So, you want to accept payments online?
When it comes to setting up a merchant account for your online business, the process can be downright confusing. There’s so much more to it than simply identifying a merchant bank that can provide you with decent rates and nominal fees. Of course, you’ll want to shop around for good rates when it comes to your merchant bank but negotiating rates is just a small part of the commercial transaction cycle that you’ll need to consider.
There are several key components and services that make up the ecommerce process. Merchant accounts, payment gateways, shopping carts, processors, it all starts to get pretty complicated when you look at all of the players involved. Let’s recap the basic online payment process:
- A customer visits your ecommerce website.
- Customer decides to make a purchase.
- The selection is added to the shopping cart.
- The customer provides personal and financial details during the check out process that are recorded via a secure form.
- Details submitted from the form are transmitted to a payment gateway service, which is separate from the shopping cart technology. The gateway service securely routes the information through the relevant financial networks, including your merchant bank.
- If the transaction is successful, the customers’ credit card account is debited and your merchant account is credited.
- Once all funds have cleared, you are then able to transfer money to your ordinary business checking account.
So, where do you start?
Well, you can shop around for the various services required and once you’ve established your providers, hope that they can all integrate with one another which is unlikely (for example, your payment gateway will need to be compatible with your shopping cart and work with your merchant account). Or, you can find a comprehensive web payment solution that can work with you to handle all of your merchant account needs. A good, ecommerce provider will offer shopping cart, payment gateway and merchant account services and the best providers are not tied to a single bank but can work with several banks allowing them to negotiate the best rates for you based on your business type and transaction history.
When shopping for the right provider, be sure that you find a PCI DSS compliant provider. PCI or the Payment Card Industry has standards for handling sensitive credit card data and if you and your provider cannot prove compliance, you may suffer additional fees imposed by the merchant bank or you could lose the ability to take credit card payment on your website altogether.
What is a Payment Gateway?
Most merchants understand the role and purpose of the shopping cart, the merchant bank and the credit card processing company but, what about the payment gateway? A payment gateway is a separate component that serves as an intermediary between the shopping cart and the financial networks involved with the transaction. The gateway is essentially a virtual version of your POS terminal. It checks for validity, encrypts transaction details, ensures that data is being sent to the correct destination and then decrypts the responses which are sent back to the shopping cart. The process is all very seamless and your customer would never directly interact with the gateway itself, only the shopping cart.