Payment Gateways, Internet Merchant Accounts and 3rd party credit card processors
A Payment Gateway is a distinct service that also mimics as a liaison. Within a specific transaction it operates an intermediary between the merchants’ shopping cart and all the financial networks involved together with the clients’ credit card issuer as well as your merchant account. A payment gateway is more like an EFTPOS terminal in cyber world. Its functions are manifold, in that the payment gateway checks the legitimacy of the transaction, encrypts its details, dispatches it to the right location and lastly decrypts the responses which are then returned to the shopping cart.
The payment gateway is a flawless process and the customer never directly relates with it. This is because the data is advanced to the payment gateway through your shopping cart and a secure connection called the SSL. The configuration of the shopping cart is done through plugins which despatches information that is suited to that particular payment gateway.
It is wise to ensure the right payment gateway as the success or failure of your online business will depend largely on it.
Payment gateway issues
As with everything else and especially an ecommerce product like a payment gateway, it is important to look around, evaluate different prices and read the offer document carefully.
While choosing a payment gateway, there are some crucial points you need to consider; they are:
Payment Gateway compatibility
On purchase of a shopping cart package, make sure that it is compatible to the payment gateway service. If that particular payment gateway service is unlisted, then get in touch with the shopping cart merchant for an explanation. These companies usually support other payment gateway services when required by popular demand, usually with no additional fees.
In the event that you have not chosen a shopping cart, you first need to get a directory of applications supporting the payment gateway service provider. The benefit of a payment gateway is that it offers great prices, however if the choice of shopping carts or storefront software that it supports is restricted, then the whole process of setting up of online payments may prove to be costlier.
Caution is advised as some payment gateways support excessively expensive and restrictive shopping cart software packages and services.
AVS protection
AVS stands for The Address Verification System. The payment gateway should have a provision of an AVS protection. The function of the AVS is to substantiate the cardholder’s billing address with the card issuer thereby reducing the risks and prevalence of accepting deceptive transactions. Another benefit of the AVS is that the fees charged by your Merchant Bank are considerably reduced.
It is essential to see what other kinds of transaction protection are provided to you as a merchant. These will fall under ‘premium’ services and carry charges that will be added to the basic servicing fees. However, depending on what products you may have, these services will be indispensable. If you are in the business of selling technology or related products, it is advisable to pay for the extra service as chargeback rates on deceptive transactions can be expensive, costing you approximately US$ 30 each time.
It is essential to have a hub where one can receive funds from credit card sales. To maintain this, an Internet Merchant account is needed. An internet merchant account can be obtained from any major bank. Keep in mind, however, that your bank is likely to charge exorbitantly for such an account as it entails a huge risk. It would be more advantageous for you to use the services of companies the likes of Durango Merchant Services or Merchant Express who concentrate more on e-commerce. They will provide you with a merchant account/payment gateway solution as per your requirements. Another alternative is to make use of a third party processing service such as Paypal, 2Checkout or WorldPay. These three services are handled by the same company and provide the dual functions of a payment gateway and merchant account as one. They are also non-USA merchant friendly.
Selecting an Internet merchant account provider or third party processor:
In this aspect of e-commerce, it is necessary to survey the market thoroughly. When a company does not respond to your satisfaction within 24 hours or are ambiguous in their answers, it is best to avoid them and look elsewhere. Banks are known for employing badly trained staff rather than well experienced people with good product knowledge and who understand the intricacies of e-commerce. It is crucial that they elucidate the charges to be levied. The following are the rates that you can inquire about.
Statement – it is the fee to be paid monthly for issuance of all transaction statements.
Application fee – as the name implies, it is the fee levied upon application. Some companies will charge this fee whether your application is accepted or not.
Setup fee – These are the fees that are linked to setting up the account following the approval of the application.
Discount Rate – a certain percentage is reduced on the sale of every product and this is called a discount rate
Transaction – it is the flat rate on each transaction and added to the discount rate.
Monthly Minimum – this is charged as a minimum amount despite of the amount of sales you may have every month.
Reserve – it is a certain provisional amount in the account required to cover chargeback fees.
Chargeback – the exorbitant fee levied on a deceptive transaction usually up to $30 and may include any client disputing a transaction successfully.
Need micropayment support?
There are merchants who sometimes have products that cost only two dollars or less. This proves a major drawback as transaction fees take up the profit margins in the form of micropayments. Paypal has come out with a new micropayment fee structure for payments under $2. The rate is 5 percent plus 5 cents per transaction.
New online business?
In the event that you have a new business with a new and untested product range, it is better to use a third party credit card processor, such as Paypal or 2Checkout till such time that you get established. It will help you to get the benefit of a payment gateway with a merchant account rolled into one. They may have higher transaction rates but they do not charge any fee like the ones mentioned above, like the monthly fees, chargeback fees etc. Both these companies also include shopping cart applications and other free tools as part of the deal.
Hasty decision-making on choosing your e-commerce applications, elements and third party services will prove disadvantageous and lead to the failure of your business. It is crucial that you spend time to evaluate and assess thoroughly all the options because this will surely reward you in the future.
