Internet merchant accounts are a type of bank account for online
business owners that have the sole express purpose of receiving credit
card payments from credit card companies. They hold these payments for
a brief period, usually less than a day, before being transferred to a
regular bank account chosen by you, the business owner. Internet
merchant accounts work together with your payment gateway or online
card processor to handle credit card payments automatically.
To
better understand, the process of funds transfer from a consumer's
credit card account to an internet merchant account, a few terms first
need defining.
What is a Payment Gateway?
A payment gateway
is the online credit card processor, which does exactly what it sounds
like: it provides a path between the consumer's credit card account and
the online business owner's internet merchant account. Specifically,
payment gateways take care of the verification of the consumer's
account information and the business owner's request to transfer the
payments. When you choose your shopping cart and website host, they
will offer you a variety of gateway choices. Based on these payment
gateway choices, you can choose a compatible internet merchant account.
What is Funds Capture?
Funds
capture describes the process by which a transaction deposit is made in
your internet merchant account. Funds capture is a request for
settlement or payment for a transaction; it does not actually put funds
into your internet merchant account.
What is Settlement?
A
settlement actually puts the funds from a funds capture into your
internet merchant account. Settlement is the funds transfer from the
consumer's credit account into your internet merchant account. A refund
settlement reverses the flow of funds from your internet merchant
account to the credit account of the consumer.
How Does The Process Work?
The
process by which money is transferred from the consumer's credit
account to your internet merchant account is relatively simple. It is
not unlike the credit card payment process that happens with a brick
and mortar establishment. Broken down into a step by step description,
the payment process to your internet merchant account looks something
like this:
1. The first step actually begins when you open your
business, purchase your product, advertise your wares, and attract your
first customer to your online shop. Through a secure web page on your
site, your customer makes a purchase using your shopping cart and
payment gateway, creating an order.
2. The order information
including credit card information, shipping information, and product
information is gathered and compiled through your web host/shopping
cart, creating a form for the credit card processing company.
3.
The payment gateway takes over, and the form is sent from your online
store to your credit card processing company. The company double checks
the information for completeness and accuracy, figures out which
company owns the consumer's credit card, and then sends a request for
funds to cover the consumer's purchase.
4. Now, the process is in
the hands of the company that owns the consumer's credit card. They
validate the consumer's card and account, verifying that there are
enough funds to cover the payment request. If everything checks out,
the credit card company sends word back to the credit card processing
company that the funds, in fact, are available for transfer. If there's
a problem, the credit card company lets the credit card processing
company know what the problem is.
5. The credit card processing
company relates the information back to the web host and shopping cart
program. The shopping program lets the consumer know whether or not to
expect her order and also tells you, the business owner, whether or not
to ship the goods.
6. The credit card processing company
initiates the funds capture, the process by which the funds will be
sent from the consumer's account to your internet merchant account.
7.
The settlement occurs when your internet merchant account receives the
funds from the consumer's credit card company. And voila! The
transaction is complete.
Copyright 2006 William Hamilton
