Is Your Website Credit Card Friendly?

Small Business Q&A with Tim Knox

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 to perform.

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

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 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
is purchased.

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 their computer.

Here’s to your success.

Tim Knox
[email protected]
For information on starting your own online or eBay businessArticle Search,

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