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Transactions between individuals

There are several online payment services for transferring funds between individuals. One of the well-established UK contenders is Nochex (www.nochex.co.uk). You can enrol as a merchant trader for a £50 setup fee plus commission, as an ordinary seller who pays commission only, or as a private account holder who can send money free of charge or receive it by paying commission.

Up to two cards (one debit and one credit) can be registered, and if you intend to receive as well as send payments you also need to register a bank account. Money is transferred between Nochex accounts, so you never need to reveal your card numbers, but there are strict limitations on the use of personal accounts. The maximum amount you can load into a Nochex personal account and transfer in a single transaction is £300, and the maximum holding of funds in a Nochex account is £90.

The commission charge for receiving money is 2.9 per cent plus 20p per transaction. Transferring Nochex funds to a current account costs 25p, or is free if the amount is £50 or more. These rates compare favourably with PayPal's charges.

Egg Pay (http://new.egg.com) is less versatile than PayPal and Nochex. Unlike those two payment options, it is used solely for person-to-person transfers and cannot be used to buy goods from internet merchants. But it is free to operate and actually pays interest (currently 2.5 per cent AER) on funds held on deposit. To send money, you register for Egg Pay and open

To send money to somebody else, you log on to Egg Pay and supply the email address of the recipient, with whom you have previously agreed a password and security question. The recipient receives an email from Egg telling them about the transfer and, provided they know the password and can answer the security question, the sum you have allocated is transferred to a bank account of their choice.

Escrow protection

The emphasis in online transactions is usually on immediacy, but there are occasions when what matters more to buyers and sellers is that they are protected against loss. This is especially true when high-value goods are being bartered between people who do not know each other. In these situations, escrow payments are useful. This is where a third party holds the money until the buyer indicates that the goods have been received in good condition, and only then are funds released to the seller. If the buyer does not accept the goods, they must be returned to the seller using a trackable form of shipping before the buyer can retrieve the money held in escrow.

The UK leader in this field is Auctionchex (http://auctionchex.com), which charges 2.5 per cent for its services and is registered by the Office of Fair Trading and HM Revenue and Customs. There are no other charges provided payments are made by bank transfer or personal cheque. An alternative escrow service is offered by PPPay (www.pppay.com), a company certified by the Financial Services Authority (FSA). In addition to person-to-person payments similar to those offered by Nochex and PayPal, PPPay also brokers escrow transactions for a fixed fee of only 99p. However, both buyer and seller are charged for making and receiving credit card payments, and the recipient is also charged one per cent to move funds from a PPPay account into an ordinary bank account.