Payment processors are something every entrepreneur should understand, but not everyone knows where to start. We’ve created a brief guide that outlines the key factors you need to know about how they affect your eCommerce site.
So, What Are Payment Processors?
In short, they are the middlemen that handle online transactions. When you make an online purchase, the payment processor is the one that verifies your information and processes the transaction.
Each of these processors has its own set of features and benefits, so it’s important to choose the one that best suits your needs.
How Does Payment Processing Work?
When you make a purchase online, the payment processor will first verify your information.
Once your information is verified, the processor will then authorize the transaction and send the funds to the merchant. The entire process usually takes just a few seconds.
Key Terms to Know
There is a handful of terms to keep in mind when it comes to payment processing.
Understanding these will help ensure that you recognize potential issues and make the right decisions. Listed below are some of the most notable.
Payment Gateway
A payment gateway is a type of payment processor that helps businesses accept credit cards and electronic payments. Payment gateways encrypt sensitive information, such as credit card numbers, to make sure that it is secure during transit. Otherwise, criminals would be able to access this data.
Merchant Account
A merchant account is a type of bank account that allows businesses to accept credit card payments.
In order to open a merchant account, businesses must first apply and receive approval from a bank or financial institution. Then, businesses will need to set up a payment gateway to start accepting credit card payments.
From here, businesses can start processing payments.
Tokenization
This term refers to the process of replacing sensitive data, such as a credit card number, with a “token” that is unique to the transaction. Tokenization helps to secure data and prevent fraud through this practice.
So, it’s essential for businesses to understand how tokenization works to best protect their customers’ information.
End-to-End Encryption
This term refers to the process of encrypting data from the time it is entered into the system until it is decrypted at the other end. This helps to ensure that data is secure and cannot be intercepted or tampered with during transit.
As a result, it is one of the most important characteristics of a reliable payment processor.
Chargebacks
A chargeback is a type of refund that is issued when a customer disputes a charge on their credit card statement.
Chargebacks can be costly for businesses, so it’s important to take steps to avoid them. Unfortunately, some people attempt to maliciously use chargebacks to receive products or services for free.
Chargebacks also occur when criminals use stolen financial information.
What Are the Benefits of Using a Payment Processor?
There are many benefits of using a payment processor, but the most important one is that it makes online transactions more secure.
Payment processors use several security measures to protect your information, which helps to reduce the risk of fraud and identity theft.
Another benefit of using a payment processor is that it can help you save money on transaction fees. When you use a reputable payment processor, you can avoid paying the high transaction fees that come with using a credit or debit card.
Finally, payment processors can help to streamline your online transactions. You can keep track of all your transactions in one place, which makes it easier to manage your finances.
Are There Any Risks?
There are always risks associated with any type of online transaction, but the risks are relatively low when you use a reputable payment processor. Unfortunately, the cybercrime industry is projected to be worth over $10 trillion by 2025. So, it’s more important than ever before to maintain security on your eCommerce site.
The best way to reduce your risk is to choose a processor that offers a secure platform and has a good reputation. This will help make sure that you avoid problems in the future that you may have otherwise encountered.
How Can I Benefit from Working with a Professional?
A good processor will offer a secure platform, competitive rates, and excellent customer service. In addition, a professional can help you save time and money by streamlining your transactions.
You can avoid the hassle of dealing with multiple vendors, and you can focus on running your business. Additionally, when you work with a professional, you can be assured that your transactions will be processed quickly and efficiently.
Payment Processors Don’t Have to Be Complicated
It might seem difficult at first to understand payment processors, but it’s easier than you might expect it to be. Make sure that you keep the above guidelines in mind so you can avoid problems you may have encountered.
Looking for more information about how we can help? Reach out to us today to see what we can do.
