How Credit Card Processing Works in the e-commerce industry
We all know that the E-Commerce industry is growing very fast. Every day new eCommerce website are being launched on the Internet. These merchants want to understand how the entire process works. So we will discuss all the factors involved in a Credit Card processing transaction on an E-commerce website.
So basically the first step is the customer visit the merchant website to purchase tangible products or services. Yes, on E-Commerce platform merchants can also sell services because you're using a shopping cart so you can load a product or you can also load the description of a service. So the customer visits the website and then the customer looks at the shopping page Where the products are listed and make the selection.
The customer does that by clicking on the product, and hitting the buy now button. The moment he hits the buy now button, the product is added to the shopping basket also known as the Shopping Cart. Once the entire shopping is done then he clicks on the checkout button. Once he clicks on checkout button, he is routed to next page also called the payment page.
On this page, the customer fills all the information that includes the billing address, the shipping address, name, phone number, email. He may also be putting credit card information on the same page or he might have to put the credit card information on the second page. It actually varies depending upon the capabilities the merchant receives from the payment processor or the merchant account acquirer. One more exciting thing out here is this particular page gives the entire total of the transaction amount to the customer.
So the customer will know how much money is paying for the products, how much is paying in taxes and how much is paying for the shipping. Most of the shopping carts also allow these merchants to place a coupon option there. So for promotion purposes, merchants promote different kind of coupons like 5% discount, 10% discount, $10 discount or $50 discount. If the customer has got a coupon code that coupon code will actually be entered on the checkout page. After putting credit card information then this information goes to acquiring bank.
This is the merchant account acquiring bank or payment service providers infrastructure where the transaction information is actually validated and lot of filtering is done to identify fraud & risk level of the transaction. Sometimes the transactions may be declined by merchant acquiring bank. Once the acquiring bank declines the transaction then the customer receive the notification on the checkout page or the merchant website and then the customer may have to use a different card.
If everything goes well this information is further sent to the card brand or card scheme or the card network. Now you have to understand one thing. There are few card brand which are also are the card issuer. If that is the case, the card issuer will take the decision to either approve the transaction or decline the transaction. In most of the cases, different card brands offer their cards through different card issuing banks. If that is the case then this information actually moves from card brand server infrastructure to card issuer. The card issuer is actually financial institution which has issued the card to the card holder.
The card issuer identifies whether there is possibility of approving the transaction or not. If the possibility is nill than the transaction is declined and then the customer has to use a different card for transaction. If it is approved then the merchant actually receives the approval information onto the system or on their website. so this will generate a new order into the CMS are the content management system. It may be woocommerce, may be magento, prestashop or anything and the customer will actually receive order confirmation. This entire process of sending the approval or sending the decline actually follow the same path backward.
If you are merchant who actually into the ecommerce industry & if your are looking at global audience & if you have majority of sales volume coming from the United States of America then I would strongly recommend you to evaluate couple of other alternative mode of payment processing solutions. The one solution which i would recommend is to look at ACH payment processing solutions. It is a great alternative to card processing . You can also look at the substitute check option also known as eCheck. So these are two additional options which I strongly recommend.