Originating in China, the pug -- a small, cuddly, wrinkly dog -- dates back to 400 BC. Dutch traders brought pugs to Holland in the 1500s and one of the rascals is credited with saving the life of William of Orange. In 1996, Canadian Kristina Reid brought the breed to the Web with a site offering handcrafted pug paraphernalia "for the discriminating pug connoisseur."
Ms. Reid, 61, is a dog lover with three pugs of her own, and she's also an artist turned small-business entrepreneur. She created her own website (http://www.solnapugs.com) and sells pug cards, mouse pads, fridge magnets and other items to an international audience -- all shipped from her home office in Ennismore, Ont.
The Web has allowed Ms. Reid to market her wares to the four corners of the globe, but the key to expanding her small business is that she can offer customers anywhere in the world an easy way to pay.
While Ms. Reid sells goods on-line, she does not have a regular credit card merchant account. Instead, she takes orders on-line using any major credit card through a third-party credit processing company, Delaware-based CCNow Inc. Because of the size of her business, and the costs and red tape involved with setting up a merchant account, Ms. Reid did not even think of directly approaching the major credit card companies to see whether she qualified for one.
Kristina Reid, owner and operator of Pug Paraphernalia, an on-line company that sells items with Reid's Pug art rendering on them, poses with Simon, in her home in Ennismore, Ont. (Deborah Baic/The Globe and Mail)
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"They'd laugh me out of the bank. I'm not big enough and they'd require some horrendous amount of money up front," she said.
She is right. Credit card companies are concerned about on-line fraud -- both by criminals posing as consumers and charlatans posing as merchants -- so they make it difficult and costly for small and medium enterprises to obtain merchant accounts.
To sell on-line, many SMEs have taken the same route as Ms. Reid and turned to the third-party credit card processing companies that are springing up to cater to small on-line merchants. It's not a cheap option -- these companies generally charge setup and monthly fees, take a bite out of each transaction and hold a small percentage of each payment for several months. This "rolling reserve" replaces the standard merchant account security deposit. From it, the processing companies deduct monthly fees and any service charges for charge-backs (such as when customers dispute credit card charges and refuse to make payments).
However, unlike the major credit card companies, third-party transaction companies do not require hefty security deposits up front, so they're an affordable option for small businesses.
PayPal (http://www.paypal.com) is one of the most popular credit card processing companies. For a percentage of each transaction, it enables individuals or businesses to receive on-line payments.
Founded in 1998 and located in San Jose, Calif., PayPal was acquired by eBay Inc. in October, 2002. It now has roughly 78 million account members worldwide and is available in 56 countries, making it a popular choice for on-line auction payments as well as e-tail purchases. Unfortunately, as a result of this popularity, PayPal users are often the target of fraud artists who e-mail bogus security alerts hoping to entice users to hand over account and credit card information.
InternetSecure Inc. (http://www.internetsecure.com) is a Canadian payment company based in Oakville, Ont., that processes credit cards on-line and charges a range of set-up, monthly and per-transaction fees. Payment Services Interactive Gateway Corp. (http://www.psigate.com) based in Mississauga, and Beanstream Internet Commerce Inc. (http://www.beanstream.com) of Victoria have similar business models.
There is also a growing number of Canadian-based on-line payment processing companies that don't focus on credit card transactions. HyperWallet Systems Inc. (http://www.hyperwallet.com) of Vancouver lets consumers fill an electronic wallet and transfer funds upon receiving invoices from HyperWallet merchants, charging a small fee for each transaction.
Certapay (http://www.certapay.com) is similar to PayPal in that it's based on e-mail addresses, but rather than being tied to a credit card it runs on the Interac system and allows direct Internet money transfers between bank accounts for a fee.
UseMyBank Services Inc. (http://www.usemybank.com) is a debit-based payment system similar to Interac, which also charges a transaction fee.
Receiving payments on-line is becoming easier for small businesses, thanks to the growing number of services available, but there are still legal considerations. Merchants who use third-party software to process credit card information, for example, do not receive their customers' credit card numbers and are not responsible for the security of credit card information.
However, they are responsible for compliances under PIPEDA, Canada's Personal Information Protection and Electronic Documents Act. That means they have to ensure that any credit card processing company they use complies with the privacy provisions of the act, just as many credit card processing companies ensure that potential merchants comply with PIPEDA before signing them up.
That hasn't deterred Ms. Reid from shopping around on the Internet for an on-line payment system. Although CCNow is an American company, Ms. Reid said she has never had a privacy or security complaint from her customers. "The whole process is straightforward and secure."
And Ms. Reid particularly likes the fact that her service allows customers to choose to pay in U.S. or Canadian dollars -- and soon in euros -- truly making http://www.solnapugs.com an international business even though it operates out of her home.
Customers seem to appreciate the growing flexibility and variety of on-line payment options, too. Almost the same number of Canadian households are on-line today (73 per cent) as there were two years ago (72 per cent), according to TNS Canadian Facts' study of Canadian Internet usage, but e-commerce has increased.
TNS says its research found that 34 per cent of Canadians who use the Internet have made on-line purchases so far this year, compared to 29 per cent for the same period in 2004. In dollar terms, Canadian on-line sales jumped by 49.7 per cent last year to $28.3-billion, according to Statistics Canada.
Special to the Globe and Mail
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