How can I receive payments online in Namibia?

IMPORTANT: This article is outdated. The most up to date information on Payment Gateways in Namibia can be found here.

**UPDATE**: 2Checkout is no longer the only good Payment Gateway to use in Namibia. Check out this blog post for an even better option.

If you recognize the logo, you probably already know that I will be recommending 2checkout.com by the end of this articel. But don't be fooled, I'm not recommending 2checkout because they are the best option. I am recommending them because they are the only option for Namibians. While we here at Namhost uses 2checkout to process payments and are happy with 2checkout, there are pros and cons to using them if you wish to make online purchases in Namibia. It is important to understand these pros and cons before actually offering online payments on your website.

This blog post will hopefully answer all the questions you have on offering online payments in Namibia, but if anything is still unclear, please comment at the end of this article and I will reply to your query as quickly as possible.

Why do you say that 2checkout is the only option for Namibians?

Technically, any payment gateway can be used in Namibia. This is because the purpose of a payment gateway is to receive credit card payments. All payment processors require this functionality and therefore any payment can technically process a payment in Namibia, as long as a valid credit card is used. The problem is not that the payment gateways can't process a VISA or MasterCard credit card in Namibia, it's that these payment processors have no way to get the money into your Namibian bank account.

PayPal supports South African bank accounts, but not Namibian bank accounts. If there is a way for you to open a South African bank account that makes sense for your business, then we highly recommend going that route. If you can get access to a South African bank account, you will have a much wider range of payment gateway options. Here are some options for payment gateways that work in South Africa.

However, if you only have a Namibian bank account, you might be able to register for an account with PayPal and start receiving payments into your PayPal account, but you will have no way to get the money from your PayPal account to your own bank account. This is where 2checkout comes in. They actually do a swift electronic bank transfer into your Namibian bank account. Why do the other payment gateways not offer this? I believe there are a few factors:

The number of new clients they could potentially gain in Namibia doesn't justify the effort it would take to support transferring the funds.
Tax implications.
Policies and Laws / Legislation

These are just speculation and there might be other reasons as well, or these might not be factors at all. Whatever the reason, I'm just happy 2checkout has gone through the trouble of supporting our sunny country so those with only Namibian Bank accounts at least have an option.

Would you always recommend 2Checkout?

No, I would not. I would not recommend that online stores that sell electronics use 2Checkout. The problem has to do with the fees and risk through chargebacks. 2Checkout has some hidden fees that you might not catch immediately if you haven't sat down and done the math. Let's take a fairly realistic example:

Let's imagine we are an online store that sells Samsung TVs. If the price for the TV was $350 USD on our store, and we bought it for $300 USD, that would mean by the time we sell it, we would have made $50USD profit. But how much of that actually hits your bank account at the end of the day. Let's look at the flow of money from the time the client buys an item from you online:

The client does a credit card payment for $350USD
$300 USD of the 350 has to go to the supplier for the purchase of the item you are selling to the client. That leaves us with $50 USD potential profit.
A 0.45USD flat-fee is then deducted by 2Checkout. That is 5 Namibian Dollars straight off the bat. That leaves us with: $49.55 USD
The next deducation is the 5.5% of the total value of the transaction. In our example, that is 5.5% of 350 = $19.25 USD. So that means we are left with $30.3 USD
Should you withdraw the balance from your account, 2checkout will charge a further $10 USD for the wire transfer. That means you are left with 20.3 USD.

That means, in an absolute best case scenario, you will be left with $20.3 USD profit. That means, of your real potential profit of 50 USD, 2checkout has effectively taken 30USD and left you with 20USD. Alhough I used roughly 15% markup on the item for sale, things could look better if your profit margins are 30% or higher. That is why I say that 2checkout isn't for everyone, especially not businesses with small profit margins because the fees can become hefty. Also keep in mind, these are only 2checkout's fees. Your bank is not going to process that international transfer for free. You will get nailed there too. So, if your bank charges 1%, that means they will take 1% of the 320 USd that will hit your bank account. That means you will lose another $3.2USD.

If that's not bad enough, there are 2 other factors that could also kill your profit even more. These aren't fees related, but very important for those selling high-value items online.

What other factors could affect my final profit?

