Payments Post-Grad, Part 1

September 9th, 2008 Chris Posted in Payments | No Comments »

I must confess that I am a bit of a geek. I actually enjoy a technology challenge when there is a problem to be solved in our business, and I have to be a bit of a Macgyver to sort it out.

I’ve never actually worked as an engineer or software designer, despite my engineering degree. However, in the various places I’ve worked, I’ve had to become proficient in the technologies associated with the work. It’s been a necessity and I’ve usually picked it up relatively quickly.

So when I joined our micro business, I was feeling pretty confident. Whether it be upgrading to a new CRM system, setting up the office network or updating our web site, I was able to rise to the task and get it done.

That is, until a problem so complex, so insidious, that it put my technology prowess to shame. What was most embarrassing is that I knew that thousands, even millions of people had already sorted it out.

I’m talking about accepting credit cards on the web.

I was recently asked by a colleague of Colleen’s about how hard it is to set this up and I was a bit embarrassed to say that I probably spent two weeks figuring it out. Our situation was especially complicated as we are a Canadian company who operates in U.S. dollars.

So, in the next couple of blog postings, I’ll try to provide a detailed look on what it took for us to go from accepting credit cards on the phone, to accepting credit cards on line. Fasten you seat belts… it’s a rough ride.

In the beginning…

Like many micro businesses, we accepted payment in one of two ways. We could process orders by phone by taking credit card payment information by phone or fax, then calling in to our credit card processor.

For on-line orders, we used paypal. It was very convenient although you pay for that convenience… Not to mention that as a Canadian company, we could not process AMEX cards from the U.S.

Our requirements:

I think we’re representative of many online businesses. We want to use our web site to sell products and services (I’ll refer to them all as products going forward). Specifically:

• Present our products online with one-time payment and on-going payment plans (ex. five payments over five months, or $x per month in perpetuity).
• Have customers select one or more products and be presented with a final bill for confirmation.
• Allow customers to specify a particular credit card, along with personal info, and use it to pay.
• Have that payment processed and deposited into our bank account.

What you’ll see definitely added to our headaches was accepting American Express cards. They do things differently than Visa or MasterCard. But for us, AMEX made sense since many of our products are purchased by individual sales persons in medium to large companies where AMEX has very high penetration as the corporate credit card. As it turns out, about 10% of our credit card business is on AMEX.

Definitions:

Today, I’ll start by providing a quick set of definition of all the moving parts so we can see what needs to be considered when implementing this. Yes, this list of definitions you need to know is way too long – just another sign of how complicated this is…

Storefront – This is the component that displays the products that you are offering your customers. Think of going to a web site and seeing the various products being offered, where you can select them to get more information or add them to your shopping cart.

Shopping cart – This is the component that collects the list of products that the customer has indicated an interest in purchasing. It includes a product catalogue, allowing the user to be presented with order information on each product selected like price, part number, additional product details, etc… It also collects or retrieves customer information that is necessary to process the credit card (card type, card number, name, billing address, etc…) and other functions like shipping (shipping address, shipping method, etc…).

Payment Gateway – In a physical store, think of this as the point-of-sale device with which your credit card is wiped and subsequently goes off to ensure that your credit card is valid and in good standing. In the online world, it is a service that receives payment information and talks to the back-end card companies to make sure all is good and you can accept that card.

Merchant account – Think of this like a bank account- but not from your bank necessarily. Obtaining a merchant account allows this bank to give you money for the credit card transaction while it deals with processing the funds with the card-holder’s bank in the back-end.

Your Bank – This one is mercifully easy. It’s where the transaction proceeds get deposited. As long as an account with the same currency as your payment gateway and merchant account. And as long as it’s in the U.S. if you want to accept $US AMEX cards. And as long as… Never mind. So much for mercy…

Next

In the next post or two, I’ll go through our lessons learned as we actually implemented this. I’ll also look at the particular challenge for a micro business not located in the $US that wants to accept $US credit cards.

I won’t focus on all the behind-the-scenes stuff that happens in credit card processing (which I don’t pretend to fully understand). Instead, I’ll hopefully give you practical tips that will make it easier for you to actually implement.

C.