Processing transactions over the internet requires a payment gateway, which is not to be confused with the role of a merchant account provider. Along with this confusion, what is common among those new to credit card processing, is that they easily get steered to a certain payment gateway due to the insistence of their merchant account service providers without first verifying the quality of the product, the necessity or compulsion to do so.
First of all, the merchant account provider and gateway are not the same thing. In the chain of events or steps involved in credit card processing, a payment gateway figures between your shopping card software in case of an online business and POS software in case of a storefront and your merchant account provider. It is the merchant account provider who sets up the merchant with the payment gateway. Often the provider may refer the merchant to a gateway that he may be linked to. You need to know that a merchant account provider can usually interface with any gateway, so just as you search the internet before choosing your merchant account provider, do the same with your payment gateway to select the best one for your business.
While acquainting yourself with the working of a payment gateway, you also need to understand what a payment network is. Several major credit card processors have processing networks that gather the transaction data from millions of merchants, aggregate it and then send it off to VISA and MasterCard to calculate how much each bank needs to pay each other to settle up at the end of the day.
We now come to how a payment gateway actually works. The entire sales process begins with a potential customer visiting your website to check out the products or services offered by you. He selects an item and clicks on “buy”. He next fills in his credit card information and other necessary details in the shopping cart software, which sends this data to the payment gateway. The payment gateway further sends this information to the payment network your merchant service provider is associated with. The processing network connects to the VISA or MasterCard network. It is also the processing network that reverts to the merchant account provider and informs the customer’s credit card issuing bank about the transaction. Finally, the end result, which comprises of a successful sale or the rejection of the order is sent back down the chain, until the user is informed of the same.
Independent gateways can be used with almost any provider. Then there are the captive gateways that are owned by merchant providers and only made available to their customers, and finally the private label gateways offered by companies that have sprung up to provide gateways merchant account providers can package and sell as their own. With several choices available to you, make a choice on the basis of the capabilities that you need and the price as well.
For more, visit Credit Card Processing and Merchant Account Services