Firstly, most electronics stores offer free shipping on orders over a certain amount. In this case, you need to ask yourself: will the $20.3 USD I am left with be enough to cover my shipping? And more importantly: will the amount that is left after I deduct shipping be an acceptable profit? And this also relates to returns. Will you have profit to deal with returns, should the client not be happy with the item? How much profit will you really have left if you have to pay for shipping to the client and back again if it has to get repaired or replaced?

The second factor, and the scariest factor of them all, is a chargeback! This is the biggest problem you will experience with 2checkout. I must say, it wasn't until I tried 2checkout on an online store in Namibia that sells electronics, that I realised exactly what this meant. It is important to understand that a payment can appear 100% legitimate. Imagine a criminal steals your wallet with your credit card in it. How can a computer know the difference between you buying something online, and the criminal buying something online? The truth is, it can't. In South Africa, 3D Secure has made this specific scenario less likely, but 2checkout doesn't have something like 3D Secure in place. However, there are a few factors that can be looked at, such as: is the person buying from within the same country you live in? Did they give the right address? However, if all the details are entered correctly on the screen as they appear on the credit card, the payment gateway has no reason to decline the transaction. This is where the problem comes in.

You receive a transaction that appears legitimate and you ship a $350 USD shipment to the fraudster. At that time, you couldn't care less, because the money is safely in your 2checkout account. A week or two goes by and you get an email saying 2checkout is taking back the money because the owner of the credit card reported it as a fraudulent transaction. If you can't prove that the client did the transaction by presenting a slip that that person signed, the chargeback will go through. And here is where it really hurts:

You will lose the entire 350USD. It will all go back to the client.
You will get charged a chargeback fee by 2checkout. (The last time I checked this was in the range of $20USD)

I think it's safe to mention that electronics are more susceptible to fraud because there are high valued items to be gained. That does not mean that it doesn't happen on other online stores too. That is why it is important to do your own spot checks to see if the client ordering looks legitimate. Once that item has been shipped, you will have no power to get the item back, should it turn out to be fraud. And yes, to make matters worse, in some cases the client has up to 180 days to report a fraudulent transaction. It is important to note that if you think receiving online payments is going to be a passive task, don't be fooled, it isn't. You will be required to inspect every transaction, or face the consequences of massive fraud on your website.

So how do I safely use 2Checkout or any Payment Gateway for that matter?

Primarily through experience, in my opinion. There are various tell-tale signs that a transaction is fraudulent but it will take time to learn which ones are and which ones are not. If you are suspicious, request further identification from the client. However, we highly recommend teaming up with guys like us (Namhost.com), just to get over the original hurdle of selling online. We've learnt a trick or two in our 10 years of building e-commerce sites in Namibia. We can definitely advise you on the best route.

So what are the pros and cons of using 2Checkout in Namibia?

Pros:

No setup fees: They used to charge 49 USD (about N$500) per domain
Supported by Various Open Source Products: UberCart for example, which is used on this website, supports 2checkout out of the box. There are lots of other open-source solutions that support 2checkout.
Easy Integration: I wouldn't say anyone without a bit of programming knowledge would be able to do it, but for your typical developer it should be easy to integrate the gateway into any website. Personally, I've found it easier integration 2Checkout than SetCom for example.
Support: Their support used to be awful, but something has changed in that company and it shows in their support.
Win with the Exchange Rate: If the Dollar becomes more against the Namibian Dollar, as is currently happening, leaving your income in your 2checkout account could count in your favour.

Cons:

Very expensive transaction fees!
Fraud: But this really is true about any payment gateway, so it's a bit unfair to call 2checkout on it. Nevertheless, it's such an important factor in the equation, that I'm mentioning it again.
Lose with the Exchange Rate: I mentioned in the pros that a stronger dollar over time could mean more money paid to you, but the inverse is also true.

Conclusion

2Checkout is a fantastic solution for Namibians if you can get past the fees. I would avoid it completely if my products don't have at least a 30% profit margin. It's simply not worth it after all the fees. If your profit margin is smaller than that. It would be better to stick with only accepting EFT (Electronic Funds Transfer / Bank Transfer) from your clients or consider finding a way to legally open a bank account in South Africa or in another country. There might be many hoops to jump through, including registering a company in the country you choose and paying tax there. However, it might not be possible at all in some case. In which case, offering online payments in Namibia won't be an option for you for a while.

Please Note: This article was written on 23 January 2015. While I do envision more options appearing in the near future, I think I can confidently say that today, there aren't any real options in Namibia. Please comment below if you know of any other options?