Is Your Website Credit Card Friendly?
In my last column
I 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 enhance cash flow. I also pointed out
that you may have to look beyond your local bank for
help in getting things set up. 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.
If you'll recall, the question that spurred this topic
came from a lady who went to her local bank for help
in setting up a credit card acceptance system for
her business and her banker wasn't very knowledgeable
on the subject. I pointed out that her banker's ignorance
of the subject probably wasn't a reflection on his
skills as a banker, but a reflection on the compartmentalization
of the credit card aspect of banking.
The fact is, most banks can provide you with the merchant
account needed to accept credit card payments, but
beyond that have little to do with the process. Even
larger banks may only have a single person on staff
who is tasked as the "credit card 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 bank employee who
was in charge of processing internet merchant account
applications, "When someone pays online how do they
swipe the credit card in their computer…"
Much like a brick and mortar credit card processing
system, you will need the following to accept credit
cards on your website: (1) an electronic shopping
cart system that allows the customer to select products
and checkout when ready; (2) a payment gateway service
to get approval or declination of the credit card;
(3) a credit card processor who will process the transaction;
and (4) an internet merchant account issued by an
acquiring bank in which processed funds are deposited.
We covered most of these elements last week. Here's
a quick refresher for those who missed the basics,
then we'll talk about a shopping cart system.
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 who
then routes the information to the processor for approval.
Depending on the reply from the processor, the gateway
service will return an approval or declination for
the purchase. This entire process takes just seconds
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 financial institution account in which
funds from online sales are deposited. Merchant accounts
are usually issued by banks who 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 your customer to choose and purchase products.
Adding a shopping cart system to your website can
be simple or complex, cheap or very expensive. It
depends on the product you're selling and the options
you wish to offer your customers. As in everything,
you get what you pay for.
A shopping cart system typically consists of three
components: a product catalog, the shopping cart,
and a checkout/payment system. The product catalog
is your inventory component and displays the items
you have for sale on the website. The checkout/payment
system is the part of the program that allows your
customers to "add this to my cart," and the checkout/
payment system is the component that allows the customer
to checkout and pay for their purchase.
There is a wide variety of shopping cart software
on the market and the price is dependent on the features
you want. Shopping cart systems range from simple
HTML form insertions to full- blown catalog and inventory
systems like those used by Amazon or Dell.
You can spend from zero to tens of thousands of dollars.
Some of them you can set up on your site yourself
while others should be set up by someone who knows
what they're doing.
You can get a free Paypal.com shopping cart system
which is the most simplistic in nature, but the easiest
to implement. Using Paypal also alleviates the need
for a bank merchant account because everything is
handled by Paypal, for a fee of course. You insert
HTML forms into your website code and when an item
There are also numerous online companies who will
assist in the setup of your ecommerce / credit card
system. These companies charge several hundred to
several thousand dollars for their services, so it
would be wise for you to have an idea of exactly what
you need before calling them into play.
Customer submits credit card. The site sends the transaction
to the gateway. The gateway sends the info to the
processor. The processor contacts the issuing bank
of the customers credit card. The issuing bank returns
the result of the processor. The processor routs the
result to the gate. The gateway passes the result
to the website. The website displays the result.
One thing to remember when setting up an ecommerce
system on your site 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 that do not hesitate
to give their credit card number over the phone to
a complete stranger 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 either telephone processing or
giving it to a waiter.
Eighty-five percent of internet users surveys said
that a lack of security made them uncomfortable sending
credit card information over the Web.
It's up to you to instill a sense of security and
make the customer comfortable shoving their card into
Here's to your success.
About the author:
Tim serves as
the president and CEO of three successful technology
companies and is the founder of DropshipWholesale.net,
an online organization dedicated to the success of
online and eBay entrepreneurs http://www.prosperityandprofits.com
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