Merchant Accounts

A business needs to set up a merchant account with a bank to handle credit card transactions. This can be done easily with your bank. Usually a fee is charged for this type of transactions yet it is worthwhile for the benefits you get. The flow of the process is, when a customer uses a credit card to purchase a product, money form the customer’s credit card account is deposited directly into the company’s merchant account. The financial institution that sets up the merchant account, process the transaction and deposits the amount to the merchant’s account.

Following diagram shows how the cyber source credit card services function. Cybersource act as the intermediary that receives the credit card payment, transfer it to the issuing bank, receives confirmation and then deposits the money in the merchant’s account.

CyberSource transaction process

Some E-Payment options

With thousands of online transactions happening every day, there are many payment options one can choose to purchase online. Here are some that can be useful.

Credit cards
Credit card is the most trusted source for a transaction. A credit card has a spending limit per month. After that you cannot spend until you pay the bill. If something goes wrong with the security measures, card holder will only loose the limit of purchase and he or she can cancel the credit card.

E-Checks
A consumer can buy e-cash and store it in a digital wallet in a hard drive. This is electronically linked to the consumer’s bank account and can be re-stored with e-cash at any time. E-cash is pre authorised and anonymous. This method is often used to pay for electronic goods received over the Internet. Forms of E-cash can be purchased online and can be emailed to the recipient. The recipient can use it to purchase products that accept e-cash payments.

Smart Cards
Smart cards are used to conduct everyday transactions. Low cost integrated microprocessor chip provides ability to do every day transactions mostly via ATM machines and cash counters. Use of smart cards or debit cards is not very popular in transactions carried through cyberspace.


Electronic Wallets
Electronic wallets are also referred as digital wallets. An e-wallet is a software program that contains a user’s payment information in encrypted form to ensure its security. For example, an individual’s-wallet could contain credit card numbers, bank account numbers, contact information, and shipping location. When a consumer is ready to make a purchase, they click the buy now button and the wallet server populates the required purchase information to the selected merchant’s online order form Users can get instant access to one-click purchase from their PC.

Process of the Electronic Wallet

Virtual Credit cards
This method is closely related to e-wallet. A virtual credit card is an image of a credit card placed on the computer desktop. Users must first register and they can choose versions of the service. With one click of the credit card image, the cardholder accesses account information and pays for online purchases. The credit card number and contact information is automatically entered into the checkout form, and the customer just need to enter an identification to authorize the transaction.

Alternative Online Merchant Accounts

Many people fined that opening a traditional merchant account is cumbersome. There are alternative methods of processing payments online. With these alternative accounts, some times per transaction rates are higher than traditional merchant accounts. But the ease of opening an account with alternative payment processors makes them popular with many online merchants. Account fees vary, depending on the acquirer. Fees and charges might include: an application fee, a minimum monthly fee, a monthly statement fee, a per-transaction fee, and all acquirers charge a discount rate, a percentage of the transaction.

Always check references of any company you conduct business with online or traditional merchant accounts, you will be required to give the company access to your checking account. Therefore, be sure you can trust the company! Research your choices before deciding on a processor. Rates and features of processors can greatly vary. Always check references before signing up to any payment processor!

To accept payment by credit card on the internet, you must have an internet merchant account with an acquiring institution. The acquirer authorizes the purchases made with the credit card and ensures that the funds are deposited into the merchant’s bank account. With a Verisign, SSL Certificate, you can create a secure channel to transmit credit card information from your site to the acquirer’s processing network, receive the results, and post them back to your sit. Your online payment processing provider also facilitates the settlement of funds from the cardholder to the acquiring institution.

Secure Socket Layer (SSL) is a protocol developed by Netscape in 1996 which quickly became the method of choice for securing data transmissions across the Internet. You are required to complete a simple 3 step enrollment process to purchase a certificate and will need to provide certain contact and company information to complete enrollment.

