Credit card is the most convenient and fastest way of paying and
receiving money over Internet. Accepting credit card payment from
your web-site can be significant revenue source for your business
and an excellent way of converting an advertisement and promotion
centre into profit centre.
Part of the revenue generated this way may be ploughed back to enrich
the web-site and spend more on promotion - ensuring higher traffic
and revenue without pinching your budget.
How Does the Process Work ?
Before I explain the process, it is important that you understand
the players and their roles. There are four major elements in any
credit card payment system:
Consumer or Cardholder
Merchant is the company or shop selling products or
services. So, if you install a credit card payment gateway at your
web-site - you are the merchant.
Consumer, obviously is the buyer of product/service. He/she has
a valid credit card and pays through it.
Bank is the intermediary between Merchant and Consumer, facilitating
the transaction. The bank that issued credit card to the consumer
is called card-issuing bank. The bank that does business with merchant
enabling him to accept credit card is called Acquiring Bank or Merchant
Above three elements are the pre-requisites for every credit card
payment systems - on-line or off-line. Payment Gateway is a software/system
that facilitates credit card transaction in on-line environment.
Here's how the process works - The consumer buys a product/ service
from merchant using his/her credit card. The merchant passes the
card information to Acquiring Bank for approval through payment
gateway system. Acquiring Bank verifies the credit card details,
approves or rejects the transaction and informs merchant about status
of transaction through the same payment gateway.
The merchant has an account with Acquiring Bank, who buys (acquire)
the merchant's sales slips and credit the value of these slips minus
processing charge/commission to merchant's account.
So, the merchant does not have to wait - Acquiring Bank pays the
merchant immediately after a successful transaction and recovers
it later from consumer through card-issuing bank.
The on-line approval process normally takes less than a minute -
making it one of the fastest and most convenient for both consumer
I have a web-site - Can I Accept Credit Card
Yes, you can. In fact, if you have a plan to sell small value products
from your web-store - installation of credit card payment gateway
is an essential step in that direction. In all probability, you
may start accepting credit cards in your present web-site - even
if its hosted in a virtual server.
How Much Does it Cost ?
Like most things in life - cost for installing payment gateway is
elastic. Its higher if you stretch on features and lower if you
settle for economy edition. Cost also varies with vendors. A rough
estimate is as follows:
One-time installation charge - Rs. 10,000 to Rs.
Annual Software Charges - Nil to few thousands
depending upon vendor
Transaction charge of 3% to 7% on every sale through
So, What is the next Step ?
You need to become a Merchant before accepting credit card transactions.
Next, you need to install a payment gateway system or integrate
your web-site with a payment gateway service provider. We shall
discuss these two steps in detail in next issues.
Happy and Safe Surfing
Dr. Amit K Chatterjee
- Newsletter on Business Opportunties from India and Abroad
Vol: 4, Issue 26
; Feb 26' 2004
Dr. Amit K. Chatterjee
(Amit worked in blue-chip Indian and MNCs for 15 years in various
capacities like Research and Information Analysis, Market Development,
MIS, R&D Information Systems etc. before starting his e-commerce
venture in 1997. The views expressed in this columns are of
his own. He may be reached at firstname.lastname@example.org