Online
Payments Make It Easy For Your Customers To Buy
Online Payments Make It Easy For Your Customers To Buy
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.
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 Tim Knox is a nationally-known small business expert
who writes and speaks frequently on the topic. For more information
or to contact Tim please visit one of his sites below.
http://www.dropshipwholesale.net/
http://www.smallbusinessqa.com/
http://www.timknox.com
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