eCommerce 101
How eCommerce Works
If you intend on accepting credit cards, debit cards, or electronic checks via your website, it is a good idea to have an understanding how the transaction process works and what components you will need in order to fulfill this objective. This article by no means is all inclusive, we do not discuss security, processing fees, or shopping carts, rather this article discusses the transaction process. As always, we welcome your comments, suggestions, or questions regarding this article or any other service that Allmar Technologies provides. We would be delighted to provide any additional information.
Before we dive into the diagram below, it is important that we define some terms:
- Payment Gateway
- A payment gateway facilitates the transfer of information between a website and the financial institutions. It has a similar role as a POS device in a traditional brick and mortar store.
- Issuer
- A financial institution such as a bank that provides your customer with a payment instrument. The issuer is responsible for the cardholder's debt payment.
- Acquirer
- A financial institution that establishes an account with you, the merchant, and is a member of MasterCard and/or Visa which maintains merchant relationships and receives all bankcard transactions from the merchant.
- Merchant Account
- A merchant account allows a business to accept credit cards, debit cards, gift cards and other forms of electronic payment.
- Clearing House
- A clearing house is a financial services company that provides clearing and settlement services for financial transactions and often acts as a central counterparty.
The two components that you will need to get started (besides a website) is a payment gateway and a merchant account. Finally on to the process.
- Your customer submits their credit card information to you via your website.
- Your website relays your customers information to the payment gateway.
- The payment gateway then queries the issuer to validate the card and to ensure that funds are available.
- The issuer responds to the payment gateway's request, either approved or declined.
- Back to the payment gateway:
- The payment gateway forwards the issuers response back to your website.
- If the issuer approved the request, the payment gateway then informs the acquirer of the transaction.
- Inform the customer and settlement:
- Your website presents your customer with a receipt upon approval or an error message if the request was denied.
- The acquirer sends the transaction to a clearing house for settlement.
- Funds are deposited into your merchant account once the transaction is settled between the acquirer and issuer.
We hope you found this article both informative and educational. Start your website project and schedule a free consultation with us today.
