E-Commerce 101 (continued)

How it Works - So how does this credit card business work? First let me dispel one common myth. Credit card processing by its nature is not done over the Internet and you do not need to accept your charges through the Internet to have an efficient, productive on-line business. Though you may wish to set up your business with an on-line "real time" processing gateway, especially if you anticipate 5 or more transactions per day, there are other methods that can work well for you. The first step in the process is capturing your customer's credit card information. That can be done verbally, by mail, by fax, on-line by use of a shopping cart or order form, or by swiping the card in person. The way you obtain your clients credit card information is totally up to you, though you will need to specify that on your merchant account application. Order capturing will be discussed in detail later on.  Once you have the credit card information you will need to transmit that information to your processor. The processing method you will need depends on the way you take orders and the amount of money you wish to budget for the function. There are three common ways that this can be done. One of the most common for a small internet business is with processing software that installs on your PC such as PC Charge. The software will be configured with your merchant account number and terminal identification number and a specific dial up string for the modem or broad band connection that you have in your computer. Once your software is set up, processing a charge is a breeze. You simply enter the credit card information that you obtained from the customer and the amount of the charge into a window. You then "send" the transaction on to the processor. Your modem will dial up the processor's mainframe usually over a toll free number that has been reconfigured in the software. In about 5-15 seconds you will see an approval and an authorization number or a decline on your screen. You can then print a receipt to your local printer if you like. Depending on the processor you are set up with your software will either automatically close the batch or you will do this yourself in the software.   Your processing organization works with an acquiring bank that will then settle the batch for you. Once settlement occurs the acquiring bank pays you your daily transaction total via an electronic deposit to your bank account. This is called an ACH transaction. Depending on the processing bank it will take from 2-5 business days for this to occur.

If you do not want any manual tasks associated with processing you may wish to opt for a live, real time system like TotalPay Authorize Net.  These systems work in conjunction with 3rd party shopping carts such as Miva Merchant and Mal's Ecommerce and our own Total Merchandiser®. These systems will capture the credit card information from the web site where the customer enters the info, download it to the Host server, transmit it on to the processing center and obtain the approval (or decline) and then send a confirmation message back to the client. Usually you will be given a password protected "manager" area where you can obtain access to information that has been posted to the server. Usually you can download files and import them into other software applications such as spreadsheets. The possibilities are unlimited. The disadvantages of real time systems are (1) cost - you will be charged a monthly gateway fee - usually $10 - 15/mo  (2) the system's ability to detect and prevent fraud are in most cases good but not fool proof. Fraudulent use of credit cards at your site can result in your jeopardizing your merchant account. Credit card validity remains the responsibility of the merchant not the bank, even though you are using an automated system. Some banks now offer their own Internet processing systems or endorse 3rd party systems - this is the best choice because they have been reviewed and approved by your merchant bank. All processing gateway systems provided by TMS are guaranteed to be approved for your processing network.  

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