Accepting credit card payments online can often be the most difficult part of establishing an online store. There is a minefield of information to understand, which varies depending on who you seek advice from. Even after the required information is understood, the process can still seem difficult if not impossible to achieve, possibly arriving at a dead end. This article aims to demystify the process and get you accepting credit cards as quickly and efficiently as possible.
Card Schemes, Issuers and Acquirers
Credit cards are administered by a number of well known global card schemes. Visa, MasterCard and American Express are the most popular of them. Visa and MasterCard license the card issuing to banks. American Express issues cards directly. Consumers establish a relationship with the card issuer to get a credit card in their name. The card issuer, who taking the credit risk, makes money from interest and annual card fees.
Issuers are often but not always acquirers as well. An acquirer provides a merchant (the business accepting credit cards) with a link to customers issuer through the EFTPoS (Electronic Funds Transfer Point of Sale) network.
Bob's Shoe Shop (the merchant) make a sale to Jill Smith (the customer). Jill pays with her Visa card, which was issued by Mammoth Bank (the card issuer). As it is an in-store purchase (card present) Bob scans the card through his EFTPoS terminal, which was provided by Giant Bank (the acquirer). The card details (which were scanned) together with the sale amount (which was sent to the terninal from the POS terminal) is sent by the terminal to Giant Bank, which in turn sends the transaction details to Mammoth Bank through the EFTPoS network. Mammoth Bank checks for available credit, records the transaction and responds with an "Approved" message. Giant Bank records the transaction against the merchant's account for end of day settlement. The funds of the sale will be available in the merchant's bank account the next day.
An Online Example
James Jones visits Bob's Shoe Shop online store, selects a pair of running shoes and checks out paying with his MasterCard. This is known as a card not present or MOTO (Mail Order / Telephone Order) transaction.What happens behind the scenes is similar to the card present transaction but has some important differences. Bob's Shoe Shop has a second merchant facility for online sales - an Internet merchant facility. This is an important difference because the two types of merchant facility are not interchangeable. The card details (which were securely captured by ezimerchant) together with the sale amount are sent to a payment gateway (included with ezimerchant), which in turn sends it to the EFTPoS network for processing.
Online versus Offline
Looking at the preceding examples it helps to think of your ecommerce platform as your online Point of Sale system and your payment gateway as your online EFTPoS terminal. Because of the differences in acquirer interfaces, a different type of merchant facility is required for offline and online transactions, with one exception - an Internet connected EFTPoS terminal, which connects through an Internet merchant facility.
It is technically possible to use an offline merchant facility to process orders, by having your ecommerce platform capture the credit card details, which you manually enter into your EFTPoS terminal. This approach has two major flaws though. Firstly it is typically against the merchant agreement and secondly it makes it extremely difficult to comply with PCI DSS requirements. Merchants who already have an EFTPoS based offline merchant facility should not find it difficult to add an online facility through their existing provider.It costs no more to process in real time through ezimerchant. We charge a per transaction fee for securing credit card transactions to PCI DSS compliance requirements and include a payment gateway facility at no additional cost (after a one off setup fee).
American Express and other direct card schemes
To accept American Express card, Diners Club cards or any of the other card schemes who don't license their brand through third party card issuers and acquirers, you will need a direct relationship with them. They will give you merchant credentials, which get attached to your payment gateway facility. Payment processed through these card schemes will settle separately into your bank account.
To summarise, here is what you will need to accept credit cards online:
- An Internet merchant facility from an acquirer (typically your bank)
- A payment gateway account (provided by ezimerchant)
Once set up, your acquirer will provide you with details regarding your merchant account, specifically a merchant ID, a terminal ID and a merchant category code. You then pass those details on to us and we'll set up your payment gateway account and hook it up to ezimerchant.
Important note: When applying for an Internet merchant facility, ensure that you get a facility which works with a third party payment gateway. Acquirers, particularly banks, will typically default to providing a facility which includes their payment gateway. You want to avoid this, otherwise you end up paying twice.
You may wonder why it can be so difficult to get a merchant facility. You are after all just wanting to accept credit cards online and you plan to use a verifiably secure solution known to the acquirers. Isn't the risk between the banks and the credit card customers? The answer is in the rules dictated by the card schemes, particularly chargeback rules. A customer typically has up to 6 months to dispute a transaction. Considering you get the money from the sale the next day, that is a 6 month risk the acquirer has to carry. Likewise if a merchant completes the sale, takes the money but fails to deliver the goods, the risk is with the acquirer. This is why the checks are so stringent. They are effectively extending a line of credit when they issue your merchant facility.
A quick, viable alternative
When signing up for ezimerchant, you effectively accept credit cards instantly through PayPal, which is automatically integrated using the email address you use to sign up, even if that email address is not already associated with a PayPal account. Through PayPal your customers have a great deal of flexibility when choosing how to pay. They can make a payment using their credit card, PayPal balance or a bank account. The funds are available instantly in your PayPal account (only e-check payments bering the exception). Whether or not you end up accepting credit cards directly through your own Internet merchant facility, you should keep PayPal enabled as a payment option. Because of the extra choice it provides your customers, you will make sales that you would not otherwise have had.