Electronic Payment Gateways Explained
An electronic payment gateway is the virtual connectivity between your website and the credit card companies (e.g. Visa, MasterCard, Discover, American Express, JCB, Diner's Club). It is similar to the point of sale (POS) terminal that you find in the grocery store or restaurant.
In the United States, there are a number of them: LinkPoint, Authorize.net, Verisign's Payflow, Cybersource, Itransact, etc.
Authorize.net is probably the most advertised electronic gateway. A lot of people think they can sign up with them and immediately start to accept credit cards. They do not realize you need a merchant account as well. Authorize.net even uses the First Data platform to help facilitate transaction processing. Since we started using Authorize.net in September 2003, they have been down about seven times. This meant
thousands of dollars lost in sales for merchants around the United States.
Authorize.net's prices are usually about $15-$25 a month and each transaction is about $.10-$.15 in addition to the transaction charge imposed by the merchant account provider. They also charge $25 a month for recurring billing.
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LinkPoint payment gateway is probably one of the strongest out there. It is owned by the First Data Corporation. First Data has been doing electronic money transfers since 1969 and they were the first processor of both VISA® and MasterCard® bank-issued credit cards in 1976. First Data processed 12.2 billion transactions in North America alone in 2003. The last time the LinkPoint gateway went down was in January 2002. LinkPoint's charges are usually about $15-$25 a month. No other fees are charged, except for LinkShield. Recurring billing is free and no other transaction fees are imposed.
Verisign also has a payment gateway. Verisign is probably the most recognized name because they also offer other services and products for the internet (i.e. SSL certificates, domain registration, hosting, etc). You do not need to purchase everything from Verisign to have a successful e-commerce business. Verisign's prices are a little more than the others. They charge extra for their API and recurring billing.
The above gateways offer both an API and a secure website to capture your consumer's credit card data. An API allows you to capture credit card data on your secure website & process the transaction. The consumer never leaves your website and you maintain consistency throughout your website. If you wish to use the gateway's secure website, there is usually some simple HTML coding to direct your consumer over to that webpage. Once processed, they will be re-directed back to your website.
Using an Internet Payment Service Provider (IPSP) (like 2CO, Paypal, CCAvenue) means you have to use their own proprietary gateway. This helps to stay in compliance with Visa and MasterCard. This also means that your customers will be directed over to the third party processor's secure webpage. Some will allow you to co-brand this page (your logo and theirs on the page), but the consumer must know who they are paying and this page must state that.
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Verified by Visa (VBV) / MasterCard Secure Code (MSC) is not all its cracked up to be. First, the card holder must be enrolled in vbv/msc with their card issuing bank, or their card issuing bank must not have vbv/mcs support for the liability shift to occur (almost all do). Second, if the customer is not enrolled in vbv/msc (which most aren't yet, are you?) they will be prompted to sign up for the service at the point of checkout. The issue is visa/mc rules state the merchant must display the enrollment page withing a single-screen as the checkout page (meaning no pop-ups). When the customer is required to enter a SSN to complete the sale they will often abandon the cart. That being said, I expect things to improve in the upcoming years as online fraud continues to affect the US economy to the tune of $3.6B annually (and following the same growth curve as online sales and an increasing rate of 20% per year). All that being said I enjoy what I read from you.