- Posted by daige
- On 2017-10-19
- 0 Comments
If you were thinking about selling online, you are probably wondering how credit card payments work through this medium and most importantly, when customer payments will be deposited into your bank account. I will tell you everything but first, I think it is useful to explain how payments on eCommerce websites work; technically speaking.
First, there are several players involved in a transaction on a transactional site and each of those parties have an important role.
- Your online platform (Shopify, Magento, Prestashop and others) or the marketplace (Ebay, Amazon, Etsy) on which you are selling your products
- Your online payment system solution platform (PayPal, Stripe, Global Payment, Moneris, Pivotal, Authorize.net and others…)
- The credit card of your client
- Your bank and merchant account
If you sell on a marketplace, you will have no say in the choice of payment platform as you’ll be forced to use the one chosen by the marketplace.
But for the rest, it is mostly identical.
If you have your own transactional site, you can choose your electronic payment platform.
Click here for tips on how to choose your payment platform.
There are two types of payment platforms: those that can be accessed with an API, and those for which clients must pass through to complete the transaction. The API platforms are transparent: that means that the customer stays on your website to do the transaction and does not see which payment platform you are using. On the other hand, payment platforms that do not use APIs imply that your customer must go to the payment platform website to complete the transaction.
For example: if you buy on Amazon, you never leave Amazon to do the transaction. You enter your address, your credit card number and you get the confirmation of purchase directly on the Amazon site, without ever leaving it. Amazon uses an API platform.
If you buy on eBay, for example, and you pay using Paypal, you are redirected to the Paypal website to make the transaction.
This means that the transactional site that uses an API payment platform holds the client’s banking information for a few moments and should thus serve its pages in HTTPS ie have a secure page on which the client will have to enter his banking information. Warning: Do not do evil! Do NOT store this information.
On the other hand, if the website uses Paypal or, for example, Interac online payments, the customer will momentarily leave the website to make the transaction. Thus, the website will never have the customer’s bank information on hand. Subsequently, however, the customer will return to a confirmation page that is usually on the merchant’s website.
- If it is an API payment platform: the website is responsible for collecting the customer’s credit card number.
- In the “back scene” , it gives the number, the expiry date and the CVV as well as the amount of the transaction to the payment provider. Note: Some API payments will also take the customer’s address and zip code to avoid fraud by comparing them with the credit card holder’s information.
- In the “back scene”, the payment provider will ask Visa or MasterCard to place the amount for the transaction in the bank account of the payment provider. That account will hold the customer’s money for a certain period of time.
- In the “back scene”, the payment provider will say “OK! or “Transaction Denied” to your transactional website
- The website will display a purchase confirmation or a refusal message to the customer
- After a certain delay, the payment provider will transfer the money from the customer to your merchant account (automatically or not)
I take this opportunity to demystify the merchant account. There are a lot of preconceived ideas about it and yet, today, it is very easy to have a bank account to be able to make transactions online. The simplest way to operate is to use your trading account at your bank and give the number to the payment platform when you open an account with them. That’s why I always suggest taking a non-contractual payment platform independent of your bank. Read other tips about which platform to chose right here.
Delays for the main online payment platforms
Paypal is unfortunately the worst payment platform if you want to receive your money quickly. Of course, it is widely used and so, THEY dictate the rules. Pretty much everyone in the world uses Paypal, and some sadly use it to commit fraud… so if you receive a large amount of payments or if you receive large separate amounts, you risk them suspending you temporarily for investigation. So, the promised deadlines can be extended from a few days to a few weeks before receiving money from your customers.
Officially, Paypal promise about 4 days of delay.
At the time this blogpost was written, Shopify’s main payment platform was Stripe. So read below to find out the deadlines for Stripe.
Stripe is an Irish-American payment platform and, in my opinion, is the easiest to use.
Among its main advantages, one finds especially the speed of implementation.
If you wish to open a transactional website today, you will be able to take payments today. It’s fast!
No contract, no commitment and no monthly fees.
On the other hand, the commission per transaction is higher than a contract platform. It is, in my opinion, a lesser evil. When you have a lot of deals, you can negotiate a better rate.
Stripe announce that the first transfer takes 7 days. Otherwise, the other subsequent transfers will have a delay of about one day or two days. That is, if you opt for the daily transfer schedule and a transfer is made on Monday, you will probably receive it on Tuesday.
When I told you that Stripe was fast, I wasn’t joking 🙂
Authorize.net say that background transfers will take up to 2-4 business days to arrive in your commercial bank account.
The information was not on their website and I had to phone them.
Moneris say that if your trading account is with one of their partner banks, the money will be deposited into your account the next business day. Otherwise, the delay may be up to 2-3 working days.
On the other hand, to open an account at home, expect a delay of about 5 working days, depending on the risk you will represent for them.
In summary, you will always have the money deposited in your bank account in less than 5 working days!