Most people who are new to the world of websites and/ or ecommerce are pretty clueless about the ins and outs of the ecommerce world. Even if you are pretty good at scripting, you can set up your store using a popular package like OSCommerce, and then you’re left wondering how to make it work with your payment gateway so that you can actually collect your money and deposit it into your account. In this article, we’ll take a look at how the system works for collecting your money. We’ll also briefly discuss what you should look for when evaluating your payment gateway. As usual, I’ll keep this as basic and easy to understand as I always do with all my articles.
The Basics - How Funds are Collected
Ecommerce simply means shopping online. From a site owner’s point of view, it means collecting funds from sales on their site and depositing those funds into the bank. To collect funds, you’ll need a merchant account and payment gateway (which we’ll talk about below). When you enter your credit card number on your website, your card number and buyer details are sent to your payment gateway. It’s done in a secure manner. Your payment gateway will communicate with your payment processor to verify availability of funds and any other criteria for accepting transactions. If funds are available, your payment processor deducts them. The payment gateway reports a successful transaction to your merchant, and your merchant’s shopping cart system responds by displaying a “Thank You” type message to you. Once funds are collected, they sit until your transaction is settled. That means they’re collected and deposited into your bank account. The transaction will not be posted to your bank account until it’s settled. The corresponding debit will not be sent to the buyer’s credit card account.
Merchant Accounts
A merchant account is a type of account specifically designed for online retailers. It is used for non-point of sale (POS) credit card transactions or transactions where you do not have the person’s credit card in your hand. Simply put, you don’t have a card swipper. A merchant account isn’t a bank account. A merchant account acts as a middleman between your payment gateway account and your bank account. It accepts funds from credit cards and deposits them into your bank account.
What is a merchant account?
A merchant account relationship is a relationship that is based on trust. The bank that issues the merchant account takes money from the buyer’s account and deposits it in your account. The payment processor then checks for availability and debits from your credit card’s account. The bank that issues your merchant account trusts that you’ll keep up your side of the deal by delivering the product/service that the buyer bought. If this doesn’t happen, the buyer has the right to dispute your transaction. This means that the issuing bank is on the hook because they’re obligated to return your funds to your buyer’s card (“a chargeback”). That’s why merchant providers take a risk when they allow a merchant to accept credit cards on their behalf.
How does the organization provide your merchant account underwriting?
When you apply for your credit check, the organization will do the underwriting on your account. Too many chargebacks and you’ll likely be denied. Too many chargebacks and, as a result, you’ll be placed on the “Terminated Merchant File” (also known as the Match File).
Payment Gateways
A payment gateway acts as the gateway to your merchant account. You can use it to manage your funds, transactions, etc. A payment gateway also acts as a link between your website and the merchant account. A payment gateway takes the data you submit via your secure order form and sends it to your processing banking. The processing bank will approve or reject the transaction and send its response back to you. The payment gateway will then turn around and send this data back to you for proper handling. A payment gateway doesn’t offer services like merchant accounts and shopping carts. However, some of the more well-known payment gateways do offer these options as added value.
Some of the most well-known payment gateway services include: Authorize.Net ,Verisign 2CheckOut, Linkpoint, Paysystems ,Worldpay.com, MerchantCommerce, Payment gateway compliance CISP SDP DISC Virtual terminal To be able to transact over the phone (instead of relying solely on your website)
Fraud Prevention Recurring billing Method of integration Cost E-checks
As mentioned above, too much fraudulent activity will lead to chargebacks, which will put you on Match List and your merchant account will be closed. Common fraud detection mechanisms include: AVS Address Verification which compares the customer’s address with the information on file with the issuing bank CVV2 which uses the 3’s security code (4’s on American Express cards).
The majority of gateways will tell you how to connect with their servers directly from your website store. There are two ways to do this. First, your site POSTs a form to your gateway’s server, which is already populated with your customer’s information. Then, your site sends your customer a payment form that allows them to enter their credit card information in a safe environment. Once processing is complete, your site sends the customer back to your site along with the transaction’s results. Your site then takes control of the process. This method is generally easier for site owners to set up, and you don’t need to buy your own SSL certificate to allow secure transactions on your site. The downside is that you’ll need to send customers off your site for payment collection purposes. Some gateways allow you to customize the payment form to look like your site’s header and footer, but the reality is that the visitor is leaving your site.
The second method is completely invisible to the client. The site owner has the SSL certificate to set up security on his/her own site. This allows him/her to host the payment form himself, completely customizing it to his/her website. When the client submits the payment, your site sends the information securely and invisibly to the payment gateway, where the payment gateway does the normal processing and then sends the response invisibly back to the merchant’s website, allowing the merchant to respond correctly. From the client’s point of view, he/she never left your site. And he/she never did. In this type of setup, you’ll need an SSL certificate and CURL library access. Many gateway providers will allow you to sign up for a merchant account along with the gateway, so in most cases you don’t need to sign up separately.