So do 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 is much more to it than simply identifying a commercial bank that can provide you with decent interest rates and nominal fees. Of course, you’ll want to look for good rates when it comes to your commercial bank, but negotiating rates is only 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 quite complicated when you look at all the players involved. Let’s recap the basic online payment process:
- A customer visits your e-commerce website.
- The customer decides to make a purchase.
- The selection is added to the shopping cart.
- The customer provides personal and financial details during the checkout process which are recorded through a secure form.
- The details submitted from the form are passed on to a payment gateway service, which is separate from the shopping cart technology. The gateway service securely routes information through relevant financial networks, including your merchant bank.
- If the transaction is successful, the customer’s credit card account is debited and their merchant account is credited.
- Once all funds have cleared, you will be able to transfer money to your regular 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 each other, which is unlikely (for example, your payment gateway will need to support 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 business 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 multiple banks, allowing them to negotiate the best rates for you. based on your type of business and transaction history. .
When searching for the right provider, be sure to 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 demonstrate compliance, you may incur additional fees imposed by the merchant bank or you may lose the ability to accept credit card payments on your website entirely.
What is a payment gateway?
Most merchants understand the function and purpose of the shopping cart, merchant bank, and 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 in the transaction. The gateway is essentially a virtual version of your POS terminal. It checks for validity, encrypts the transaction details, ensures the data is sent to the correct destination, and then decrypts the responses that are sent back to the shopping cart. The process is very simple and your customer would never directly interact with the gateway itself, only the shopping cart.