In our last blog post, Part 1 of “What You Need To Know About Payment Gateways,” we covered the basic essentials of what a payment gateway is and what purpose it serves.  To summarize, a payment gateway is the link that connects your website to your merchant account at your bank—it handles secure processing of your customers’ financial information and relays the payments right to your bank account.

While it is technically possible to skip the payment gateway all together and connect right to the financial institutions’ payment processing networks, doing so would be extremely cost prohibitive, due to the extreme degree of custom interface programming and the levels of access required.  Payment gateways have been created as a solution—a middleman—to this process.

The Step-By-Step Payment Process

In a typical payment gateway transaction, the process works in several different steps.  Let’s take a look at the step-by-step payment process from start to finish:

One: Your customer provides their payment details, including the credit card/debit card information necessary.

Two: The provided information is SSL encrypted and securely submitted by your e-commerce web server to your payment gateway.

Three: Your payment gateway service transmits this information securely to the processor of your merchant bank.

Four: The processor for your merchant bank passes the information along to the credit card network.

Five: The credit card network forwards the information one more time to the correct issuing bank of the customer’s credit card for approval and processing.

Six: After the cardholder’s issuing bank has made the decision to approve or decline the transaction, that information is now routed in a reverse path to the credit card network, merchant bank processor, and finally, back to your payment gateway.

Seven: The payment gateway sends the final results of the transaction back to your e-commerce system on your web server with the appropriate approval or decline status.  This enables a final confirmation to your customer in near real time.  Steps one through seven typically take place instantaneously.

Eight: Now that the transaction has been approved by all financial networks and banks involved, the settlement process of actually depositing the funds into your merchant account are handled within their own network, usually within a couple of days.

What do you think about this process?  If it seems rather complicated, that’s because it really is.  And this is another reason why using a dependable payment gateway to intervene and expedite the process on your behalf is downright essential.

What Payment Gateway Does Sleepless Media Recommend?

It’s a good question.  Here at Sleepless Media, we prefer to work with Authorize.net, and here’s why:

• Authorize.net integrates very nicely with most open-source and custom e-commerce software systems that we use on our customers’ websites.

• This payment gateway is very professional and reliable—one of the top in the business for sure.

• Using a payment gateway like Authorize.net on your website appears much more professional than using other third-party payment collectors.  The difference in conversion rate when using professional payment processing is a clear advantage.

• Their setup and transaction fees are very competitive (and often amount to be lower in cost than receiving payments from a third-party service would end up being).

There are additional reasons why we recommend Authorize.net to our customers for a majority of e-commerce applications that we work on—please just give us a call if you’d like to discuss the options and advantages in depth.

Remember, payment systems are probably one of the more complicated components of an e-commerce website.  It’s not that they’re all that difficult to work with or understand, it’s just that most folks just want their shopping cart and payment process to work—without paying too much attention to what the best available option actually is and why it’s best in the unique circumstance it’s being used.

We want to help you choose the best possible payment system for your new website!

Tags: authorize.net, E-Commerce, payment gateways, payment processing

This entry was posted on Thursday, May 6th, 2010 at 1:17 pm and is filed under E-Commerce. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.