Online Payments Make It Easy For Your Customers To Buy by Tim Knox
In the last column we discussed the process of credit card enabling your
brick-and-mortar business. I pointed out that research has shown that accepting
credit cards can help increase revenue and speed up cash flow. This week we
will 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.
We covered most of these elements last week. Here's a quick refresher for those
who missed 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
About the Author
Tim Knox Entrepreneur, Author, Speaker http://www.prosperityandprofit.com
http://www.dropshipwholesale.net
http://www.smallbusinessqa.com http://www.timknox.com
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