Internet Payment Gateway

Internet Payment Gateways & Schemes

Every merchant that wants to accept and process payments on the Internet is required to have the following:

􀂃 An Internet merchant account

􀂃 A Virtual Terminal

􀂃 An Internet Payment Gateway certified with their credit card processor.

What is an Internet Merchant Account?

An Internet merchant account is a merchant account specifically approved for processing "card not present"

sales [i.e. "MO/TO" (mail order, phone order) / Internet-Based transactions].

Visa and MasterCard have different criteria for evaluating the potential risk involved in credit card

transactions where the card is not physically presented to the merchant. This type of business is typically

referred to as "card not present" or "MO/TO" (mail order/telephone order) merchant. For this reason, a

separate merchant account is required to process credit card transactions over the Internet.

In order to process credit cards online the first thing you will need is an Internet Merchant Account. An

Internet Merchant Account is a relationship between a business / merchant that is selling goods or services

over the Internet (you) and a merchant bank. This relationship enables you to accept web-based credit card

payments from their customers. Here is how it works:

The Merchant Bank assigns you a unique number called a Merchant ID Number or MID. This unique

number is attached to each credit card transaction that originates from your Web site. The Merchant ID

number is also associated with your business checking account. This allows funds captured from your

customer's credit card payments to be automatically deposited into the proper business checking account. It

takes approximatly 48-72 hours for the funds to settle into your business checking account. To qualify for a

merchant account, you must meet the bank's requirements. Most applications can be approved within 24

hours!

Cost for merchant account vary considerably but average $50.00 Application fee, $20.00 per month, 2.49%

of the gross dollar amount per transaction plus a $0.25 per authorization fee per transaction.

What is a Virtual Terminal?

A Virtual Terminal performs all the functions of a physical credit card/check processing box, conveniently

accessed over the Internet through a secure web page interface.

What is an Internet Payment Gateway?

An Internet Payment Gateway is a feature of a virtual terminal. It takes the credit card information from the

Virtual Terminal to the credit card processor, and returns the approval information back to the Virtual

Terminal.

The Internet Payment Gateway does this in a "real-time" manner, over the Internet, in a totally secure

environment.

The payment gateway is software and network service that operates between your Web site and the bank

authorization systems. The Internet payment gateway is the Internet equivalent to the credit card swipe

terminals used in your local retail stores.

The job of the payment gateway is to capture, secure, and communicate the credit card and billing

information to the bank credit card authorization systems. Let's look at this process in more detail.

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Why Do Internet Payment Gateway Providers Exist?

They exist because credit card processors will not allow individual merchants to access their systems

through the Internet. They do not permit this because of security issues.

Credit card processors only permit companies that have "certified" their software to access their systems. In

this way, credit card processors are able to make sure only a few certified [and therefore trusted] companies

have access to their systems via the Internet.

What Can You Do with a Virtual Terminal / Payment Gateway?

First, you can use the Virtual Terminal to perform all the same functions of a physical credit card terminal,

conveniently accessed over the Internet through a secure web-page interface. You will be able to manually

process credit card transactions, issue credits, void transactions, view your online log file... really manage

your Internet-Based business... from any computer in the world.

How Does it Work?

1) The consumers complete their orders via the merchants web store. This should be

done on a secure web page so that the consumer's personal information including

banking information (credit card or check) is encrypted so that it can't be intercepted and

read by third parties while being transferred over the internet. Secure pages should

always be used while handling credit card processing online.

2) The shopping cart program on the web host computer gathers the order information,

compiling it into a form that the credit card processing company expects.

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