Payment Gateways, Internet Merchant Accounts and 3rd party credit card processors

Merchant accounts, payment gateways, shopping carts - it all gets pretty confusing when you start looking into the various aspects of ecommerce.

In our previous articles, we examined points to consider in setting up your ecommerce site and also hints and tips on choosing shopping carts.

Let's briefly recap the nuts and bolts of the process of online sales using credit cards.

  1. Customer visits your site
  2. Customer clicks on a "buy me" button after reviewing sales copy
  3. The selection is added to the shopping cart.
  4. Once at the 'checkout', the customers' personal and financial details are recorded via a secure form.
  5. Details submitted from the form is transmitted to a payment gateway service which securely routes the information through the relevant financial networks.
  6. If the transaction is successful, the customers' credit card account is debited and your merchant account is credited.
  7. Once all funds have cleared, you are then able to transfer money to your ordinary business checking account.

Payment gateways

A payment gateway is a separate service and acts as an intermediary between the merchants' shopping cart and all the financial networks involved with the transaction, including the customers' credit card issuer and your merchant account. Think of it as a EFTPOS terminal in cyberspace. It checks for validity, encrypts transaction details, ensures they are sent to the correct destination and then decrypts the responses which are sent back to the shopping cart. This is a seamless process and your customer does not directly interact with the gateway; as data is forwarded to the gateway via your shopping cart and a secure (SSL) connection. The shopping cart is configured via plugins to send information in a format that is acceptable to the particular gateway.

The proper choice of payment gateway is another vital element which will contribute to your success or failure as an online business.

Payment gateway issues

As with any other ecommerce element, shop around, compare prices and read the fine print. Here are some of the major points to consider when selecting a payment gateway service.

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