If you are planning to sell products or services through your website, accepting credit card payments will benefit your business to a great extent.
There are mainly four components required for accepting online payment from credit card:
• Payment gateway
• Merchant account
• Payment processor
• E-commerce website
In a web-based scenario, you will be entering into a merchant agreement with the payment processor that operates a merchant bank account. You will be assigned a merchant ID that will serve as a merchant account. A business checking account will also be required in which the funds will be deposited.
Second requirement is the payment gateway which is used for initiating a transaction and retrieving feedback such as denial or approval. It acts as the point of sale or a credit card terminal. When the payment processor determines the approval or denial of a transaction, the authorization is passed back to the gateway which provides the e-commerce website with a response.
In order to offer online payment service, your website will also need a payment processor. It is a service that communicates with card issuing banks and credit card companies. When a transaction is forwarded to the processor from the payment gateway, the request is then forwarded to the card issuing bank or directly to the credit card company by the processor.
Before sending a response to the processor about approval or denial of transaction, the card issuing bank performs fraud, debit or credit checks. This response is then forwarded to the gateway by the payment processor for relay back to the e-commerce system.
An e-commerce system is also a requirement as you need a way to sell your stuff in order to initiate credit card transactions. It should be compatible with the payment gateway you are using.