It is of utmost importance that every e-commerce site has a payment processing system up and running on the web site. This is because if the customers wish to buy a product or a service listed on the website, they need to first sign up and then place a valid order using their credit card or other payment method. If the payment system is not is not place, it will create problems for the customer as well as the website owner.
If you are starting out from scratch, you can choose from wide variety of payment processing system options available such as having your own merchant account or third party payment processing system. The steps for credit card processing for a merchant account are given below:
1. A buyer places order.
2. This order information is then securely transferred to the merchant
account provider over the internet using a secure encrypted messaging protocol.
3. Merchant account provider securely forwards the transaction authorization request through its payment gateway to the processor.
4. The transaction is then routed to the issuing bank to request transaction authorization. The transaction is either authorized or declined by the issuing bank. The merchant account provider then relays this information to the merchant.
5. If the issuing bank approves transfer of money to acquiring bank, the acquiring bank credits the merchant’s account.
However, in the initial set up period of your business, it may be difficult to get a merchant account, as you may need to build a credit in the market first.
All the exorbitant cost involved in having your own merchant account can be quiet discouraging for a newbie. Merchant account can cost as much as $30.00 per month in addition to a high application fee, which can be, quiet expensive when you are just starting out.
There are some low-cost alternative such as paypal, 2checkout etc. which you should consider before having your own merchant account These companies have no monthly or yearly contractual obligation in addition to low application fees. But, these companies charge slightly higher transaction fees. Additionally they check for fraud orders, which you have to check yourself when operating a merchant account.