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How Are Online Payments Made?



An e-commerce merchant service facilitates the processing of online payments for secure and convenient online purchases. Also called an electronic payment gateway, e-business merchant services include merchant account services, online payment solutions, and online payment gateways. The term payment gateway refers to any one of several computer software applications that allow a business to process online payments in a secured fashion. Also referred to as an e-cash or web-based payment solution, e-business merchant services are becoming increasingly popular thanks to the widespread usage of the internet, especially for online shopping and online banking.

An online payment gateway allows the processing of credit and debit cards, electronic checks, and online payments from multiple financial institutions and a wide range of Web sites. Payment processors usually control the sales processing, card acceptance, and cash withdrawal aspects of merchant accounts. Merchant accounts may be accessed through a browser, a command-line interface (CLI), or through a software program. Some companies provide online payment gateway services directly to business owners through the application of a toll-free telephone number. Merchant services also include merchant software that provides business owners with a host of options such as point of sale systems, merchant cash advance systems, and integrated merchant accounts. Some providers offer online merchant services based on merchant accounts tied to existing commercial lines.

One of the most popular online payment gateways, and the most well-known, are an e-check. With almost instant approval, e-check is a secure, reliable, and fast way to accept electronic checks as payment for services or products. Merchants who use e-check need only maintain an electronic account with a check acceptance service provider that verifies the validity of an account with the Reserve Bank of America or the Internal Revenue Service. Online merchants accepting online payments with e-check must also register with the Reserve Bank or the IRS.

Another popular online payment method, with a much higher transaction volume, is credit card merchant services. Credit card transactions are processed rapidly due to advances in connection technology and relatively inexpensively as well. Credit card networks provide merchants with the ability to process credit card transactions immediately after the customer has verified his or her account with the credit card network. When selecting a credit card merchant service, business owners should investigate all the different services and rates available, and select the one most appropriate for their specific needs.

Computer-generated electronic statements, or CFE, are another convenient online payment method. The most accepted forms of CFE are those provided by the major banks, which provide a standard format that merchants can download and use with minimal effort. CFEs generally have the option of accepting debit cards, but business owners should choose a payment method that allows them to monitor credit card and debit card transactions in real-time. Business owners should also investigate the cost of accepting debit cards.

Network-based processors offer a fast, safe way to receive payments. When a business owner submits a merchant account contract, a payment gateway is automatically inserted into the business’s Internet network. The payment gateway acts as an information exchange between the client (e.g., website) and the processor. When a customer requests a transaction, the processor requests authorization from the customer’s account using a secure connection to the Internet. The processor then determines the gateway’s transaction fee; typically this fee is less than one percent of each transaction. Once authorization is obtained, the transaction is authorized, and the transaction is completed.

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