Online Payment Hampers Small Business
Online Payment Problem for South African SME’s
South African SME’s are hampered by lack of economical online payment facilities for their customers. Small enterprises in SA came across a big stumbling block when trying to trade online in South Africa; Normal credit card methods of online payment are simply too expensive for most small traders, taking around 8.5 percent in transaction fees. Many operate at low margins in order to be competitive.
Low cost online payment methods are not available, e.g. the well-known PayPal service cannot be integrated successfully with e-commerce application using local SA Rand as the base currency. Direct transfer by online banking is not a realistic payment method for cash strapped customers, most will need to pay using a credit card for all except small item purchases.
SA Problems with PayPal
PayPal is a highly desirable payment method for online traders. Many online business owners rely on PayPal for credit card processing (creditcardprocessing.net) as customers often favour using PayPal for online purchase. Buyers using PayPal don’t need to disclose their banking information to websites they may not be familiar with, or engage in online activity with their bank account when making payment for products bought on-line.
Unfortunately, the most suitable PayPal product for small businesses, PayPal Express is very limited for SOuth African online shoppers. Online stores offering PayPal Express have to use one of the available foreign currencies, e.g. US Dollar or Euros as a default price for their shop, instead of local currency.
Wildly fluctuating exchange rates make it near impossible to price products accurately. Store owners operating in a business sector where margins are already low find they are overpricing goods to make sure a profit is realised. It is impractical to update the prices across the full range of stock to closely follow this exchange rate variation.
Forex And Monetary Control
South Africa does not have a totally free currency exchange policy. Banking legislation requires banks to track and verify sources of deposits, and banks add extra fees to forex transactions. Trying to explain to an unsympathetic banker that a deposit of Euros or dollars originated from a customer resident in the country, and is a local transaction so exchange fees should not be charged, is an exercise in futility.
Once PayPal fees and bank exchange and other charges are deducted, the seller can find they are giving the goods away without making profit.
No Reason to Accept Card Purchases
At the end of the day, the small e-business owner may as well drop using the available card payment systems, and require all payments by EFT or direct bank deposit. This is exactly what I recently did with my online pc shop… After using offering PayPal for less than two months (Why We Discontinued PayPal Transactions)