One key business solution merchant website owners always look for is a dependable payment processor to accept payments for online transactions. To the uninformed, however, payment processing is a perplexing subject. There are many complex issues to start with, specifically with regard to the basics of payment processing, payment gateway configuration, and some aspects of third-party payment processors.

Before we get down to the best payment processors, here are some essentials about payment processing itself.

About Payment Gateways

A payment gateway is a third-party company that connects your shopping cart to your merchant account (a merchant account is a bank account set up to accept business payments, and you can obtain one from your bank). This real-time facility allows you to accept credit cards, debit cards, and other forms of online payment directly from your website.

In the past, banks used to act as the only gateway to both process and hold payments. With liberalization of the banking system and the Internet, companies have been able to offer an alternative to the traditional payment processing model, cutting out banks for payment processing. Some companies have also been able to offer merchant accounts without you needing to apply for one at your bank.

Using a payment gateway is not essential, you can achieve the same result by using your bank's payment processing software and your bank's merchant account. In fact, in some contexts, using your bank's payment processing software has some advantages, including advanced customization of your payment pages. However payment gateways have many benefits compared to the do-it-yourself route, such as:

• You will need to spend little time integrating the payment gateway on your website. It is generally a pre-built system, with clear installation instructions, and little or no programming knowledge required.

• You can process your payments on the back of a large payment processor that optimizes its service and security features. You won't have to worry about payment processing rules and compliance, unless you are storing credit card details on your server. If your business conducts large transactions, you benefit from speed, efficiency, and sometimes lower processing fees (payment processors are able to obtain discounted processing fess; they may transfer some of their savings on to you).

• You can start straight away. A payment gateway starts accepting debit or credit cards immediately, with minimal programming knowledge required.

To summarize, payment gateways accept payment information, encrypt it, and transmit it over the web to the various banks to confirm that a payment has been processed successfully.

Setting Up Gateway Configuration

Setting up your payment gateway essentially consists of two steps.

• The first step involves setting up your merchant account with your bank (some payment gateways offer merchant account services, further bypassing banks).

• The second step involves choosing your payment processing script. You can either choose a pre-built payment processing gateway, or use the software provided by your bank (which is likely to require a higher programming knowledge). Set up your script to connect with your merchant account to start accepting payments immediately.

You may ask whether you can configure different checkout choices. Yes, you can. You can either authorize funds or ask the customer to make real-time payment during actual checkout. Your decision will depend upon your business model. Real-time payment requires that you ship the merchandize within a specified period. In the event you are unable to do so, choosing the other alternative is a better option. The choice of “Authorize Funds” allows you to put a temporary hold on the customers’ funds till you ship your product.

Understanding Third-Party Processors

Simply put, a third-party processor is a vendor who charges your customers’ credit cards on your behalf and then transfers the money electronically to your account. Many online merchants prefer to have both the third-party processor and the payment gateway. This way, you can ensure that your prospective buyer has his or her preferred payment method and is not turned away.

Now that you have the basics, we can focus on what features the best payment processors have.

A good payment processor

• Provides merchant account services efficiently. Good customer support is essential. Availability of 24x7 help provides a lot of reassurance that there is someone to troubleshoot your problems.

• Has an effective antifraud solution in place. You hear a lot about credit card frauds going on these days. Credit cards are stolen, lost, or misused by false information. The best payment processors verify billing and shipping addresses with those provided by MasterCard/Visa. In addition, card security codes are put in place to verify that the buyer actually owns the card.

• Provides you with accurate financial information.

• Has a recurring billing feature. This simply means automatically collecting payment installments after a fixed duration.

• Have reasonable rates and fees. However, you must remember that each payment processor may have different sets of rates. For example, they may have an assortment of rates, such as discount rates, chargebacks, or transaction rates, in addition to application fees, ongoing fees, and settlement fees. Choosing the best payment processor will entail evaluating all financial aspects of the charges and fees.

• Is dependable in all respects. Any weak link in the payment processing system means loss of customer confidence, and this translates into loss of business.

There are many dependable and well-known payment processors out there. All you need to do is evaluate the benefits and disadvantages each processer has. Some of the well-known names in the business are Google Checkout, PayPal, MiraPay, and Authorize.net, to name a few. They have survived the competition and are thriving because they have built customer trust by providing a dependable, secure, and fast payment environment.