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E-Commerce and Credit Cards 101... E-Commerce & Credit Card Processing E-Commerce can seem intimidating and overly complex, especially if you're a small business. I intend to break it down into its basic parts and give you a clear starting point from which to proceed with your e-commerce solution. Read on and it will all start to look a lot simpler! The 3 basic elements involved in your e-commerce strategy are: Credit Card Processing Internet Merchant Account E-Commerce ready website, shopping cart software Credit Card Processing You'll need a company to process your credit card transactions for you. These companies are sometimes referred to as your Payment Service Provider (PSP). Your credit card processing company will usually: Fraud check the customer's card Charge the customer's card Settle funds to you via your Internet Merchant Account There are lots of different credit card processing companies around. If you're in the USA you've probably got the best deal - credit card companies are falling over themselves to get you to choose them as your credit card processor. If you're in the UK, Ireland or elsewhere you should still find you have a good selection to choose from. It's just a case of comparing their relative advantages and choosing the best processor for your business. When choosing your credit card processor, the key elements to look out for are: Regular fees - do you have to pay a flat monthly or yearly amount? Per Transaction fees - these usually consist of either a flat amount or more often a percentage. For example, your credit card processor may take 5% of the value of each transaction. Some processors charge both a flat and percentage fee on each transaction. Chargeback fees - how much will they charge you, if one of your customers insists on having their money back? Internet Merchant Account An Internet Merchant Account (IMA) is essential to trading online, since this is where your credit card processor will send your funds. You can go to your bank and talk about setting up an IMA but there are also lots of companies that specialise in providing Internet Merchant Accounts. Some allow you to sell in your own country, others worldwide, so be sure of what you're getting before you sign up. Please note that if you are already trading offline and have a Merchant Account with your bank / account provider, you will still need to open an Internet Merchant Account specifically. Most providers view the two things separately, due to the fact that all Internet transactions are 'card not present' transactions and therefore carry a higher fraud risk. E-Commerce Ready Website with Shopping Cart Software There's no point setting up your Internet merchant account and credit card processor if you've got no way to sell. An important part of your online store's development is selecting the best shopping cart software for your requirements. Shopping cart systems allow the customer to purchase multiple items at once. Your website's software keeps track of the contents of visitor's shopping cart. When the visitor is ready to checkout, your online store communicates with your credit card processor and handles the credit card payment. How this happens varies from one e-commerce solution to another. At the point the customer enters their credit card details, they should be on a secure server. This means that their details are encrypted for increased security. Web pages located on secure servers are usually denoted with a padlock symbol in the status bar of the web browser. Storing customer credit card information is an important responsibility and should always be done through a secure server, with the credit card details encrypted. Deciding how to handle credit card details is a vital part of your e-commerce strategy. There are two options here, you can either host a secure payment page yourself or let your credit card processor handle it for you. Option 1 - Secure page on your credit card processor's website Many credit card processors are happy to handle this responsibility for you. They offer to 'host' the secure payment pages themselves, on their secure server. In this situation, your shopping cart software communicates all the order information to the secure page and the customer actually makes the transaction on a different website (that of the credit card processor). This 'remote' secure page can usually be branded to look like part of your website, so that the customer gets a seamless transition. Once the payment is complete, the shopper is then returned to your website, usually to a 'Thank You' page. The advantage of this method is that you are not responsible for receiving and storing credit card data. Option 2 - Secure page on your website If you host the secure payment page yourself, the credit card payment is processed in the background. Your website communicates with your card processors 'behind the scenes' and is told whether or not the transaction was successful. The advantages of this method are that the user's experience is slightly enhanced due to the fact that they never leave your website; and that you have complete control of your credit card processing decisions and methods. All-In-One Solutions You'll still need a website of course but there are now some options that combine the roles of credit card processor and Internet Merchant Account provider very nicely. These are sometimes referred to as third-party processors. Some third-party companies are believed to have operated in a slightly grey area in legal terms, because they effectively accept credit card payments on your behalf, without you needing to meet the usual criteria for an Internet Merchant Account. Two companies that provide a combined e-commerce solution that I recommend are PayPal and WorldPay. WorldPay even provides you with a dedicated Internet Merchant Account.
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