Ecommerce – Merchant Accounts

Ecommerce sites interested in accepting credit cards must have merchant accounts. Merchant accounts are provided by the merchant banks. Transaction settlements move the value of the sale to this account. Banks consider these important factors before creating a merchant account. Business type, possibility of fraud, charges in cases of default is considered before offering a merchant account. It is to be noted that merchant banks benefit 5% through e-commerce sales but the risk of fraud is over 50% of the total sales executed.

Credit card payments are enabled through Payment gateways. Payment gateways are contracts executed by the retailer with the credit card processing organization. These gateways serve as a point of sale system with all the functionalities of a POS integrated in them.

E-commerce website with payment gateway contacts the credit card processing organization. The organization secures the sale by providing authorization from the credit card issuing merchant bank. Authorization is followed by funds transfer into the retailer merchant account. Messages are sent to the merchant and the customer on the sale settlement with relevant information.

Contract with the credit card processing organization provides a bank account, provision for the website to access the payment gateway and security for credit card information input by the customer. Cost of contract involves a startup cost, monthly charges for payment gateway, address verification and statement fees, transaction fee charged per transaction and discount rate applied as a percentage on the transaction.

Charges add up on the cost and reduce profit factor but an ecommerce site has multiple benefits than a brick and mortar business that makes cost an insignificant consideration.