The method used to accept payments from customers via debit or credit cards is called online-based credit card processing. The same way a person swipes their card when making a payment at the supermarket, online shoppers must also do the same when making purchases over an e-commerce website. The only distinction is that there is no physical link to execute the transaction, hence online processing. Online credit processing is the route by which money transactions take place online. The steps involved require a payment gateway and payment processor to assist in moving and sharing information over the internet to ensure that a business owner receives customer payments quickly and correctly. A lot happens behind the scenes, even though the transaction takes seconds.
Process of Accepting Online Payments
The customer’s data is securely moved over the internet when they submit their credit card information to ensure that they have sufficient funds to purchase. Once the online credit card processing companies finish the verification, the transfer of funds from the client’s account to the business owner’s account is executed. The following is the step-by-step process of online credit card payments:
1. The client enters and submits the credit card information as they check out from the online store.
2. This information is encrypted and carried securely through the business’s integrated gateway to the credit card processing company.
3. The credit card processor submits the transaction data to the applicable credit card network.
4. The credit card network sends the information to the client’s bank to verify whether the customer has enough funds to pay for the goods or services. If the cash is available, the transaction is approved, and if not, it is declined.
5. The declined or approved status of the transaction is sent by the client’s bank to the credit card processor, which then reports the information to the company’s credit card processing company and finally to the merchant.
6. The order is fulfilled once the business owner receives the authorization message.
7. The shopper’s bank transfers the money to the credit card network, which sends the money to the company’s bank. The bank deposits the funds directly to the account specified in the initial application.
Should One Use an Online Merchant Account or a Third-party Service
Several businesses choose to use third-party services because of the quick setup and convenience, but there are some disadvantages of using these services exclusively by themselves. Both methods provide clients with the flexibility and convenience they need, but one needs to ensure that accepting credit cards through the business merchant account is an option. The following are reasons for this:
· Convenience: A merchant account makes the checkout process more convenient. If one only accepts third-party services, the client has to leave the business site and log on to the third-party site or create one to complete the transaction. Many clients will not be willing to do this.
· Reduce abandoned shopping carts: When customers are unwilling to take the extra step to check out, they will most likely abandon their cart and find a website that meets their needs. Using one’s merchant account to receive payments increases sales.
· Faster receipt of payments: A merchant account allows businesses to receive their payments in a minimum of two days, and the money is directly deposited into the business bank account. Third-party services can take longer, causing challenges when balancing accounts at the end of the month.
· Customer support: Merchant accounts give more personalized customer support, while third-party services offer phone support to highly valued customers.
· Business growth: Third-party services are no longer viable as the business grows due to their high transactional costs. As the consumer base increases, so does the need to expand payment options to satisfy the different sets of customers.
Fees Associated With Online-Based Credit Card Processing
Regardless of the provider one chooses, all providers have a standard fee every month:
· Discount rate: A percentage of each sale a credit card processor retains.
· Gateway fee: The credit card processor provides this. They encrypt customer data for safety.
· Transaction fees are separated into transaction fees per transaction and gateway fees per transaction. These small fees are linked to each transaction one processes.
· Statement fee: Like a personal credit card bill, the processor lists all the transactions for the client to review later.
In sum, selecting a suitable credit card processor is vital for a company’s long-term and short-term success. This guide offers a snippet of the information needed for a business owner to decide on this and help their business thrive while satisfying their clients.