|
SubscriptionsSites I Read
|
|
|
|
| More stories about William Cooper hereWilliam Cooper
Introduction To Ecommerce
Many people new to websites and/or ecommerce are confused at the in andouts of ecommerce. Even many people who are fairly adept at scriptingcan set up a store using some popular package such as OSCommerce andthen are left stumped by the idea of making it work with a paymentgateway to actually collect money and put it into their account. Inthis article, I will give a brief overview of how the system is set upto collect your money. I will then discuss briefly what to look for inevaluating payment gateways. As usual, I will keep this basic andunderstandable just as I do with all of my articles.
The Basics - How Funds are Collected
Ecommerce simply refers to the practice of shopping online. Fromthe site owner's perspective, it entails collecting funds from salestransactions on their website and depositing that money into the bank.In order to collect funds, you need to have a merchant account and apayment gateway (discussed below). Basically, when a person enterstheir credit card number on a website, the card number and buyerinformation is sent to a payment gateway. This is done securely. Thepayment gateway will interface with a payment processor to checkavailability of funds as well as any other criteria set for acceptingtransactions. If the funds are available, the payment processor willthen deduct the funds. The payment gateway will then report back asuccessful transaction to the merchant, at which point the merchant'sshopping cart system will respond by displaying a "Thank You" typemessage to the buyer. Funds will sit until the transaction is settled,which means the funds are collected and deposited to your bank account.Until a transaction is settled, the transaction will not post to yourbank account and the corresponding debit will not post to the buyer'scredit card account.
Merchant Accounts
A Merchant Account is a special type of account specifically foronline retailers. They are designed to allow non-POS (point of sale)transactions using credit cards, or transactions where you don't havethe person's credit card in hand. In other words, you don't have a cardswiper. A merchant account is not the same as a bank account. It actsas a go-between between your payment gateway and your bank account,accepting funds from credit cards which are then deposited into yourbank.
A merchant account is a relationship based on trust between you andthe issuing bank. The bank takes funds from the buyer's account anddeposits into your account. A payment processor takes care of checkingfor availability of funds and debiting from the credit card account.The bank issuing the merchant account is trusting that you will fulfillyour end of the transaction by providing the product or service thatthe buyer purchased. In case where this does not occur, the buyer candispute the transaction. This puts the issuing bank on the line becausethey are then obligated to return the funds to the buyer's card (achargeback). Therefore, merchant providers are taking a risk inallowing a merchant to take credit cards under their name.
The organization providing your merchant account will dounderwriting on the account when you apply to check your credit. If youhave a history of too many chargebacks, you may be denied. In fact, toomany chargebacks can result in you, as a merchant, being put on theTerminated Merchant File (also called The Match File). This is ablacklist which will effectively prevent you from ever receiving amerchant account again.
Payment Gateways
A payment gateway serves as the front end to your merchant account,allowing you to manage funds, transactions, and the like. It alsoserves as a connection between your website and your merchant account.It takes data submitted via your secure order forms and presents it toyour processing bank. The processing bank then approves or declines thetransaction and sends its response back to the payment gateway. Thepayment gateway then turns around and provides this data back to themerchant for appropriate handling of the transaction. A paymentgateway, then, does not offer services such as merchant accounts orshopping carts, although some of the larger-known gateways do providesuch options as value-added services.
Some of the better known payment gateway services areAuthorize.Net, Verisign, 2CheckOut.com, Linkpoint, Paysystems.com,Worldpay.com, and MerchantCommerce. Some of the things to look for in apayment gateway are compliance with CISP, SDP and DISC (securityinitiatives put out by the major credit card companies), virtualterminal (to be able to accept transactions over the phone by typing intheir data rather than only relying on your website), fraud prevention,recurring billing, methods of integration, cost and whether they canaccept e-checks or not.
Fraud prevention is a big one because, as stated above, too manyfraudulent transactions will result in chargebacks which could end upputting you on the Match List and your merchant account closed. Some ofthe common fraud detection mechanisms are Address Verification (AVS)which compares the customer's address with that on file with theissuing bank, CVV2 which makes use of the 3-digit security code on thecredit card (4-digit on American Express cards).
Most gateways will provide instructions on how to interface withtheir servers from your web store. Most gateways offer two methods ofintegration.
One method is to have your site POST a form to the gateway's serverwhich is pre-populated with your customer's information. At that point,the customer will provide the customer with the payment form whichallows them to type in their credit card number in a secureenvironment. After processing occurs, the customer is then routed backto your website along with the results of the transaction. Your siteagain takes over the process. This method is usually easier to set upfor site owners and it also means the site owner does not need topurchase their own SSL certificate (allowing secure transactions on thesite itself). The tradeoff is that you do need to send your customersoff of your website for payment collection. Many gateways offer ways tomake the payment form look like your website using customized headersand footers, but the fact remains that the visitors are leaving yourwebsite.
The second method is totally invisible to the customer. If the siteowner has an SSL certificate, they can set up security on their ownsite. This means they can host the payment form themselves, totallycustomizing it to their website. When the customer submits payment,your site will securely and invisibly submit the information to thepayment gateway. The payment gateway will do the usual processing andthen invisibly send the response back to the merchant's website,allowing it to respond properly. From the customer's perspective, theynever left your website. And they never did. This type of setuprequires an SSL certificate as well as access to the CURL library.
Many gateway providers can get you set up with a merchant accountat the same time as the gateway. So, in most cases, you do not need tosign up for them separately.
Conclusion
Hopefully this has given you a brief introduction to how credit card payments are processed on the internet.
William Cooper
http://www.qedmediagroup.com
Internet Marketing SEO | | |
|
