It was not long ago when malls were the epicenter of neighborhood activity. Malls gave people a place to shop, eat and hang out with friends.
But the times have changed.
Nowadays many shoppers tend to skip the long lines and standstill traffic near malls or shopping centers, especially during the holiday season, in favor of shopping online. The internet provides a one-stop shop for anyone looking to buy any item for any family member or friend.
Making payments online is quick and easy, often done with a few clicks or taps from a finger. Using money online can also make some people nervous, because one must enter their credit or debit card number to make such transactions. Identity theft and the risk of being scammed is a strong, fearful feeling some have about online payments. Learning about how online payments are processed and dissecting the terminology behind this action is vital when calming the nerves some people feel.
When it comes to using your money online, there are two key concepts to understand: payment gateways and merchant accounts. Understanding both of these concepts will ensure that you better understand the online payment world.
A payment gateway allows an online store or business to charge a customer’s credit or debit card when said customer makes a purchase. Examples of payment gateways include PayPal, Braintree Repeat Billing and WePay. A payment gateway is the mediator during the transaction between the customer and the payment processor — where the money is actually processed. When using your credit or debit card at a brick-and-mortar store, the point-of-sale machine takes that data, sends it to Visa or MasterCard or whichever company manages your account, and checks if the customer has enough money to make the purchase. A payment gateway is the point of sale equivalent for e-commerce.
An online store needs a payment gateway due to the fact that an online store is not allowed to transmit your banking information directly to a payment processor. Payment gateways are exactly what they sound like, in an online transaction sense: a gateway for you to make online purchases.
By entering credit or debit card data, an online business is able to take that information and confirm or deny that the payment can be made. Only then is money actually moved from accounts to complete the transaction. The accounts that businesses must have to do this are merchant accounts.
Merchant accounts are accounts that authorize online businesses to accept online credit and debit card payments. These accounts exist to hold the funds from approved credit and debit card sales. This is the where the payment actually takes place. Merchant accounts are the last step for an online business to receive the money from online sales.
An online business must set up a merchant account to be able to receive money from their online sales. Otherwise, those businesses will lose money.
Payment gateways and merchant accounts help online businesses solidify sales and complete transactions. There are multiple easy ways to set up accounts for an online store. Some programs like PayPal can perform the duties of the payment gateways and merchant accounts. As e-commerce continues to dominate how we shop, businesses selling products online believe having one program that can do all aspects of the transactions is convenient.
For shoppers, the world of payment gateways and merchant accounts does not cross their minds when using their credit or debit card online. However, knowing what goes on behind the scenes of an online purchase should comfort buyers that their information is not being shared in harmful ways. Understanding and using this information is vital for those wanting to sell items online, as well. The internet and e-commerce are creating the new American mall.