When it comes to the means by which people pay for products and services, there have never been more options available. From online payments to mobile devices, to credit and debit cards or plain and simple paper currency, payment methods truly run the proverbial gamut.
However, given their simplicity and convenience, online payments have been the biggest success story. The start of the COVID-19 pandemic saw a dramatic shift to online shopping and the demand for online stores has continued to grow ever since.
In January 2021, UK online sales grew 74% year-on-year, making it the largest rate of growth since the start of the first lockdown in March 2020.
With the future of eCommerce looking brighter than ever, it’s important to understand what merchant payment processing is and how it all works if you choose to take your business online.
WHAT IS MERCHANT PAYMENT PROCESSING?
Merchant payment processing is a high-level system of authorisation. A neutral third-party assesses the details of a customer’s online payment method (such as a credit or debit card) so the transaction can be verified, and the funds can be distributed from the bank that issued the card originally.
This authorisation is done through a payment gateway.
If everything checks out and the issuing bank verifies that the funds are available, and your payment processor will send the funds to your merchant account, minus the accompanying processing fees.
While the average person may think there are only two parties involved – a buyer and a seller – in reality there are several. Your payment processor essentially acts as a middleman for your customers’ transactions, ensuring all of the necessary hurdles are cleared so that the funds move seamlessly to your merchant account.
WHAT IS THE DIFFERENCE BETWEEN A MERCHANT ACCOUNT AND A BUSINESS ACCOUNT?
A merchant account is essentially one step along the path before reaching your business bank account.
While a bank account is yours, a merchant account is one that is provided by your payment processor, and is what makes accepting any online payment possible. If you want to offer more payment methods to your customers, a merchant account is a must-have.
HOW DOES ONLINE PAYMENT PROCESSING WORK?
When it comes to online payment processing there are six main steps involved.
To learn more about this process, read our blog on ‘How to Accept Card Payments Online’.
WHY IS A SECURE PAYMENT GATEWAY SO IMPORTANT?
Protecting your customer’s data is incredibly important. In January 2021, data for over 7 million customers was stolen from a men’s clothing retailer, which later ended up on an online hacker forum for the world to see.
If sensitive information about your customers is stolen it could ruin the reputation of your business.
By actively seeking out a payment gateway which is both reliable and secure, your customers will feel more comfortable making purchases and you can rest easy knowing that you’ve got security for your online business covered.