{hubspot_owner_id=}

Ask CWS: How do Online Credit Card Payments Work?

As more and more business is being done online, we've seen an increase in the demand for applications that include real-time processing of credit cards. To make smart decisions when you're setting up a payment solution, it's helpful to have an understanding of how these transactions are handled. Although the whole process happens very quickly (usually just a couple of seconds), there are several different components involved that all have to work together.

Step 1: A customer submits payment information to your website. This connection must be encrypted with SSL, a sophisticated technology that prevents anyone from intercepting the contents of the request while it's being transmitted from the user's local computer to your server. As a website owner, you'll need to purchase (and renew annually) an SSL certificate for these connections.

Step 2: Your Web server takes the payment information and opens a second SSL-encrypted connection in the background to a payment gateway. A gateway is a secure server that acts as a bridge between Web applications and the payment processing network. There are many different gateway providers, though your bank may have a partnership with a particular vendor. Some popular gateways include Authorize.net, LinkPoint and Payflow Pro. Although they all perform the same essential funcion, each has its own set of features (and fees), and many factors may influence your decision. For example, if you're using an off-the-shelf shopping cart, it likely supports a particular set of gateways. Some gateways handle particular types of transactions that others do not.

Step 3: The payment gateway contacts the processing network to determine if funds are available for the transaction. The cardholder's issuing bank relays a response back to the gateway.

Step 4: What happens next depends on the type of transaction. An authorization simply gets approval for the purchase, with the actual charge to happen at a later time. For example, when shipping hard goods, the sale is not complete until the order has been fulfilled. A final sale, on the other hand, immediately charges the customer. Examples would be payment for a service or electronic download, where fulfillment occurs immediately. The payment gateway has details for the merchant account provided by your bank and will route the payment accordingly.

Step 5: The results of the transaction will be passed from the payment gateway back to your Web server. For approved payments, this typically includes a unique ID that can be used to reference the transaction later. If the transaction failed, a status code or other message will be given to help determine the cause (insufficient credit, incorrect expiration date, etc.). The Web server will then display an appropriate success or failure screen to the user.

[Looking for ways to drive clients to your site? Download a FREE copy of 22 Website Hacks to Drive Traffic, Leads and Sales!]

The entire process happens very quickly under normal circumstances, and the customer never sees what's happening in steps 2-4. However, all this background infrastructure is critical and the pieces must work together. As a website owner, you must have the following to accept payments online:

  1. An SSL certificate (see step 1 above)
  2. A merchant account that supports Internet transactions. If you don't have one already, apply with your bank. One notable exception is a service offered by PayPal called Website Payments Pro, which bundles merchant and gateway services together and does not require a separate merchant account.
  3. A payment gateway that supports your merchant account

Each of these services will have its own set of fees, so shop around and find the best set of features and value for your needs.

A helpful summary of the entire process can be found here. CWS specializes in developing Web applications that make businesses work better. If we can help you implement an online payment solution, contact us at support (at) cws (dot) net.

Spend 62% Less Per Lead

22-website-hacks

How? Learn about it in 22 Website Hacks to Drive Traffic, Leads & Sales for FREE! Find out about best practices for SEO, driving traffic to landing pages, and more.

Download for Free