Merchant Account Tutorial
by Peter Cooper
How to Implement a Merchant Account
Sketching out your digital shop
Before you apply for an e-commerce merchant
account, you need to establish a strategy for your new venture.
Are you selling memberships? A wide range of products? A single
product? An ongoing service? Whatever your situation, you'll need
to approach the task from a certain direction. Decide what your
goals are, and stick with them until you're established.
Choose suitable software for your e-commerce
You're probably going to need software
to run your e-commerce site, especially if you have a large catalogue
of items to sell. The software will act as an electronic catalogue,
allowing you to enter your wares, categorize them and price them
accordingly. E-commerce software usually allows you to enter your
own design templates so that your site looks the way you want it
Even if you're only going to be operating
a simple membership service, you'll need a program to handle new
subscribers and supplying passwords, although there are some specialist
providers who can supply these services directly on their own servers.
How an e-commerce site works
To establish what needs to be done before
applying for your merchant account, let's run through a sample e-commerce
site. Your customer arrives at your site, and is invited to browse
a database of items. Product descriptions, pictures , and prices
are all displayed to the customer by the database driven e-commerce
software. They pick and choose from a variety of products and these
are placed into their 'shopping basket'.
Now the user clicks on the Checkout button.
Having decided to purchase their chosen items, the user fills out
a delivery and payment form, handing over their credit card details,
address, and other relevant information. Where do things go from
This is the point where different systems/methods
can be used. If you're using an online authorization company who
provides a secure server for your orders to be sent to, then once
the user submits their payment details, it will go to the processors
secure Web site, they will pass through the instruction to debit
the card, and e-mail you the rest of the details (delivery address,
product choices, etc.).
On the other hand, if you run your own
secure server, the details will be sent to your own server. Then,
depending on the setup, forwarded onto your credit card processor
via programs installed on your server, or stored on the server for
you to send, or process, manually.
Most Merchant Account Providers can provide
you with equipment and software to allow you to process all credit
card orders yourself, saving you from paying an online credit card
processor to do it. However, this means you will have to provide
the secure server for accepting the credit card information, and
then you'll have to take each order and run it through your software
or credit card terminal. Using an online credit card processor simplifies
matters by sending the details straight to them, and they process
the orders automatically.
After the card has been processed by yourself,
or your online authorization company, the customer's card will be
debited, and your Merchant Account credited within usually a couple
of days. The Merchant Account Provider will also take a commission
of approximately 5% per transaction.
Once you have the details of the order,
the products selected and the delivery address, you must take action
straight away and e-mail your customer a digital invoice, or at
least a confirmation of the order. Many e-commerce software packages
will deal with this for you, so there shouldn't be a need to worry.
You will want to arrange dispatch of the
product promptly, to reduce the risk of 'chargebacks' when people
become dissatisfied with waiting for their orders. Chargebacks cost
you money, and won't put you in good favor with your Merchant Account
Linking your Credit Card Processor with
your Merchant Account
If you opt to use an online credit card
processor in conjunction with your e-commerce software, you will
need to supply the credit card processor with details to link transactions
to your merchant account. When you get a merchant account, you will
be provided with a e-commerce merchant account number, which you
can supply to the credit card processor. When a transaction comes
through on your account, it merely delivers the money (minus commission)
to the specified merchant account.