Adapting to new technologies and striving to satisfy the customer to the fullest has led a lot of merchants and retailers to start doing their selling online. Simply, the Internet is the future of commerce (if it isn’t already the present) because the customers save time and effort by shopping online. And now, a lot of smaller businesses are jumping on the bandwagon and they want to be able to offer their products and services online.
However, many small business owners find it hard to enter the fray of online retailing, as the system that is in place can be a little confusing at times, especially for the newcomers. Processing credit card payments is the hardest problem that needs to be addressed here, and here I will try to explain some of the essential things related to it.
In order to fully integrate credit card payments into your website, you will need three things:
- A merchant account
- A payment gateway
- A payment processor (or a credit card processor)
A merchant account
Your merchant account is basically a bank account which can accept payments from credit cards. As you might already know, you cannot just have a simple bank account and have people pay to it directly from their credit cards. Instead, you need to go to the bank, order a transfer of funds and wait a couple of days while it is processed. This is not very good for conducting online business.
However, possessing a merchant account allows a person to accept credit card payments, which makes everything easier, because the customers will be able to order things from your website the same way as they would from Amazon. They just go through the verification process, the order is placed and the money is transferred from their account into yours.
There are multiple ways to obtain a merchant account, including going through PayPal as an intermediator, but if you want to set it up properly, we recommend making one with a payment processor (which we will talk about a bit later…).
A payment gateway
A payment gateway serves like a virtual point-of-sale system. Just like the POS system communicates with Visa or MasterCard in order to verify whether everything checks out with the card and the cardholder has enough funds on the card to process the transaction, the payment gateway does the same, only online. Since there is no physical credit card and there is no “swiping”, the payment gateways operate differently, but the essence is the same.
The gateways are usually also provided by the payment processors, but it something that you should check with them before signing the agreement.
A payment processor
Payment processors (or credit card processors) are the ones responsible for all the confusion when it comes online selling. When people hear this term they usually think that it is the actual processor (as in a chip) which performs the functions of the payment gateway (i.e. it verifies and processes credit card transactions).
The processors are actually the companies which perform these services on the behalf of the business doing the selling. They are there to guarantee that the credit card transaction will go according to plan for both the customer and the seller. This means processing payments through gateways (which most of them have a part of their services) and guaranteeing that the order will be completed or money returned.
There are numerous companies which offer these services, but they will all want to audit your business’ health before getting into an agreement with you, because, as we said, they have to guarantee that the order processed through them will be completed. This audit is not a very strict process, but there are certain standards that you should meet, so be sure to prepare for it.
Also, be aware that there are numerous companies doing payment processing all around the globe. They all offer competitive fees (because, of course, there are fees involved) and the conditions vary from one provider to another. That is why you have to check and see which are the top credit card processors, get in touch with all of them and see what they propose. Weigh out different options and choose the one which seems the best to you.
Hopefully, this clears the confusion up a bit. Getting into the world of online retailing is not as hard as one might think, and now is probably the best time to get into it. Certainly, the sooner the better, as it is, like we said, the future of commerce.