THE SYSTEMS Essay

Submitted By JulieSalam
Words: 1089
Pages: 5

TRANSACTION SYSTEMS USED IN E-COMMERCE There are various ways in which merchants can accept payments for products or services through the Internet. The standard form used in e-commerce transactions is setting up a merchant account, a payment processor, and a payment gateway in order to get started1.

Merchant Accounts involves a special type of arrangement with a bank or clearing house that allows you to accept payments by payment cards, debit card or credit cards into a special account; your merchant account. This method provides e-commerce processing in every major currency in the world. Payments that clients make pass through a gateway, which is designed to protect the clients and the merchants, as well as offer a means by which the merchant receives funds with minimal risk of fraud for both parties. A payment processor is the company that a merchant uses to handle its card transactions. Payment processors implement anti-fraud measures in order to ensure that they connect merchants and customers safely and in the proper place. In simple terms, this third party company takes the money from the cardholder’s bank account and delivers it to the merchant’s bank account. Some of the most common payment processing companies include: PayPal, Moneris, Payfirma and Freshbooks. The process of payment processing is divided into two parts: the front end and the back end process2. The front end consists of the pages your customer is visiting depending on the product or service they are searching for. After the selection process, they will proceed by filling out a payment form with their personal information (name, credit card, shipping address) and complete the first steps by clicking submit. This will kick-start the back end process, in which the information submitted, is verified by the payment gateway with the credit card companies. After verifying the credit card information, either an approval or refusal is given by the credit card company. After the authorization, the payment gateway sends back the funds to the payment processor, where it then proceeds in depositing the funds into the merchant account and at the same time signals to its clients that his transaction has been completed. Once the funds are transferred into the merchant account and the payment is completed, the funds are then transferred to the merchant's business account at whichever bank he does business with. Thus the entire process is now complete. A Payment gateway is a means of authorizing credit card or other forms of electronic payments. The payment gateway acts as the middleman between the merchant and their sponsoring bank, and handles all communication messages between these entities. It allows merchants to make sure that the payments being accepted are securitized before being deposited in the proper account. It helps protect sensitive information submitted online from paying customers and at the same time protects the merchant from any fraudulent transactions. The gateway takes the data submitted and then sends a request to the charging cardholders bank for the card to be charged, where the transaction will then be approved or declined before sending the response back through the gateway. The payment gateway then initiates a payment settlement to allow the transfer of funds from the customers credit card account to the merchant’s bank account.
Facts to consider: When choosing a payment gateway, there are four major factors that you need to consider: transaction fees, card types, on-form payments, and recurring billing. These factors will vary by processor, so it important to choose one that meets your budget and needs3.
1. Card types: It is important to know what type of credit or debit cards are accepted by your chose payment gateway. Additionally, some processors require users to link their bank accounts rather than entering a card.
2. On Form Payments: If you use a pre-built form integrated with a payment gateway to collect your…