You know those all important “oh, I never knew that” moments that we all come across from time to time?
We get lots of questions about internet merchant accounts and they usually fall into one of three categories:
1- internet merchant accounts
2- payment gateways
3- shopping carts
The categories are often linked but there are distinct differences between them so it’s important to understand how they all fit together.
In an attempt to cut right to the chase, I’m going to simply list the distinctions and ideas you should know and pay attention to when considering signing up for and maintaining an internet merchant account, payment gateway or shopping cart solution.
I’ll provide a brief explanation when needed but for the most part these are just meant to be reminder snippets that all relate to processing credit card transactions online.
Some of these things will overlap but my goal here is to provide clarity and understanding of internet merchant accounts and ecommerce solutions at your business.
Alright, here we go!
1- “Payment gateway,” “internet gateway” and “gateway” in the payment processing world, all refer to the same thing
2- A payment gateway and merchant account are NOT the same thing – the terms are just (and often times) used interchangeably
3- You must have an internet gateway AND a merchant account to process credit card transactions online – having one without the other does you no good. If your goal is to process transactions on your website and you sign up for a merchant account but don’t get a payment gateway to go along with it you’re missing a big piece of the puzzle.
4- There are 4 ways to use a payment gateway
- Virtual terminal – stand alone web interface to enter a customer’s credit card number
- Api redirect – takes the customer from your website payment page, redirects them to the payments page hosed by the gateway provider and then redirects them back to your website after the purchase is made.
- Api integration – full integration where your customer experiences the ability to add items to a shopping cart and buy something from your website without leaving the customized look and feel of your website experience.
- Cell phone – by using a card swiper you can use the gateway to process transactions in the field while obtaining retail rates due to the card present nature of the transaction.
5- Internet processing rates are higher than retail (swiped) rates – usually by an average of 0.50%
6- Monthly gateway provider costs typically range from $8 to $20 – these fees are in addition to the rates, fees and monthly charges from your merchant account provider.
7- Most payment gateways charge a “per item” fee which ranges on average from $.04 to $.08.
8- Paypal is both an internet gateway AND a merchant account provider. They also offer a gateway ONLY solution which means you can use your own merchant account provider and plug into their payment gateway solution.
9- Authorize.net is a payment gateway provider, and they also resell merchant accounts.
10- Merchant account providers like First Data, Heartland Payment Systems, Card Connect, Transfirst and others are merchant account providers who resell payment gateways. Some merchant account providers have developed their own payment gateway solution since a merchant account and a payment gateway go hand in hand.
11- The transaction flow (from customer bank to your bank account) for internet payments follows the same path as it does for a retail merchant account transaction.
12- When using a payment gateway the security risk falls on the gateway provider in the event of a security breach.
13- Never, ever, ever, store your customers’ credit card numbers on your own company computers or servers. This is one of the biggest benefits of using an internet gateway solution – it removes most of the security risk.
14- Using an internet merchant account while keying in (vs. swiped credit card transactions) your customers’ transactions is different than using a cell phone solution like Square or Roampay. However, some payment gateway providers such as NMI.com offer web based solutions AND mobile phone solutions so that you can use both modalities simultaneously under one merchant account.
15- Internet merchant accounts carry a higher chargeback risk than a retail merchant account, which is why it carries a higher percentage rate per transaction.
16- You can use an internet gateway in conjunction with a retail merchant account – you just need to remember to set the account up properly.
17- Some shopping cart solutions, like www.1shoppingcart.com act as a payment gateway AND a shopping cart solution.
18- A payment gateway is the virtual equivalent to a credit card terminal – such as the Verifone VX570.
19- You can use your internet merchant account to take orders by phone – via the virtual terminal option.
20- A payment gateway (along with a merchant account) can be set up and used in a retail setting by obtaining a USB card swiper attached to your computer system.
21- Some payment gateways have a VAULT function which allows you to set a payment profile for a customer and recharge the customer’s card each month on a designated day. This is especially useful if you have a subscription service or offer payment options to your customers and clients.
So there’s the list!
If you need clarification on any of these questions or thoughts, feel free to contact me directly by filling out the CONTACT US form on this website or by leaving a comment below. As they say, if you have a question, chances are that someone else has the same question.