Accepting online payments is crucial, as it helps businesses sell their products or services online faster and more conveniently to the global audience. However, setting up an online payment processor is one of the most complex parts of launching an e-commerce business. Merchants running a brick-and-mortar business must already be familiar with the payment processing ins and outs, but online payment systems work a bit differently. So, here is a complete beginner’s guide to online payment processing a merchant must read carefully.
Four Components of Online Payment Processing
An online payment processing system requires four components to work:
A merchant is a company selling its goods or services online. Also known as an e-commerce merchant, the merchant needs a merchant account with the acquiring bank to collect business payments. The bank identifies the seller through the merchant account and receives the incoming funds. The merchant and the acquiring bank must comply with the regulations set by the payment services provider.
The buyer is the person purchasing products or services from the merchant. While buying something online, the buyer visits the merchant’s website, places an order, and enters the payment details on a secure checkout page. The online payment processor collects this information to authorise and decline or approve the payment.
The payment gateway collects the buyer’s details and transmits them to the payment processor. Simply put, the gateway remains at the front side of an online payment process, and the processor works in the background to make it happen. A merchant may choose a gateway and a processor from the same or different service providers to integrate the cash flow.
A payment processor is responsible for payment processing management with the aim of accepting online payments. When a buyer processes payment, the processor links to their bank and checks the available funds to approve the transaction. During the process, the processor also verifies the buyer’s identity to avoid fraud or foul play. Payment service providers set specific regulations that payment processors need to abide by.
Important Terms to Know
Here is a glossary of terms a merchant will frequently come across while managing online payments:
- Authorisation: When a buyer initiates a payment, the gateway connects to their bank account to check if they have sufficient funds to pay for it. If yes, it authorises the payment and transfers the funds to finalise the transaction.
- Tokenisation: A merchant should never save a buyer’s payment details on their website. If they want to store some details for faster access in the future, the payment gateway tokenises them to ensure safety. Hackers cannot use these tokens to misuse or make purchases without the buyer’s authority.
- SSL Certificate: An SSL certificate protects buyer’s and seller’s information while processing payments on site. They help improve conversions by giving a secure environment while transacting online. Customers must look for a ‘green lock’ icon at checkout to ensure the site has an SSL certificate.
- PCI Compliance: Payment Card Industry imposes regulations that merchants must comply with for online payment processing management. These regulations aim at securing online payments, and complying with them is termed PCI compliance.
Qualities to Look for in a Payment Processor
Merchants looking to accept online payments must work with a payment processor to receive payments in their merchant accounts. These are the qualities to look for while evaluating the available alternatives:
Payment Methods: Offering multiple payment methods to buyers is a crucial part of accepting online payments. Buyers have preferences when it comes to paying money online. Some like to use their debit or credit cards, while others are more comfortable using net banking or e-wallet. So, look at the payment methods the online payment processor supports. Find out on Daily Prosper if do you need a job to get a credit card.
Security Features: The merchant must provide buyers with the latest security features to build trust and gain a reputation in the industry. They need to keep their own finances secured while accepting payments online. Therefore, look for a payment processor with a robust anti-fraud system to protect buyers’ and sellers’ details.
Automated Billing: Subscription-based businesses must look for a processor with automated billing features. It streamlines the payments and boosts the merchant’s retention strategy.
Still, people hesitate to shop online due to fear of fraudulent activities. The merchant must offer a secure online payment processor to streamline the payment processing with minimal risk of losing money. An e-Commerce store with a vigorous payment processor encourages people to purchase online and build the business.
Read More About Supreme Target.