The following things need to be in place for any Credit Card transaction to take place over the internet:
1) The Merchant (you) provides a good or service to the customer
2) The Merchant Bank (your banker) receives the funds from the Credit Card company
3) Payment Processing Network or Gateway facilitates the transaction/exchange of information between Merchant, Credit Card company, and Merchant Bank.
In order for you to accept Credit Card payments you need to have Merchant Status and have a Merchant Account with a bank that provides such services (most large banks should be happy to extend this service to any good client of theirs). The best place to begin looking for a Merchant Account is your current banker. The Bank provider assumes the risk and responsibility that its client, the transaction payee, is providing a legitimate product or service in return for this payment. If the Card Holder refuses the charge the Card Issuer passes this cost along to the Merchant Bank via what is called a Chargeback. The Merchant Bank assumes the risk that it can collect such chargebacks from the Merchant.
In order for you to accept Credit Card payments over the internet you need to acquire the services of a secure Payment Processor or Gateway (Memberize uses Verisign/PayPal exclusively). The Payment Gateway provider assumes the risk and responsibility of securely passing the payment account information from the web portal to the Merchant Bank provider. In affect it takes the place of the Point of Sale system, the risk involved is that without a physical POS the Merchant Bank can’t assume an authorized Cardholder entered the Credit Card number. When you swipe your card at the gas pump and the POS acquires the account information from the magnetic stripe the station’s Merchant Bank assumes it was you doing the swiping (provided you haven’t reported the card stolen). This absence of verified physical presence (the card swipe) is the risk that makes the Payment Gateway provider necessary.
What is an SSL?
An acronym for Secure Sockets Layer, SSL is an encryption method originally developed by Netscape that Payment Gateways like Verisign use to securely transmit transaction data. The process uses an SSL certificate which consists of two encryption keys, one public and one private; both are needed to authenticate a secure transmission. By encrypting the transmitted data this way the Payment Gateway ensures that even if the data packets being exchanged are accessed by an unauthorized party the Credit Card information will be unreadable. A secure SSL connection address or URL is always preceded by the https:// protocol designation.
Note on the difficulty of attaining Merchant Status:
Acquiring a Merchant Account can sometimes be troublesome for small business. Often banks are wary of extending this service to smaller entities they may feel represent too much risk. This risk takes the form of Card Provider (Visa, Mastercard, MBNA etc.) chargebacks to the Merchant Account provider who must then pass this cost on to their client. In many cases if any Merchant Account holder experiences chargebacks in excess of 1% the provider will penalize the Merchant Bank Services provider.
What is a Chargeback?
If a Cardholder disputes a charge on their account, and the Card Provider accepts this dispute it does not “eat” this disputed charge, instead it passes this cost back to the Merchant Bank via what is called a Chargeback, or a “charge” directed back to the Merchant Bank that received the transaction funds originally. Naturally the Merchant Bank will then collect this amount, plus a fee, plus a fixed penalty amount, from the Merchant. You may want to inquire about the chargeback fees and penalties your bank of choice associates with its Merchant Services.
How do I go about attaining Merchant Status?
If you are securing Merchant Status for online sales the bank will typically require that:
a) Your web site is live and accessible, and products or services you are selling there are real and tangible
b) Your pricing, products, and Merchant Name (or DBA) appear on your site
c) Your return/refund and privacy policies are clearly stated there also
d) You have a customer service phone number
e) You have an SSL (your Memberize account includes our own SSL).
How do I apply for a Verisign Payment Gateway?
Verisign now offers their Payflow Pro Payment gateway through Paypal. Go here to sign up: https://www.paypal.com/cgi-bin/webscr?cmd=_payflow-gateway-overview-outside
Note: The page above also contains signup information for a similar Paypal service called Payflow Link. This does not require an SSL connection on the vendor side since the transaction takes place on Paypal’s server, i.e. the customer is redirected to Paypal’s site. With your Memberize account and our SSL connection you will need Payflow Pro to accept credit card transactions on your site. Once you get a Payflow Gateway login and enter this information into your Memberize account you are ready to begin accepting payments online.
Can I configure my Payment Gateway to process automatically recurring payments?
Yes. If you designate a Membership Plan as a Recurring Billing Plan Memberize will, via Paypal/Verisign Manager, automatically charge your member’s credit card when their membership is up for renewal. Each time such a member logs in to your Memberize account Memberize will interface with Verisign and to verify that the members recurring billing profile is in good standing. Memberize queries Verisign’s database daily to check for any pending recurring billing transactions.