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Lesson 2Payment methods
ObjectiveConsider the methods used and requirements for processing payments online.

Payment methods (Processing Online)

The goal of an e-commerce site should be to use software that processes all orders independently. To do this, you will need an automated method that processes the payments with a minimum of human intervention. Below are the terms you will use as you create an online transaction solution.

ecommerce Transaction Terminology

All e-commerce transaction models, from standard online transaction software to SET, assume knowledge of the following terms:
<strong>Issuer:</strong> A financial institution such as a bank provides credit cards to a customer.
1) Issuer: A financial institution such as a bank provides credit cards to a customer.
<strong>Card Holder:</strong> A person ready to buy goods and services with a credit card.
2) Card Holder: A person ready to buy goods and services with a credit card.
<strong>Merchant:</strong> The ecommerce site ready to sell goods and services. A merchant must establish a relationship with an acquirer before transacting online
3) Merchant: The ecommerce site ready to sell goods and services. A merchant must establish a relationship with an acquirer before transacting online
Merchant Bank: A financial institution that offers accounts to merchants. These accounts enable transactions between the card holder and the merchant.
4) Merchant Bank: A financial institution that offers accounts to merchants. These accounts enable transactions between the card holder and the merchant.
Transaction Terminology 5
5) Transaction Terminology 5
Payment Gateway: Software operated by the merchant that relays data between the merchant and the merchant bank.
6) Payment Gateway: Software operated by the merchant that relays data between the merchant and the merchant bank.
Third Party: A merchant can delegate responsibilities to other organizations to save time and expense.
7) Third Party: A merchant can delegate responsibilities to other organizations to save time and expense.


Payment Gateway Functions

The payment gateway is the interface between the e-commerce site and the bank. Your payment gateway will take some time and expertise to configure. Once it is configured, however, it should be secure and should cut down on manual work. It should:
  1. Receive and process information from Web forms directly to you
  2. Provide online validation of credit cards
  3. Ensure secure communication between you (the merchant) and the merchant bank
  4. Provide easy-to-read billing statements
  5. Automatically deposit funds into your bank account
  6. Allow several different options, including the use of CyberCash, digital wallets, SSL, or newer methods
  7. Allow users to conduct transactions without having to modify their normal browsing habits radically or know about the complexities going on behind the scenes

Dedicated Payment Gateways

You have already learned that many products contain their own payment gateways. However, several different third-party companies now offer online dedicated payment gateway services. Rather than installing payment gateway software on your own system, you can access theirs on the Web. Online payment gateway vendors include CardSecure.com and Cybermerchant. You do not have to install complex software with these options, because these companies focus only on providing a payment gateway. Using a Web browser, you can supply vendors with your merchant account information, as well as the payment options you desire.
Advantages to this approach include:
  1. Easier setup
  2. Extensive user tracking
  3. Customer support
  4. Seamless integration between your site and the Internet service provider (ISP)
Additionally, these vendors configure the payment gateway. The chief concerns about this option include all the issues that arise whenever you relinquish full control of your site to another provider. Such concerns include the vendor's ability to provide reliable service, security, and the fact that your provider may not be able to grow with your business.

To implement online transactions you must:
  1. Configure modern e-commerce site software
  2. Establish an online merchant account
  3. Configure a payment gateway

Preparing your ecommerce Servers

Prepare your Web server for automatic payments by configuring your Web pages to work with all site components. For example, your Web pages must be capable of handling requests and integrating with the payment gateway for each transaction. Databases will need to be set up for real-time inventory tracking. You will need an online merchant account to process the payment transaction online. Online merchant accounts typically include both a merchant ID (MID) and a terminal ID (TID).

Configure Payment Gateway

Most site development software includes a payment gateway. For a partial list of payment gateway software vendors:
  1. Paypal
  2. Apple Pay
  3. Google Play
The next lesson discusses payment methods and credit card processing issues.

Payment Methods - Quiz

Click the Quiz link to take a multiple-choice quiz on payment methods.
Payment Methods - Quiz

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