Article: Merchant Accounts

Selling On-Line? Plastic Helps!

One important e-commerce solution to increase orders is by accepting credit card payments on-line. The reason is that on-line buyers are usually impulse buyers and accepting credit card payment on-line provides a convenient means for them to buy and pay.

With more than 65% of the population carrying at least one major credit card, credit card acceptance creates impulse and cash restrictive purchases, along with ease of use for Internet businesses.

There are four basic links in any credit card E-commerce transaction: The Web site ‘shopping cart’; the Web host or server; the ‘Payment Gateway’ (or credit card processing agent) and the Merchant Account (the financial institution that credits the E-commerce vendor). There are many ways that these links can be joined and these services and products can be purchased as packages or individually. In order to achieve what is called ‘real-time’ credit card processing, each link must be able to successfully transmit information down the chain to the next, almost instantly.

Like most retailers, an E-merchant has a display window for their products. In E-commerce this is known as the ‘Shopping Cart’. It is the first link in completing an E-commerce transaction, yet the last link in the merchandising chain.

The Shopping Cart is split into two parts, the ‘storefront’ and the ‘cash register’. A good shopping cart amongst other things, allows customers to select several items from the storefront and purchase them as a group when they reach the cash register.

The cash register will present the purchaser with an order form that will collect all of the relevant credit card information for processing. This information is then transmitted through what is known as a Secured Socket Layer (SSL), a sophisticated encryption system, to the credit card processing agent (‘Payment Gateway’ in E-commerce terms).

When your customer has entered their purchase order the relevant information travels the link between your site and the Payment Gateway.

It goes directly from their computer to the server on which your site is hosted or to a server maintained by the Payment Gateway. If it goes to your server the Web host re-routes the payment information to the Payment Gateway. These transmissions of confidential information must be secure. Securing consumer confidence is one of the foremost struggles of E-commerce merchants today.

The Payment Gateway, or credit card processing agent, is the agency responsible for verifying credit card information and affirming that there are sufficient funds to cover a purchase.

The better known ‘Link’ companies are VeriSign, Authorize.Net and Online Data Corp. These companies pass the information to their Merchant Bank that in turn contacts the credit card issuer, which approves or denies credit. Notice of approval or denial is then forwarded back down the chain to the Payment Gateway and to the E-merchant.

Over the last few years, Internet experts have been working hard to create standards and systems to protect consumers from fraud. With the invention of SSL and Security Certificates the Web has become a much safer place to shop.

The last link in the chain is your Merchant Account. This is an account held for you by the Merchant Bank that credits you for your approved E-commerce transactions.

Canadian businesses often find getting a merchant account from their bank for an Internet business is next to impossible. Many American companies such as Online Data Corp. are now jumping into our Canadian market, and providing this service quite readily to Canadian companies.

However it is done, the keyword is integration. Remember that a shopping cart is only part of the equation; it is the final check out section of all your merchandising efforts.

By making the decision to accept credit cards, your company’s profit and growth can be realized much sooner. – John Shenton – April 30, 2002