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1-866-854-98511-866-854-9851Chargeback, payment gateway, PCI compliance, recurring billings, tokenization, shopping cart.
With all these words thrown around in the market, it's no wonder consumers and merchants alike are lost and frustrated. This page explains what you need to begin accepting online payments, how and when you receive your money, payment processing security, chargebacks, billing methods, industry risks - everything you need and should know before choosing the right payments partner.
Industry risk refers to the dangers involved in doing business in a particular market field. Dealing in a higher risk industry will result in a tighter account restraints. Merchants will also be required to provide additional proof of financial stability. Here are a few examples of high risk industries: telemarketing, virtual currency, lodging, auctions, and tours, etc.
Some merchant providers might host high risk industry accounts but many will prohibit dealing with markets such as: adult, online dating, credit repair, and liquor, etc.
To begin processing payments, you must sign up for a merchant account through a payment processor then acquire a payment gateway. Some companies bundle the two services together but they can also be bought separately.
The credit card issuer determines how long it will take to process a customer's payment transaction and file money into the merchant's bank account. The average processing time is listed below:
Depending on the merchant account provider and/or gateway, merchant processing fees may be charged daily or monthly.
"What is the difference between a payment gateway and payment processor?"
They are bundled or separately sold payment processing services. To process payments, merchants must have a payment gateway and acquire a merchant account from a payment processor.
Payment Gateway |
Payment Processor |
| The gateway is a piece of software running on the server that securely connects the purchase platform (website, virtual terminal, mobile) to the payment processor. When a customer makes a purchase, the credit card info is sent through the gateway to the processor. | The payment processor hosts the merchant accounts. It's also responsible for securely receiving credit card info sent by the gateway. Once it obtains the data needed to process a payment, it begins to handle the transaction and transfer money from the customer to the merchant's bank account. |
Each merchant account provider can provide different credit card services the merchant can chose from when filling out the merchant application form. Generally providers will bundle the popular credit card issuers such as Visa, MasterCard, and Discover leaving others such as American Express as an option.
Chargebacks occur when a customer challenges the credit card issuer about a made purchase. The issuer investigates the details and looks to reverse charges suspected of being fraudulent. The additional chargeback processing fees must be paid and covered by the merchant.
Depending on the type of credit card, issuers charge the customers transaction fees for each payment. Fees may also vary depending on your merchant provider. Be sure to read the credit card processing bank's contract and ask your merchant provider the right questions to avoid paying unwanted hidden fees.
Whenever a merchant account provider issues an account they are financially liable for any losses. The provider faces this risk for every issued merchant account that supports online credit card processing. For example, if a business goes bankrupt and outstanding liabilities still exist (say, goods that have not been yet delivered to customers), the liabilities would be passed onto the merchant provider (who must cover the cost of the outstanding goods).
Due to the possibility of the scenario stated above, it has become a business standard to acquire the merchant's personal guarantee to ensure all parties are aware of their responsibilities. The business will have to provide sufficient proof of financial strength, especially for high-risk services such as aggregation, annual billing, and especially lifetime memberships.
Payment Card Industry (PCI) compliance standards were created by the major credit card issuers to protect personal information and ensure security when transactions are processed using a credit card.
There are many factors that are considered when estimating the cost for your business to become compliant. A large merchant, processing around 1 million transactions/year, can spend up to $500 000 annually to meet PCI standards while smaller merchants such as resturant owners and retailers may pay up to $50 000 on technology upgrades to become PCI compliant.
Visit the official PCI Compliance website for more information on the standards.
When it comes to processing online credit cards, security is one of the biggest concerns. When your business is PCI Compliant, your customers' credit card data/account and transaction information is protected from hackers or any malware system intrusions. Consumers should recognize this standard and look to make payments deemed under PCI Compliance.
© 2011 Admeris Payment Systems Inc. 326 Adelaide St W, Suite 400, Toronto ON, M5V 1R3 Canada.