Payment Gateways And Merchant Accounts

If you have an online business, you need a merchant account to keep up. That's because most people, if not all, who purchase online expect to be able to pay online. After all, that's one of the reasons why they're buying through their computers - they don't need the hassle of mailing a check or coming down to a store to pay. If you have an online business and your website isn't capable yet of accepting credit cards, then you could be in trouble.

The following are the most basic requirements for applying for a merchant account:

1.You must be the primary owner of a business. 2.You must have a business license (Tax ID) or DBA (SS#), a checking account, a driver's license and good credit record.

The odds of your application being approved will also depend on factors related to your website which should:

1.be active 2.contain company name or DBA name 3.display products and prices, terms of service, refund policy, shipping methods, privacy policy and content details 4.have an active, working and sufficiently secured shopping cart (check out page)

When considering to get a merchant account, you will have a choice between applying with a merchant bank or a merchant service provider. Just like any other service providers and business establishments, they will give you distinct benefits. It is your job to weigh which is better. Some companies give their clients free credit card terminals as part of their plan. It is important, however, to know the difference between the two - merchant bank and merchant service provider.

Banks, during the credit card payment process, use First Data Corporation Network which clears nearly 80% of all credit card transactions. On the other hand, MSPs are companies that provide transaction processing solutions to merchants and are well-known for the following advantages over merchant banks:

1.MSP companies have several bank affiliates which indicates they have very high approval rates. 2.MSPs make recommendations on the best packages or solutions while banks offer limited options. 3.MSPs are more accommodating during negotiations relating to contract terms and rates.

Another thing you'll need to be familiar with are payment gateways. If you've always heard the term but never understood it, it actually refers to a company that provides a link from your website to your merchant account. It also provides a virtual terminal which can be used to enter credit card transactions manually through the Internet. An Internet or mail-phone-order merchant account cannot work securely without a payment gateway.

There are many companies that offer a 24 hour access to virtual terminals for reporting, processing, and check payments and other steps to complete the transactions. These orders can be made through your site in batch uploading or you can manually upload them through the virtual terminals. Here are the details of how a payment gateway works:

1. Buyer/customer types in payment into a secure site (shopping cart/checkout).

2. Information are delivered to the Payment Gateway for evaluation and approval.

3. Payment gateway forwards the transaction to a merchant bank.

4. The Merchant Bank sends the transaction to a credit card-issuing bank for confirmation.

5. Credit card bank verifies the transaction and sends a response code indicating denial or approval back to the merchant bank.

6. Merchant bank passes the response to the payment gateway.

7. Payment gateway displays payment information to the buyer/customer.

If you are an online merchant, you understand the importance of a credit card processor and how it affects your business and your customers. As a result of the stiff competition in the business industry these days, an online credit card processing gateway is needed to keep up with the times.