These days, it’s imperative that businesses keep up with the needs of today’s tech-savvy consumers on an ongoing basis. As technology continues to simplify a variety of tasks, consumers are demanding a high level of convenience from business owners and service providers. Online businesses and ecommerce websites are rapidly gaining momentum as they offer convenience and ease-of-use, while delivering peace of mind to consumers. 

The process of accepting online payments is an essential feature for ecommerce websites and applications. Consumers expect websites to offer frictionless credit and debit card acceptance as it is less stressful and complicated than entering a bank routing number. All online business owners owe it to themselves to research merchant accounts and find a trustworthy merchant service provider to partner with. 

Understanding online payment processing. 

When a business owner signs up for an online merchant account, it allows them to accept payments on their ecommerce websites. To understand how this works, business owners need to understand how online payment processing works. 

The key players.

There are two key players in online payment processing: the business owner and the customer. To accept online payments, businesses need to open a merchant account. The account will accept funds from the cardholder’s bank. It works at the backend to smoothly process the online transactions. The consumers get their cards from an issuing bank that they present at the POS terminal or checkout in exchange for products or services. 

Advanced technology.

Technology is the driving force behind the payment solutions that people are using today. The process of online payments uses two main forms of technology. The first is the payment gateway. A payment gateway is an ecommerce application service provider that allows payments to be made through debit cards, credit cards, or any other form of electronic payments. It serves as the key linchpin between your website’s shopping cart and the payment processing network. 

In addition to the payment gateway, there is the payment processor. They are the most crucial part of the process as they handle critical responsibilities such as: forwarding the transaction to the processing network, sending the billing statement to the merchant, and securing authorization from the merchant’s bank. At North American Bancard, we offer access to seven different payment gateways, as well as Electronic Payment Exchange (EPX), our own in-house payment processor. This allows us to oversee the entire payments process, resulting in less points of failure.

The process.

There are two stages of online payment processing. The first stage is the authorization of the transaction. A customer makes a purchase on a website using their debit or credit card. Before passing through the gateway, the transaction’s data gets encrypted and is sent to the payment processor. 

The payment processor then sends a request to the bank that issued the credit card to the merchant to check whether a consumer has sufficient funds to make the payment,  the expiration date of the consumer’s account, sufficient funds, and the limits of the credit card. The issuing bank then responds to the processor with an “approved” or “declined” and adds credit to the merchant account. All of this happens in just a matter of seconds!

The second stage of online payment processing is settlement. This is when the card issuer forwards funds for the transaction once it has been approved. 

Pricing and fee structures.

Online payment processing results in fees which have to be paid by you as the business owner. All entities involved in the process, including the issuing bank, card associations, the payment processor, and merchant bank, are compensated for helping you complete the process. A percentage of the transaction amount is paid to the issuer, known as the interchange fee. Then there are assessment fees, which are paid to the credit card association. Finally, your business banking and payment processing partners also get a predetermined amount for the transaction. 

Whether you’re planning to expand your brick-and-mortar store to the online world or you’re looking to grow your existing ecommerce business, it’s important that you understand the online payments process and partner with a reputable and knowledgeable payments technology company!

Contact NAB today and see how easy it is to get the merchant services you deserve.


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