Shopping Carts, Gateways and Payment Processors: Anatomy of an Online Purchase
Merchants should understand the value of operating in multiple channels. For those who haven’t yet incorporated e-commerce into their business but want to, there is much to learn.
With a little research and education, merchants can find the best providers to accommodate their business needs and those of their consumers. It just makes sense — e-commerce provides merchants an opportunity to make more money and succeed in an increasingly competitive marketplace.
What Makes an E-Commerce Solution Possible?
In addition to the range of software and hardware that companies use to support the sale of products and services online, there are three vital components that make online shopping possible: the shopping cart, payment gateway and payment processor.
The shopping cart acts quite literally as a virtual shopping basket. It holds the items customers select from a Web site until they are ready to proceed to the checkout stage, where their credit card information will be processed. The shopping cart:
o Keeps track of items until they are purchased
o Automatically totals the amount of a customer’s order, including shipping and tax
o Allows shoppers to securely enter address and credit card information
In order to accept credit cards through the Internet, a payment gateway is critical to transport the credit card information from the shopping cart to the payment processor once the consumer clicks the “Buy” button. In most cases, this transaction happens almost instantaneously. The payment gateway receives encrypted transactions from the merchant’s shopping cart. An encrypted transaction simply means that credit card numbers can’t be read by people who are not supposed to read those numbers. Authentication is then provided and the decrypted payment information is transmitted for authorization. The payment gateway:
o Fulfills the same function as a point-of-sale (card swipe) terminal at a physical retail location
o Takes information provided through a shopping cart and transmits it electronically and securely to a payment processor to be routed for authorization of payment
The payment processor transmits a customer’s credit card information via the Internet to the merchant bank for authorization. It also sends data back to the merchant’s bank to approve payment or the transfer of funds. A payment processor:
o Acts as a link from the merchant to the acquiring bank or merchant bank
o Receives information from the merchant through the payment gateway and packages the information for delivery to the acquirer, ensuring that all necessary transactional data is present and valid
o Later transmits information back from the acquirer for delivery to the merchant to settle the transaction