validate card numbers and charge cards in real time. You will need to setup an account with a gateway, which often involves both monthly fees ($20 - $50/ month) and minor transactional fees. Some vendors offering payment gateways include Authorize.net, WorldPay, PayQuake, and more
• A merchant account to allow you to charge credit cards online, and to store your money
• Reports, to be able to determine who bought what on your site. These often come with shopping cart packages.

This is a method for which you will certainly need a programmer with experience building payment systems.

Benefits of this method:

• Complete control over the functionality, look and feel, and reporting.
• May have lower ongoing costs than other methods, particularly if you handle a high volume of transactions.

Drawbacks of this method:

• Substantial upfront cost ($4000 - $10,000+ depending on needs).
• Need to define how the application will be supported – will the person or company who built it be around for the long haul?
• More complexity in setup – need to define who will build, who will provide merchant account, and who will provide payment gateway.

Other Methods

The above list is from being a comprehensive overview of all possible payment vendors. In fact, it is not even a comprehensive list of different types of payment vendors. There are several other ways that you could go about accepting credit cards online:

• Online Mega-storefronts. There are several vendors, such as Kagi and 2Checkout, that provide the ability to sell your own products within the context of their (massive) store site. As you can link to these store pages from your own site, this model is akin to a tool like Yahoo Merchant. It is likely to be somewhat cheaper, but you will have only moderate control over the layout and look of your site.

• Sending Credit Card Numbers by Secure Email. For a minimalist version of the “Build it Yourself” method, it is possible to send the visitor's payment information via encrypted email. You would then manually charge the card after receiving the email. This needs to be done with care to ensure the security of your visitors' credit card number. You need a secure server, an email encryption tool, and a programmer who knows how to put it all together.

• All-in-one Packages. While they are not exactly priced for the “shoestring” organization, it is worth mentioning that most of the internet/ contact management integrated packages – such as GetActive, Convio, Kinteria, and many more – also support online credit card payments. While they are expensive (several thousand minimum to setup, and several thousand in yearly fees), they provide an integrated environment that can be very powerful for internet savvy organizations. These packages can track who is donating or buying and then support targeted email campaigns, online appeals, and more based on this information.

For More Information

Groundspring Internet Strategies (www.groundspring.org/learningcenter/series.cfm)

Groundspring's excellent series of articles about effectively marketing and fundraising online include several about online fundraising strategy.

Fundraising Approaches that Fly and the Tools that Fuel Them (www.nten.org/conferences-2004-ntc-fundraising)

PowerPoint overview of online fundraising techniques and tools presented at the 2004 NTEN conference.

Webmaster World Ecommerce Forum (http://www.webmasterworld.com/forum22/)

If you really want to understand the nuts and bolts of e-commerce, this forum has useful conversations about sophisticated ecommerce solutions and packages.