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Online Payment Processing Explained


If you are thinking about setting up an online business, you may have questions about online payment processing. The good news is, you can safely and securely accept payments from your customers online with a minimum of fuss or effort on your part.

The Process

There is a simple process that every online purchase undergoes to complete an order:

  • The customer finds an item she wishes to purchase, and places it her shopping cart on your website.
  • Once she is finished shopping, she goes to checkout. During checkout she enters her shipping information, special instructions, and also her credit card information.
  • Her financial information is encrypted by another program called a credit card payment gateway. This gateway interfaces with her financial institution, withdrawing the funds from her account and depositing them into your merchant account. This information is kept secure to prevent theft.
  • Once the payment clears her bank, you can download the funds from your merchant account to your business checking account.
  • Her order is then forwarded to you by the shopping cart system so that you can complete and ship the order.

In order to offer this seamless shopping experience and offer Internet payment processing to your customers, you will need two crucial pieces of software: a shopping cart and a gateway.

The Shopping Cart

  • The shopping cart is an ingenious software package that allows your customers to order items, save items, change items, make specifications as to color or size, and send special instructions about her order.
  • Back in the old days, a customer would have to order each item individually and then pay for them separately. Shopping carts make online ordering convenient and easy.
  • Shopping carts also allow you to track orders from beginning to end, or download every order a particular customer has placed.
  • They allow you to track buying trends for popular and not-so-popular items.
  • They can be automated to check orders against your inventory, making sure you have an item in stock before the order is placed.

The Payment Processing Gateway

The payment processing gateway is the interface between you, the customer and the customer's bank. It allows sensitive financial information to be passed among the three of you encrypted, to prevent theft.

Online card processing allows you to collect the customer's payment immediately. This spares the customer from the inconvenience of printing out her order and mailing a check. It also allows you to collect payment immediately, capitalizing on the customer's desire to buy at that moment.

Most shopping carts come with their own payment processing gateways, but you may wish to shop around and see what fees and rates other gateway services charge. In that case, make sure your shopping cart and gateway are compatible before you sign up for service.

That's all there is to it: two simple pieces of software that take your ecommerce to an entirely new level. By offering online payment processing, your business becomes instantly available to customers worldwide with just a click of the mouse.


Sarah Baker is a documentary filmmaker and writer currently living in New Bern, NC. Her first book, Lucky Stars: Janet Gaynor and Charles Farrell, will be published December 2009. Read more about her.

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