The Business of Software Wiki

A part of Joel on Software, and a companion to the Business of Software discussion group.

Online Payment Processors

For a more complete list of payment processors see this page. Online payment processing is critical for microISVs and other software companies who use the Internet as their primary distribution channel.

Payment Processors from a microISV point of view fall in one of two categories:

  • "Pure" Payment Processors - Companies like PayPal and and ClickBank (to name 3 widely used in the online world) process the payment from your customer's credit card (or other funding source) to your bank account.
  • "Traditional" Payment Processors - These are most banks, and banking institutions (such as credit unions in the United States) who offer merchant accounts to their commercial customers for the purpose of collecting and settling credit card transactions and have for many years.

The key differentiator is whether you need a Merchant Account.
Pure Payment Processor advantages
- Much easier to get set up and processing.
raditional Payment Processor advantages - These are bank accounts - regulated, insured and (in the United States) subject to a wide range of public reporting requirements.
You might want to check one of these 2 articles for more details: Why Choose a 3rd Party ecommerce Provider for Online Software Sales?   What Are The Benefits Of OutSourcing?

A sub-group of payment processors offer additional services designed to allow the expansion of one's sales network by giving commissions on sales to those that join the sales network and sell vendor products. This is known as an "affiliate system" with those in the sales network called "affiliates." Examples of payment processors that have affiliate systems are ClickBank, Avangate (also has e-marketing services and a reseller management system), Plimus, Cleverbridge, and the entire Digital River network.

Affiliate commissions range widely, but 30% is fairly standard in many affiliate systems and is the default in RegNow (part of the Digital River network).