When you install SSL Certificate on your server, your customers will be able to view the following information:

The Fully Qualified Domain Name (FQDN) for which the certificate was issued. This allows them to check that the certificate was issued for your domain (URL).

The validity dates of the certificate. This is extremely important, since it shows users when your SSL Certificate was issued as well as when it will expire.

When customers access your web server through an SSL connection, the information transmitted between the secured web server and your customer’s browser is encrypted. This ensures customer’s information is securely transmitted to and from your website. PayPal recently acquired VeriSign Payment Services and offers both an all-in-one Internet Merchant Account and payment gateway solution and the stand alone Payflow Payment Gateway solution.

What is a merchant account?

A Merchant Account is simply a relationship between a retailer, a merchant bank and payment processor for the settlement of credit card transactions. Any retailer who wants to take credit card orders must establish a merchant account.

All retailers must meet the bank’s requirements to be approved for a merchant account.
Internet merchants usually have to pay higher fees for their card than a normal retailer. This is because they are more likely to be targets of fraud. To be approved for your banks internet merchant account, you have to be prepared to provide the following details.

A business checking account, a voided check, articles of incorporation or other business certificate, Web site URL, trade references and a statement of your return policy.

All banks and credit card processors require fees from you for accepting credit cards. They may include a discount rate, transaction fees and monthly fees. Additional fees may include an application fee, address verification, monthly minimums, statement fees, chargeback and annual maintenance fees.

Make sure that you read every detail before you sign up for a merchant account. Merchant account may be costly, but most customers prefer to pay by credit card than PayPal. There is more possibility of you being successful as an online merchant by providing your customers more than one payment option.

This is how the process goes:
When a customer goes to your website and pays with their credit card, money comes directly from the customer’s account to your banks checking account and this is done right through your merchant account.

Benefits of banking online

Growing number of companies allow you to make automatic payments through your online banking account to make your life easier.

Whether your bank is a traditional institution or a Web-only bank, online banking lets you connect to your bank through the Internet and do things such as view your accounts, transfer money between accounts, view images of canceled checks, print copies of those checks and pay bills online and above all they are available all the time twenty four hours a day and seven days a week. Even if you are out of the country you can always log on to your online banking account and do your business dealings. Transaction speed is quicker than ATM speed. Another advantage is you can manage all your accounts even securities from one secure site.

To make your life easy, many banks allow you to manage your checking account by allowing you set up e-mail alerts so you can be notified when checks clear or when your balance slips below a certain level. There is also a detailed listing of your canceled checks.

Getting started is easy. The bank's Web site will direct you through the steps of registering the bills you want to pay and the accounts you want to use to pay them. You can always make changes and add or subtract bills.

Once you have registered the accounts you wish to pay online, the next step is to schedule payments. Your creditors receive your online payment in one of two ways: electronic payment or check. If the company is set up to accept electronic payments, your payment is automatically debited from your account and deposited electronically into their account. If the company can't accept electronic payments, your bank issues a check based on your online payment instructions.

Security:
you’ll have a user name and password to access your online account. Just as with any information used to access any other financial account, you should keep these codes secret. Your bank will tell you what to look for -- usually an icon of a locked padlock -- to ensure you're accessing your account over a secure line.

You should also beware of scams that send out e-mails looking exactly like e-mails from your bank. They will tell that account or personal information is needed. You're asked to click on a link and fill in the information. Never click on a link in an e-mail and submit your account information. Call your bank and never use a phone number supplied in the e-mail. Ask your bank if the e-mail is legitimate. I got such e-mails twice about my PayPal account. The fact is I have never registered for a PayPal account.

Disadvantages of online banking:
Start up time. You will have to provide your ID and sign forms at a bank branch. Bank sites may be difficult to navigate first. But you get comfortable with the site after some time. Biggest hurdle for many people is learning to trust it. Always print a transaction receipt and keep it with your records until it shows up on you personal site or bank statement.