The Nuts And Bolts Of Ecommerce Credit Card Processing By Akhil Shahani At Isnare.com Ezine Articles

Gone is the era when customers used paper transactions! People are turning to plastic over paper when they open their wallets. Any online business therefore demands automated payment processing to be in place. Imagine that a customer is willing to buy your services online, but is not able to sign up and pay. Don't let this happen with you.

Customers prefer to use their credit cards for online purchases for a variety of reasons.

· Facility to pay later

· Ability to make large purchases

· Rewards such as loyalty points (for example airline miles)

· Tracking of reimbursable purchases on company account

If you’ve ever wondered how it all works, read on to learn about ecommerce credit card processing.

1. Authorization: This is the process of requesting an authorization from the bank or company that issued the customer’s credit card. This is done through a payment gateway connected to your online shopping cart. Say for example, that a customer is using a Visa card to make an online purchase. First, the transaction will go to Visa's network, where the validity of the customer’s credit card account is checked and an approval is sent back to the payment gateway.

2. Merchant Balancing: Also known as batching out, it involves the totaling of transactions and balances by card type and sending the information to the credit card processor. This is usually done at the end of the day and in most cases the payment gateways perform this automatically.

3. Capture: The process of requesting payment from the card issuer is called capture. The credit card processor matches the authorization data with the settlement data and transmits the card capture file to a back end processor.

4. Clearing: In this stage of ecommerce credit card processing, the bank debits the cardholders' account along with the transaction fee and makes appropriate payments to the credit card processor through an automated clearing house.

5. Settlement: This is the last step wherein the bank or credit card company calculates fee and deductions (i.e. chargebacks) and routs the net funds to the merchant’s account.

Now that you have an understanding of how ecommerce credit card processing works, you will be better equipped while setting up an online payment portal. Make sure that your web hosting service provider can provide you with the following technological requirements for processing credit cards:

Secure Payment Area: Ecommerce credit card processing involves the transfer of sensitive customer information. Hence you need to protect credit card data and other information from hackers during the transaction. You can secure the site using socket layer certificate (SSL) technology. You can purchase this certificate yourself, or your web host may let you use theirs as a part of their service.

Compatible Shopping Cart Application: There are different payment gateways, and each one has a specific set of standards. Ensure that your shopping cart application supports the available payment gateways. Check with your merchant account provider or consult your shopping cart documentation to ensure that all the elements work together.

PGP Encryption: PGP stands for "pretty good privacy". It is the most common form of email encryption. If your business model involves sending or receiving credit card information via email, you will need to encrypt such data. PGP encrypts emails when they are sent and decrypts them when the information has reached its intended recipient.

Firewall: While using ecommerce credit card processing, you may have to store customer data or credit card numbers on a server. Therefore, firewalls form a very important element of your business. If you are not certain how to install one, take the help of your web hosting company.

Remember that you cannot escape having to provide a facility for online payments if you want to run a successful ebusiness.

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