E-Commerce Credit Card Processing

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Understanding ecommerce credit card processing. What the every day merchant needs to know?

It's 2017 and the world of e-commerce has never moved faster. Brick and mortar stores are taking a back seat while online shopping steps up to the plate. 

Whether you've started a new business or had a mom-and-pop shop for decades, giving your customers the option to shop online will only increase your sales. 

You may be saying, "I've only ever accepted transactions in person. How do I bridge the gap to e-commerce? Where do I start?"

It all starts with e-commerce credit card processing and we're here to shed a little light. 

So why e-commerce?

Giving your customers the option to shop online provides several benefits for both you and the buyer. With an online option, you'll be able to market and sell to more than just those in your immediate territory. 

87% of U.K. consumers have bought at least one item online in the last year. With this kind of staggering statistics, you'd be doing your business a disservice if you never pursued a way to accept card payments online. Opening up a web based shop gives you the potential to boost sales by reaching a larger consumer base. 

Another benefit of e-commerce is making money even when you're sleeping. With online marketplace, you and your employees won't be limited to making sales when your doors are open. Your online store will allow you to profit around the clock.

The customer benefits from having the option to make a purchase online if they prefer staying indoors or want to save time. Weather conditions, busy schedules and long hours at work make online shopping idyllic for the average buyer. The customer also benefits from being able to find exactly what they want in a concise and efficient way.

The What

When your customer shops online and enters their credit card info, what's going on in the back end? 

The answer to this is simple:

There are a few steps that take place as the cardholder enters their card details. These steps make the transaction quick, easy, secure and more importantly, possible! 

The Payment Gateway

The payment gateway is the first flaming hoop a customer's transaction jumps through. 

The payment gateway allows you to charge the customer's credit or debit card directly from the site. It's basically an online application that acts as a buffer between your payment processor (which we'll discuss later) and the transactions that take place on the site.

Why is this gateway necessary? You might be asking yourself.

This gateway is in place for you and the customer's security and to connect to banking networks and ultimately to Card Associations like Visa and MasterCard.

When a customer enters their payment information and clicks the purchase button, the transaction information heads straight to the gateway, hosted by the payment processor.

The Payment Processor

The Processor is the company, a middle man of the whole e-commerce credit card processing operation.

Once the transaction information reaches the processor's gateway, a back-and-forth game of sending the payment information to and from the banks and card associations takes place. They take the fee for that of course.

The Merchant Account

Now that the transaction has gone through the gateway, the merchant account comes into play. 

A merchant account (sometimes called a MID for 'merchant ID') is the type of account opened and provided by the acquiring bank (the acquirer), that will allow the settlements of the funds captured from credit/debit card transactions.

This type of account is required if you plan to use a payment gateway to process payments from your website.

There are two different types of MIDs. Aggregated (3rd party) and dedicated (direct).

Aggregated MIDs or 3rd party accounts (such as PayPal) are designed for small businesses, or in some cases for hard-to-place businesses which cannot obtain a direct account. The process to obtain a dedicated account is extensive and requires credit checks and risk assessments. But once approved, it will allow you to negotiate your sales rates based on your business type and the volume of which you sell.

The How

All of that information might seem overwhelming but it doesn't have to be. 

It starts as soon as the customer inputs their credit or debit card information and the transaction details are sent to the payment gateway. 

From there, the details are transferred from the gateway through the merchant's processor. During this point of the process, the processor references the MID and sends the transaction details to the merchant's account. 

The merchant's payment processor also receives the transaction details and is responsible for quickly contacting the issuing bank. This step is required to validate the legitimacy of the card.

The bank will then either accept or decline the payment. If the bank approves the sale, the merchant can ship the products or provide the services.

It is upon this approval that the issuing bank will deposit the correct funds into the merchant's account and from there to merchant's business bank account.

Things to Keep In Mind

Any new business decision should be thought out strategic. As a merchant, it is important to keep several things in mind while making the leap from only in-store sales to e-commerce credit card processing. 


Credit card processing charges and interchange fees vary from processor to processor. Some charge a fee per transaction and discount rates that come as a flat fee or percentage.

Interchange fees are what credit card associations charge per transaction to maintain and aid payment processes. These associations pass down their interchange fee that the processor and acquirer will almost inevitably charge you. 

Monthly service charges might also come into view, depending on your gateway provider. 

It's good to be aware of potential fees that might be involved in your agreement with your payment provider to avoid mountainous, unforeseen fees.

Integration and Shopping Cart Plugins

Most modern gateway providers will allow you to integrate your website with their gateway directly via Server-to-Server API, which in practice means the whole payment process takes place in the background while your client fills out the payment form on your website and never leaves it. Another method, usually meant for smaller or riskier merchants, is redirection where your clients are redirected to a payment form hosted on processor's server, after which they get redirected back to your "Thank You" page.

If you're using a popular shopping cart (for example OpenCart, WooCommerce, Magento, etc...), your gateway provider should be able to provide the integration plugin module that allows you integrate with few clicks of a mouse.


The idea of switching over to e-commerce might seem like a daunting task. We're hoping this article has shed some light on all that goes on within e-commerce and credit card processing.

If not and you still have questions, we'd love to answer them for you! Send us your questions and we'll get your credit card processing plan mapped out in no time. CONTACT US

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