How to set up online payments for small businesses in South Africa

How do online payments work?  

Every online payment involves the customer, the merchant, and the financial institutions of these two parties. Without payment gateways, online stores would have to sell their wares, then send the customer an invoice, wait for an EFT or cash payment, and then send off the products or complete the service.   

But there’s an easier way. Many online businesses have opted to involve payment processing partners such as Stripe, PayPal, Netcash, and Payfast.   

These third-party payment facilitators make things easier for you as a business owner and have many other benefits. For example, they enable customers to pay how they want –through bank cards, Instant EFTs, or digital wallets. It’s also instant payment, which creates less risk for businesses and more convenience for customers. 

Why should you set up and accept online payments on a website? 

From boosting customer trust, expanding globally, increasing security, and seamless transactions, here are some of the benefits of accepting digital payments:  

• Transfers happen quickly: Transfers between shoppers and merchants can occur within seconds, allowing efficient transactions. Otherwise, using more manual methods like EFTs can take more than 24 hours to clear.  
• It’s convenient: With a third-party processing partner, shoppers are less likely to leave your store because of long-winded steps just to buy a product.  
• It’s secure: Ordering online is safe thanks to end-to-end encryption between your business and customers. Payment processors also add security features, such as chargeback protection, fraud protection, setting limits, and flagging activity on your account.    
• Customers are happier: You can offer your customers various ways to pay for their purchases, increasing customer satisfaction.  
• Reach a wider audience: By providing online transaction services, people across South Africa and even the globe can purchase from your store.  
• Low transaction costs: With traditional payment setups, you’ll have to hire and pay front-desk employees to complete a transaction. Whereas with digital payments, transactions occur in an automated environment with low transaction costs.   
• Increase profits with Buy-Now-Pay-Later payment options: Opting to provide this payment method to customers could increase cart sizes. More and more shoppers prefer to pay smaller amounts over a certain period rather than one big amount.    

How to take online payments: The best way to receive money 

A payment gateway is one of the most secure and versatile ways to accept money online. For small businesses in South Africa, it’s much easier and more convenient to use third-party software rather than hiring an outside developer to create one for your website.   

This will save you money and time, especially as your business grows and transactions pile up. Also, many reputable payment gateways in South Africa are connected to influential companies and brands. You can offer a solid range of payment methods to help expand your audience and make it easier for customers to send you money.  

Pro Tip: Check out the top payment gateways in South Africa. 

Here are some common payment methods:   

1) Enable credit and debit card payments: Paying with debit or credit cards is still one of the most popular ways for consumers to complete online purchases. So, as a small business, you should ensure that your customers have this payment method as an option. You can use payment providers such as Payfast or Netcash Pay Now to facilitate these payments.   

2) Receive money through mobile payments: As a small business owner who wants to thrive in the digital space, accepting money through mobile payments is an absolute must.   

Some excellent examples of apps that enable mobile payments in South Africa include SnapScan, Zapper, PayPal, and Nedbank PocketPOS.  

How to set up payments on a website 

Now it’s time to get into the main aim of this guide: How to set up online payments. Before we dive in, it’s important to note that you need to have eCommerce enabled on your website. You can use the Netcash eCommerce Payment Gateway to get you started if you haven’t got it integrated into your site yet.   

Ensure Payment Card Industry Data Security Standard (PCI DSS) compliance 

Your website and payment processing setup need to comply with PCI DSS guidelines to protect your customer’s financial and bank account data. All third-party payment processors (TPPPs) should be PCI DSS compliant, and it’s important to check this and other security measures before signing up. 

Perform test transactions 

Before accepting online payments, ensure that everything works smoothly by performing test transactions. This will reveal if your processing system is working effectively under various scenarios. These can include scenarios like refunds, declined transactions, and successful payments.  

Setting up online payments without a third-party system 

Setting up payments on a website without third-party involvement can be far more complex. To make things easier for you, have a look at some of the steps you can take:   

1) Choose the right payment service provider (PSP) and sign up: We cover this step in depth in the next section, but you want to choose one that aligns with your needs and goals.   

2) Explore the developer resources provided by the PSP: Use the developer resources offered by your chosen PSP to help integrate their payment solution into your eCommerce website.  

3) Secure your website: You can add SSL encryption to ensure safe and secure communication between your customers and PSP during online transactions. You’ll achieve this by obtaining an SSL certificate and configuring it with your website.   

4) Choose an integration method: These can include API integration (connecting two or more applications or systems), shopping cart plugins, or hosted payment pages.  

5) Maintaining compliance: Ensure your integration aligns with PCI DSS compliance regulations.  

6) Test the integration and go live: Once you’ve successfully tested the integration, you can go live with your PSP and update your website to enable real transactions and start accepting payments.  

