Accepting Credit Cards Online

In order to accept credit cards online, you'll need three basic things: a secure way to transmit the card number from the user's browser to your Web server, a merchant account with a bank and payment processing software to link your Web server to the bank.

• Security
  The most popular way to transmit credit card data securely over the Web is with the secure socket layer (SSL) protocol. You (or your Internet service provider) will need to use a Web server that supports SSL, and your customers' Web browser must also support SSL (most do). You'll also need a digital certificate that identifies you as a legitimate business ? these are available for a fee from companies such as VeriSign.
  
  
• Merchant accounts
  You'll need a special bank account in order to accept credit card orders. Most banks offer merchant accounts ? the problem is figuring out which one offers the best price, typically calculated as a percentage of each credit card order you submit. Most banks charge higher fees for what they consider risky accounts, such as those with large numbers of charge backs or fraudulent charges.
  
  
• Payment processing
  This is where things get really tricky. Dozens of companies offer transaction processing software that sends the right information to everyone involved in the sale ? your bank, the customer's bank, the bank issuing the credit card and so on. But most banks work with a handful of the biggest companies, including Authorize.Net and CyberCash. Some processors lease their services to you for a monthly fee, while others combine a monthly fee with some percentage of your sales.

  You have 3 basic choices:
  
  

  • A device in your office to enter the transaction over the phone lines. ( You can actually just use the phone on your desk. ) This device could also be similar to those you see in retail stores when you buy something using a credit card. There are many options with widely varying prices.
    
    
  • Internet software that enables you to 'deposit' your transaction over the Internet. Typically by filling out an online form. Here again you will find a rather wide variation - in most cases you will need to rent the software on a monthly basis. This option also includes Batch Processing software.
    
    
  • Real Time Credit Processing. This is the service provided by companies such as AuthorizeNet and Cybercash. Using this method your Shopping Cart interfaces with the Real Time Credit Processing company to complete the transaction. This takes place automatically while the customer is placing the order. Using this method the customer and the seller are notified as to whether the credit card account has sufficient funds to enable the transaction.

What will it cost to process credit card payments on the Internet?

A seller will pay a discount rate -- a percentage of each transaction -- that will typically be in the 2 percent to 3 percent range. A set transaction fee of about 30 cents also will be paid for each sale. Some acquirers will charge an initial setup fee of several hundred dollars, and some charge monthly minimums. The discount rate quoted by most acquirers for Internet credit card transactions is often the same as for mail order/telephone order (MO/TO) catalog sales, which is significantly higher than for in-store transactions. In-store discount rates are typically in the 1.5 percent to 1.75 percent range, with an approximately 30 cents transaction fee. Merchants will be charged a fee in the $10 to $15 range for each payment chargeback. This is a concern for merchants selling goods that attract online credit card fraud perpetrators. Fees for fraud protection and tax calculation services, assessed by the payment gateway services, are also charged on a per-transaction basis.

How important is it to receive real-time authorizations when customers try to purchase online?

Customers are given real-time authorizations for in-store purchases and will expect the same immediate acceptance of their transactions on the Internet. With rising Internet fraud rates, real-time connections to the processing networks also give merchants access to systems (i.e., fraud detection services and digital certificate networks) used to authenticate buyers. One of the biggest struggles that Internet sellers face is converting online visitors from shoppers to buyers. Industry studies indicate that even when potential customers reach the payment page during the purchase cycle, they abandon purchases nearly two-thirds of the time. Not finalizing payment authorization at the time of purchase further jeopardizes the closing of an online sale.

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