Online Payment Processing
When a customer purchases an item with a credit card, a two step process begins.
- The merchant or the website requests an authorization from the customer's credit card account to ensure
that the card is valid and the customer has enough available balance for the purchase. The customer's bank sends an
authorization number back to the merchant or the website and the order is "captured".
- The merchandise is sent, and the merchant informs the bank where they have a merchant account. The bank
deposits funds to the merchant's account while the customer's account is debited for the amount of the purchase. At that
time, the customers' bank takes out the required fees and the transaction is complete.
Credit cards are an important part of enabling E-Commerce. The easiest process to integrate into an existing business
is an off-line authorization and settlement process. For more advanced web merchants who are processing more than 100
transactions per month, real time credit card authorization becomes economical. With a link to a Processing Service Provider
such as AuthorizeNet, the website generates an authorization request
when the customer places the order.
If the merchant is selling hard goods which have to be shipped to the customer, the order is saved securely for later
settlement. Once the goods are shipped, the merchant can settle the order, and the transaction is completed. If the merchant
is selling downloadable media, software, or site memberships for example, then the order can be authorized and settled in
real time, without any intervention by the merchant.
Accepting Online Payments
Whether you choose to do Real-time or Offline (Batch) Transaction Processing you will need to open the following accounts in
order to receive and process payments:
- Checking account
- Merchant account
- Payment Gateway account
After the above accounts have been opened, you are ready to configure the new E-commerce Web site to work with the accounts to
accept payments from online customers.When selecting providers for your Checking account, Merchant account, and Payment
Gateway account, you need to be sure that the different companies are compatible with each other. Not all Merchant accounts
and Payment Gateways will work together. If you are unsure about the e-commerce software you are working with, most of this
information is available on the specific vendor’s web site or by contacting them.
Merchant account providers:
- PayPal
- Check with your local bank
Payment Gateway providers:
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