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When
discussing the process of credit card enabling
your brick-and-mortar business, it's important to note that research
shows accepting credit cards can help increase revenue and speed up
cash
flow. Now let's look at setting up an online payment system for
your business website.
If you think hooking up a brick-and-mortar
location with a credit card system stymies most bankers, try asking
them how to do it on your website.
The fact is most banks can provide you with the merchant account needed
to accept credit card payments online, but beyond that, they have
little to do with the process. Even larger banks may only have a single
person on staff that is tasked as the "credit card processing expert"
and if that person ever goes on vacation, you're pretty much out of
luck (voice of experience talking here, folks).
I have helped many clients set up online credit card processing systems
and more than once I've had to sit down with the bank issuing the
merchant account and educate them on how online payment systems work.
Don't believe me? This is a direct quote (here's the Bible, here's my
hand) from the manager who was in charge of processing Internet
merchant account applications at a local bank, "When someone pays
online how do they swipe the credit card in their computer..."
You will need the following to accept credit cards on your website:
(1)
an electronic shopping cart system;
(2) a payment gateway service;
(3)
a credit card processor; and
(4) an internet merchant account issued by
a bank or other financial institution or service bureau.
Here's how online credit card processing works.
(1) Your customer
submits his credit card information at checkout on your website.
(2)
The shopping cart software sends the transaction to the gateway.
(3)
The gateway routes the information to the processor.
(4) The processor
contacts the bank that issued the customer's credit card.
(5) The
issuing bank approves or declines the transaction.
(6) The processor
routes the result back to the gateway who then passes the result back
to the website shopping cart system.
The entire process is done
electronically and takes seconds to complete.
Here's a quick look at the basics, then we'll talk about the shopping
cart system you'll need to implement on your website.
Payment Gateway Service: The payment gateway service comes into play
when a customer submits their credit card information to the webpage
form. Think of the gateway service as the middleman in the process. The
website's shopping cart checkout system electronically submits the
credit card to the gateway service that then routes the information to
the processor for approval.
Credit Card Processor: The credit card processor is an electronic data
center that processes the credit card transactions coming from the
gateway company, ensures that the charge is valid, then settles the
funds in your merchant account.
Internet Merchant Account: An Internet merchant account is a bank or
account in which funds from online sales are deposited by the
processor. Merchant accounts are usually issued by banks that are
associated with the major credit card services like Visa and
MasterCard.
Be aware that many banks will not grant merchant accounts
to Internet merchants as they are often categorized as "high risk
ventures." This policy varies widely and in the end, the granting of
the merchant account will come down to economics from the bank's point
of view. If the bank sees even the smallest iota of risk, you will not
be granted the account.
Fortunately, the growth of online sales has given rise to an entire
industry of merchant service bureaus that will grant you a merchant
account and everything else you need to accept online payments. The
fees are usually higher, but it's better than not having an online
payment system at all.
Shopping Cart System. To accept online payments you must have what's
called a "shopping cart system" that allows the customer to select and
purchase products from your website.
A shopping cart system typically
consists of three components: the product catalog, the shopping cart,
and the checkout/payment system. The product catalog is the component
that displays the items you have for sale on the website. The shopping
cart system is the component that allows your customers to select
products by clicking to "add items to cart," and the checkout/payment
system is the component that allows the customer to complete the
checkout process and pay for their purchase with a credit card (or in
some cases an electronic check). It is the checkout/payment component
that communicates with the gateway system to complete the transaction.
Adding a shopping cart system to your website can be a simple or highly
complex task, depending on the system you select. The cost of shopping
cart software ranges from free (for simplistic form-based systems) to
very expensive. Which shopping cart system is best for your business
depends on a number of factors, including the product you're selling,
the depth of your product line, the purchase options you wish to offer
customers, the inventory control functionality, and the extent of
automation you desire.
There are numerous companies who can assist in the setup of your
shopping cart and online credit card payment system. These companies
typically charge several hundred to several thousand dollars for their
services, but like anything you get what you pay for, so always use a
company with good references in this area.
When you're dealing with
something as important as credit card processing and cash flow, bite
the bullet and get it done right the first time. The money you spend
now will be returned many times in increased sales volume from credit
card customers.
The most important thing to remember when setting up an online payment
system is this: online it's all about security and privacy.
Though
online credit card processing has been around for years there are still
many people who are uncomfortable giving their credit card number
online. These are the same folks who do not hesitate to give their
credit card number over the phone or hand their credit card to a waiter
who disappears with it for ten minutes. Online credit card processing
is much less susceptible to fraud and abuse than of those scenarios.
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