Looking for a merchant account/payment gateway and I'm a little unclear about the roles performed by each.

Also, are there some that provide more documentation for integrating with their systems? I've found doc's for linkpoint and authorize.net. Any others with integration doc's available to view? It would be nice to be able to test app's before making them live, hopefully without paying extra for the testing.

TIA

Hi Shawna888,

In simple words, The gateway is the system that connects your merchant account with your web site.

The gateway gets the credit card information and pass it to the merchant account. Then the merchant account is in charge of depositing the funts into your bank account.

Not all merchant accounts support all gateways. The one i recommend the most is Authorize.net and is supported by many merchant processors.

Authorize.net has a lot of documentations plus there are a lot of scripts already made for it.

Are you planning on having a shopping cart? or is it for something else?

Thanks for your response, wbpro.

Yes, a shopping cart, though I don't know which yet. Currently using a small custom cart, but need to make some changes. Hence the desire for integration documentation.

If you don't want to spend too much time making an integration and making a shopping cart i suggest you go with a pre-made script.

In my opinion osCommerce is one of the best solutions out there and has the authorize.net integration. Is also a fully dynamic system, easy to use and install.

If you are good programming you can also customize it and make it look completly different from the original.

Hi Shawna,

To add to Jorge's comments... a payment gateway is really just the "Internet equivalent" of those credit card terminals you see at bricks-and-mortar stores.

It takes the credit card transaction request securely and then routes it through an authorization network that is contracted by your merchant account provider.

This authorization network queries the cardholder's issuing bank to see if the issuing bank will approve the sale. If approved, the amount of credit is temporarily reduced and an authorization code is provided. Then the process goes back through to the gateway or terminal to let the customer (and merchant know).

Then, later that night, the gateway sends through a settlement of all of the approved sales for that day at which time the transactions are "cleared" through the Visa/MasterCard interchange networks and the issuing bank permanently reduces the cardholder's line of credit for the sale.

The issuing bank then pays the net amount to the Acquiring Bank and then the Acquiring Bank is instructed by your merchant processor to release the funds into your local bank account.

Your merchant processor is responsible for the underwriting & activation of your account as well as many other aspects of servicing it - merchant support, technical support, risk management, chargeback & exception processing and many other related roles.

And just a little more information:

Authorization: The first step is called the Authorization which is the process of requesting an authorization from the bank or company that issued the customer’s credit card. For Internet Merchants, the shopping cart is connected to or integrated with a Payment Gateway. For Retail Merchants, the card is swiped through a magnetic reader on the Point of Sale (POS) Terminal. The Payment Gateway and POS Terminal then connects to a Front-End Processor. If the credit card used is a Visa or Mastercard (V/MC), the Front-End Processor transmits the authorization to the Visa or Mastercard Associations who then rout it to the appropriate Issuing Bank. Otherwise, the authorization is transmitted to the appropriate Card Issuer (Amex, Discover, Diners, JCB) for approval. The Issuing Bank or Card Issuer authenticates the Cardholder and approves or declines the transaction amount. It is important to note that no money changes hands during the Authorization. Merchants must re-present the transaction to receive payment. For Retail Merchants, the transaction is stored on the POS Terminal. For Internet Merchants the transaction is stored on the Payment Gateway.

Merchant Balancing: The second step is called Merchant Balancing which is the process of totaling the transactions and balances by card type and transmitting them to the Front-End Processor. This is also known as Batching Out. Most POS Terminals and all Payment Gateways perform an auto close function at the end of the day and batch out automatically.

Capture: The third step is called the Capture which is the process of requesting payment from the Issuing Bank or Card Issuer. The Front-End Processor matches the Authorization data to the settlement data and transmits the card capture file to a Back-End Processor for V/MC transactions or to the appropriate Card Issuer for other card types.

Clearing: The fourth step is called Clearing. During this stage the Back-End Processor performs compliance checks and risk management procedures and transmits the transaction to V/MC or to the appropriate Card Issuer for other card types.

Interchange (V/MC Only): The fifth step is called Interchange. During this stage the V/MC Associations sort the transactions by Issuing Bank and transmit them to the appropriate Issuing Banks for settlement.

Settlement: The sixth step is called Settlement. During this stage the Issuing Bank calculates fees and deductions (i.e., chargebacks) and routs the net funds to the V/MC Associations who then sort them by Acquiring Bank and transmit them to the appropriate Acquiring Bank for payment to the merchant. For other card types, the appropriate Card Issuer determines the daily deposit for the merchant.

Merchant ACH: The final step is the Merchant ACH. During this stage the Acquiring Bank or Card Issuer transmits the merchant deposit to the merchant’s checking account.

Thank you both for your very thorough and well thought out answers. The information you've provided here as well as in other threads has been very helpful.

Now, off to digest all this along with a few tutorials, api documentation, online demos ...

Should be ready to make some phone calls soon (I haven't missed your links ;) ).

Thanks again.

Good luck in digesting it - I still am from time to time :)

And things always keep changing too. :)

Especially now... come October, for instance, the impending influx of Visa Rewards cards is going to have huge impact on merchant pricing nationwide.

It will, in essence, be a form of "overnight inflation" since Visa is now going to allow their Member Banks to convert entire portfolios of non-Rewards cards over to become Rewards cards which will instantly drive up costs nationwide on the processing side.