Adding payment capability to your website 

How to integrate a payment gateway into your website:   

1. Choose a payment gateway 
2. Set up and FICA your merchant account 
3. Obtain API keys (unique codes for authenticating payments) 
4. Integrate the payment gateway into your website  
5. Test the payment gateway 
6. Go live 

Top payment integration options in South Africa  

• Netcash Payment Gateway 
• Payfast 
• PayU 
• PayGate 
• Yoco 
• Ozow 
• PayPal 
• SnapScan 
• Payflex 

How to test if your online payment system is working 

Here are four tests you can perform to see if your payment system works:  

• Functional test: Ensure your system is behaving as it should. You can test the accuracy of placing orders, if the calculations for orders placed are correct, whether the tax estimates are accurate, etc.  
• Integration test: See if the payment integration is working correctly on your eCommerce platform. This will help you to check if funds are received in your account, verify the placement of orders, and test voided and refunded transactions. 
• Performance test: You can test the performance of your system by allowing multiple users to interact with your online store. They can place orders, transfer money in various ways, use discount codes, etc. This will also reveal if your payment system can handle multiple transactions and other activities.  
• Security test: You must ensure that your customer’s sensitive information is safe, so you should test your encryption and data security first. Use cryptanalysis software, penetration testing tools, and security audits to determine any system weaknesses, vulnerabilities, or errors.  

What documentation is required in South Africa – per business type? 

Before accepting online payments in South Africa, you must have certain documents in place to comply with general FICA (Financial Intelligence Centre Act) and PASA (Payment Association of South Africa) laws.   

This is required as FICA acts as a legal framework to identify and combat unlawful activities relating to financial crimes. These include fraud, money laundering, tax evasion, identity theft, and terrorist financing activities.  

Close corporations: 

• Registration documents  
• Verification of Authority to submit application  
• Copy of CIPC registration documents (CK1) 
• Copy of Members ID’s 
• Proof of business address 
• Proof of banking details 

Sole Proprietor: 

• Copy of the most recent SARS document confirming registration with SARS (Income Tax) in a personal capacity (any document except an IRP5) 
• Copy of the Sole Proprietor ID document 
• Proof of business address 
• Proof of banking details (in a personal capacity) 

PASA documentation requirements for system operator authorisation: 

• Proof of your business’s physical address 
• An appropriate documented business continuity plan. 
• A properly documented disaster recovery plan.  
• Reports of any changes to management, ownership, and nature of business.  

FICA compliance documentation for all businesses: 

• Founding document. 
• Proof of business address, such as a utility bill (not older than three months). 
• Identity documents. 
• Resolution.  

How fees are deducted 

Most third-party payment processors deduct a transaction fee from the gross payments made by your customers. When customers pay you through a payment gateway, the platform will either deduct their transaction fee before the money lands in your merchant account or deduct the fee from the total received into the account  

How to pay out earnings 

Funds will appear in your merchant account 24 hours after the customer has paid you. Then, you can move these funds into your business account by clicking the “withdraw” button. Payment processors have different fees for withdrawals. 

How to take payments online: Choosing the right payment gateway or service provider  

Another significant factor to consider when adding online payments to your website is choosing the right payment service provider that suits your business needs in the long run. Depending on these needs, you can look at a few qualities different providers offer.  

Will they allow your business to accept other currencies? 

If you want to branch out globally at some point in the future, consider a payment service provider that supports multiple currencies. You don’t have to stress about this too much if you plan to sell within South Africa only. It’s important to note that most regional payment gateways do not offer foreign currency conversion – you will always be charging and receiving Rand payments for example, with South African payment gateway providers. 

Can you customise your checkout experience? 

You’ll want to be able to customise your checkout page to match your brand to some extent. This will ensure a seamless checkout experience and foster trust, as customers might question your honesty if the payment page is entirely different from the rest of your site.  

Do they offer risk management tools and security? 

Any good payment service provider will offer strong verification, chargeback protection, and fraud detection, among other risk management tools. These are vital since so many security threats are associated with digital payment processing.  

Do they offer good customer support? 

Excellent customer support is vital for any business, whether brick-and-mortar or online. So, examine the quality of a PSPs customer support services. Are they responsive, helpful, and knowledgeable? They need to be able to provide a seamless payment experience for your customers, otherwise, you’ll risk losing a lot of support and loyalty.   

Can the PSP grow with your business? 

Scalability is an important role to look for in a PSP. You need a provider that can grow with your business and keep up with its needs. Do they offer other payment services for example, or integrate with ERP, eCommerce, accounting, and payroll software you may use? This will allow your business to have one provider for multiple business needs, reducing costs and onboarding requirements in the future.  

Want to offer more payment methods, such as BNPL or mobile wallets? The payment provider should be able to accommodate these methods and keep up with increased transaction volume.  

Can the PSP give you valuable insights?   

Consider whether a PSP can provide detailed reports and analytics to grant you more insights into customer behaviour, transactions, and overall performance. This allows you to establish what’s working and what’s not. For example, what payment method do your customers prefer, or how often do they abandon carts?