In this article we're going to talk about how to get started with payment processing integration and why you'll want to do that soon. If you don't feel like reading a long text, jump straight to our PayLane's Payment Gateway Integration Guide . But... come back later, alright :)?
As a merchant who accepts credit cards or PayPal, you are most probably familiar with the process of accepting payments. If not - let us explain. You set up your online store, define how much things cost, publish them somewhere and... sit back, cross your fingers and hope for the money to come in. That's right. Accepting credit cards online is easy - but actually getting the money from a credit card is a whole different story.
There are several entities involved in this process:
- The customer who buys something from your website, by providing her credit card details - the Cardholder;
- Your online store which houses an order form and - optionally - redirects traffic to it directly by embedding iFrames;
- A payment gateway which sits between your store and its customers, checking for all kinds of fraud; acquiring the money from the customer's credit card and transferring it to your account (a Merchant Account); and finally,
- The acquiring bank that provides you with a Merchant Account.
All this is a big hassle - but think about it from the other side. Do you know how credit card transactions are processed? When someone provides a payment to your online store, their bank first sends a special code to them (via SMS or email), that says something like "You have just provided XYZ Merchant with a payment of $50. Are you sure that's what you want to do?".
After the Cardholder confirms the payment (or, in case of a thief trying to use someone else's credit card details, denies it), their bank then sends an approval code to the customer's issuing bank. The issuing bank then tells all other banks that "XYZ Merchant was given an authorization request for $50 and the authorization was approved. This means that the customer's account is good and we will allow them to make a payment of $50 to XYZ Merchant". The issuing bank then sends an approval code (usually in the form of a special message) to your acquiring bank, which passes it on to you or whoever requested that transaction in the first place (in our case - it's your online store).
If you're thinking "Wow, that sounds like a lot of hassle", then you're right! Payment processing is complicated by design. It can be expensive to implement and maintain (from both money and time perspectives) and that's why only about 10% of all online stores actually accept credit cards. The other 90% rely on alternative methods like PayPal, bank transfers or some special prepaid cards which the customer bought in advance. For sweet simplicity (and more competitive rates), we recommend using direct credit card processing.
Now that you know how payments are processed - let's see why integrating with a payment gateway is so important.
- First of all, you'll be avoiding a lot of hassle during the sales process by having your customers pay directly on your website. It's much easier for them to provide their credit card details once - than to look up their bank account information and retype it into your payment form every time they place an order.
- Second, payment gateways provide a nice set of extra features that can come in very handy when running an online business. This includes secure storage of customer's credit card details, ability to accept PayPal payments and even recurring billing (if you want customers to pay for something on a monthly basis without manually sending them invoices each month).
- Third, and most importantly - payment gateways provide you with additional tools to protect your business from fraud. For example:
If you're using Authorize.Net then in addition to all this you'll also get automatic declines of transactions that look like they might be fraudulent (and resubmits when the customer's bank gives them a valid code), customer data collection, detailed transaction history and refunds.
If you're using Braintree then in addition to all this you'll also get an automation suite that will let you do things like automatically void or refund transactions when they reach a certain state (for example: if your customer's order is marked as "canceled", then you could automatically cancel and refund their payment), make rules for your transactions (for example: if a customer's order is over $100, then require them to call you), customizable order statuses and real-time reporting.