Payment Options for Export Import Trade Part VII - Accepting Credit Card Payment at Your Web-Site

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:

  • Merchant

  • Consumer or Cardholder

  • Bank

  • Payment Gateway

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 Bank.

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 and merchant.

I have a web-site - Can I Accept Credit Card Payment ?

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. 70,000+

  • Annual Software Charges - Nil to few thousands depending upon vendor

  • Transaction charge of 3% to 7% on every sale through payment gateway

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

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Source: FAIDA - Newsletter on Business Opportunties from India and Abroad Vol: 4, Issue 26 ; Feb 26' 2004

Author : 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 )

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