In a typical online purchase your customer will enter their credit card information into a form, and each third party processor has their own particular form (known as a gateway). The third party processor contacts the bank that issued the customer's credit card and the issuing bank approves or declines the transaction based on the information entered into the form. The processor routes the result back to the customers computer screen either as a "purchase declined" message or by passing your customer onto the web page containing your sales fulfillment information.

If the transaction was successful, the customer’s credit card will be billed for the selling price of your niche product or service. This service is not free and you will be charged a set fee for each transaction. The most common third party payment processors are:

1) PayPal (www.paypal.com)

PayPal is owned by eBay the world’s biggest online auction and can be used by customers living in the developed world. Opening a PayPal account id free, but you will need to verify your bank and contact details before being able to use it for accepting payments at your website. There is a fee charged for each transaction and this is automatically deducted from the selling price charged to the customer.

You can link your PayPal account to your bank account which makes it a simple task to transfer the money made from your sales into your account. Your normal banking transaction fees will be charged on this service.

Be careful of using an un-encrypted PayPal payment link on your website as it is a simple task for link highjackers to change the details to their own so they get the money for every sale you make...

PayPal can be easily incorporated into a shopping cart system (i.e. you can sell multiple products at different prices all in one transaction).

2) 2CheckOut (www.2checkout.com)

2CheckOut is a very popular third party payment processor and although there is a small setup fee, they don't charge a monthly fee for their services; they do charge a small fee for each transaction processed. As with PayPal, you can use 2CheckOut with a shopping cart system.

One advantage of using 2CheckOut is you can accept credit cards payments from customers living virtually anywhere. The will transfer money directly into any US or Canadian bank and send a monthly check or Bank Wire to non-US bank account holders.

3) ClickBank (www.clickbank.com)

ClickBank is another similar third party payment processor who have restricted their service to suppliers of downloadable products or internet services. For example, e-books, one time membership fees, software programs etc. To open a ClickBank account there is a small one time setup fee, no monthly fee and you are charged a small fee on every transaction processed on your behalf. You will be sent a check twice a month for all the sales you make during that period.

One major benefit of Using ClickBank for your niche product is you can set up your affiliate program through them and they will automatically pay your affiliates for every sale made on your behalf.

One big disadvantage of using ClickBank is that there is you can't incorporate their payment gateway into a shopping cart system.

4) Digibuy (www.digibuy.com)

Like ClickBank, Digibuy can only be used if you sell digital products or services that can be downloaded, the major advantage of using Digibuy is that you can use a shopping cart with their payment gateway (i.e. you can sell multiple products).

Unfortunately they don't include an affiliate payment system like ClickBank.

Your choice of third party payment processor is going to depend on how many products you sell and whether you intend to run an affiliate program. One extra consideration is some customers will be unwilling to use their credit card on the internet. For these customers you need to decide whether it's worthwhile accepting alternate forms of payment... Some third party payment processors, for example Digibuy, allow you to accept alternate forms of payment through them as default.