Credit Card Transactions – Learn How to Accept Online Payments!

There are many, many, different methods to accept payments online. Ultimately though it boils down to the need accept online credit card transactions. So, when you’re faced with setting up a site you’re also left with the question how do I accept payments?

Before we go any further, please note that this article is designed with Australian business owners in mind and may discuss information that is not relevant outside Australia.

How Do I Accept Online Credit Card Transactions?

There are almost countless methods you can use to configure a web site and the way in which it conducts credit card transactions. We’ve sifted through them to produce a list that consists on three fundamental methods:

1. Third Party Processing
2. Third Party Hosted Solutions
3. Merchant Facility

The price of using these services goes beyond the scope of this article, however as a rough guideline we’ve listed them in order of cost of setting up and/or running.

Third Party Processing

This means you have your credit card processing conducted on your behalf by a third party. The quintessential example of this is PayPal. The concept here is that you set up an account with the provider and set up bank account details to deposit money to. The simplest example from here involves sending your customers to the service with an amount to be processed and the provider processes the amount on your behalf.

There are a number of providers of this type of service and the costs involved will vary for each of them. It may involve paying a monthly fee as well as a transaction fee, a commission based on the transaction amount or just a monthly fee.

Third Party Hosted Solutions

Third party hosted solutions will be similar to the previous example, except that they will provide extended solutions such as a shopping cart. In this example you would host a shopping cart containing a product catalogue, or just one product if need be. Then your users will leave your web site, going to the shopping cart to purchase your item. Once a user has made the decision to buy they will need to see the product in the third party solution and the provider conducts a transaction on your behalf.

The pricing structure of a service such as this will be similar to those from example one, except as a general rule you will need to pay slightly more based on the fact you require more services.

Merchant Facility

This would be the most expensive solution as it involves having a merchant facility with a bank before you proceed. This means you need to have a business bank account and you will need to pay a monthly fee for your merchant facility. This may not necessarily be a problem for people who have a bricks and mortar shop front and already have a merchant facility, but for those starting out it may not be ideal.

When you have a merchant facility you need to have a mechanism to actually conduct the online credit card transactions. There are three methods for doing this, which include:

1. Collect the credit card details online and then process the transaction offline through your merchant account. In order to conduct yourself in this manner you need ensure the entire process you use to collect credit card information is SECURE. You will also need to ensure that you conduct yourself in accordance with the relevant legislation about collecting/storing credit card details.

1. Conduct transactions through your bank’s “gateway”. This means that you send users to your bank and have the bank conduct the transaction on your behalf. The term gateway refers to the interface that is communicating with the bank. In this case the credit card transaction will be approved and the funds deposited into your bank account in real time, or close to it. In this example you, generally depending on the volume of transactions you do, will need to pay a transaction fee. Transaction fees can come in a flat fee or a percentage of the transaction. The advantages of this system are that the user will be sent to your bank to conduct your transaction, giving your users the confidence that a bank is conducting the transaction. This may be a disadvantage too in that there is several steps involved in a user actually conducting the transaction and it may lead to lost sales due to people not completing the process correctly. Another disadvantage is that you may need to pay an extra fee for the use of the gateway, on top of the transaction fees.

1. Conduct transactions through a third party gateway. In this instance you use a third party gateway provider to communicate with the bank and conduct the transaction on your web site, without the user ever leaving. There are many third party gateway providers available and your bank will usually suggest some with your merchant account. Third party gateway providers will provide the necessary software to communicate with the bank to conduct transactions in real time and you will need to provide the secure pages to send the credit card details through the gateway. Third party gateway providers’ fee structure can vary but generally you will be paying a flat fee.

In examples one and three above you will also need to an SSL (Secure Socket Layer) certificate for securing the pages that credit card details are gathered. Costs of SSL certificates can vary greatly and need to be renewed each year.

Back to Fact Sheets