We’ve addressed how you can receive credit card information securely through the use of SSL and digital certificates, but the actual processing of the credit card requires that you have a “Merchant Account.” A merchant account is a business account at a financial institution that functions as a clearing account for credit card transactions.
While there are many different payment methods, most e-commerce sites will want the ability to accept credit card payments from customers. There are two ways to process credit card payments: offline or online. Both require a merchant account and credit card terminal.
Although many people equate a merchant account with a checking account, setting up a merchant account is a bit more complicated. A plethora of businesses, in addition to traditional financial institutions, are eager to set you up with a merchant account. Thus, there is an enormous variety in the deals offered. Prior to making a final decision as to what company you will use for your merchant account, do your homework — learn about the process, talk to others who have existing accounts regarding their experience with their provider.
Offline Order Processing
If you have a brick-and-mortar business, it is likely that you already have an existing merchant account as well as a credit card terminal. Thus, you initially may want to continue with your current set-up for your new e-commerce site. Of course, that means only offline credit card processing, which would work like this: A form would be included on your website so that after a customer types in the billing and shipping information, the information is relayed to you through encrypted email. You then process the information manually using your existing credit card terminal.
Figure 9: A typical credit card processing process.
Some customers may want to pay via their Debit/ATM card. Processing this type of payment is basically the same as processing a credit card except that the order amount is deducted from the customer’s checking account. Websites that provide this type of payment option can usually forego the need for check processing. However, before making a final decision on this matter, check with your Merchant Account Provider for details on how they might handle Debit/ATM card processing and obtain their pricing information for such service.
Real-Time Credit Card Authorization
Does your current e-commerce software allow integration with real-time credit card authorization systems? Do you process credit card transactions prior to product fulfillment? If the answer to both of these questions is yes, then you might need real-time authorization capability. (A real-time credit card authorization account doesn’t require you to lease or to purchase equipment or to install software on your computer.)
If you want your customers’ credit cards processed instantly 24 hours a day, 7 days a week, and the funds deposited into your business checking account within 48 - 72 hours, open a real-time credit card processing account after your merchant account is approved. Contact a real-time Internet processing company such as AuthorizeNet.com or Cybersource.com.
With a real-time credit card authorization account, authorization occurs at the time of sale; the processing network receives the authorization information from your merchant terminal and checks the databases of the financial institution that issues the card for available balance and reduces the available balance (but no money changes hands). This authorized transaction is then stored in a local database called a “batch.” Settlement occurs once per day for any authorizations that have accrued for that business day. When a settlement or auto-settlement has been executed, the transaction, minus any merchant fees, will be approved for transfer to your bank account and the funds will arrive in fewer than three business days. (Settled batches, or closed batches, are stored for later access.)
There are specific requirements that an e-commerce site must meet before it can open a real-time credit card processing account. Advantage Communications Enterprises, a well-known web design and marketing firm in Kalamazoo, Michigan has provided a list of items needed to establish a real-time credit card processing account, they include:
- A shopping cart.
- Software or CGI scripts used to store products and orders.
Figure 10: Steps in transaction processing when there is a website has established a real-time credit card processing account. Compare with typical credit card transaction depicted in Fig. 9. Graphic courtesy of Advantage Communications Enterprises of Kalamazoo, Michigan.
- Hosting for Storefront.
- An Internet connected web server.
- Business banking account.
- Internet-ready merchant account.
- A bank or merchant processor who has access to an Internet connected process ing network (to enable high-speed/real-time authorization).
- A gateway to the “processing network.”
- A high-speed provider with access to processing network. (There are banks and merchants that provide gateway services, and there are gateways that provide merchant services.)
For more information about real-time credit card processing, visit Advantagecommunications.com.