The most important aspect of any e-commerce website, whatever product or service you are providing, is the payment solution – allowing you to charge customers online.
To enable online payments you will need to set up a payment gateway and a merchant account.
Payment gateways are an interface between your website, or more accurately your server, and banks/card issuers around the world.
A search for [payment gateway] or [payment solutions] will return a huge selection of providers. You can choose to work with a specialist provider, your own bank or another bank. Ask for quotes from a selection of the above and compare set up fees, monthly fees and the percentage charge per transaction. Ideally, you want to choose a partner who is sympathetic to your status as a start up and will allow you to scale quickly. Most providers work on a scale, so the more transactions you conduct a month, the cheaper the per-transaction fee will be.
Merchant accounts are a depository (usually a bank account) into which the funds you receive from online payments are paid. This account is separate from your company bank account. Although you may well set up your merchant account with your existing business bank, it is not obligatory.
How does it work?
Which ever payment gateway you choose, fundamentally the process works as follows:
1. Payment Card Data Collection – The customer enters their card details on your website.
2. Payment Card Authentication – Those details are sent via your payment gateway, (i.e. RBS Worldpay, Sagepay,VeriFone) to the card issuer (i.e. the customer’s bank). If the card details cannot be verified, the payment is normally declined your customer is asked to check their details are correct, or use an alternative card.
3. Payment Authorisation – The issuing bank checks the cardholder’s details are correct, that there are enough funds in the account to cover the payment and that the card hasn’t been reported lost or stolen. If the details are all correct, the issuing bank authorizes the amount requested and reserve those funds. Once the payment transaction is complete, a final instruction is sent to the bank to debit the funds.
4. Payment Settlement – Your merchant account is credited with the value of the card transaction within a few days of the actual transaction