Ecommerce challenges any businessperson, especially those who have experienced it before. The term itself means buying and selling online. Ecommerce technology makes doing business online safe and secure, making it an ideal way for a business to expand or for individuals to start their own business.
The eCommerce terms, payment processing information and hosting solution services discussed here will help a new online merchant get a head start.
Ecommerce terms
Chargeback - A process where a credit card holder challenges a credit card charge, usually as part of a dispute between the customer and a merchant.
CSP (Commerce Service Provider) - A hosting company that provides a secure ecommerce platform or a digital storefront.
Disintermediation - A term used to describe the practice of removing intermediaries from business transactions. This allows a manufacturer or service provider to sell directly to end users rather than through retailers or brokers.
eChecks - A form of electronic payment that allows shoppers to enter their bank account number rather than a credit card number. Processors submit the transaction to the customer’s bank as a check.
eWallet - An electronic wallet keeps all the different payment options available to a shopper in one secure, password protected file. With a wallet enabled, choosing a payment method is easy and convenient when checking out with an ecommerce order.
Ecommerce - the paperless exchange of business information. Much of the time, people use the term to describe sales between businesses or between businesses and consumers.
Merchant account - A special bank account used to facilitate credit card transactions. These accounts often have strict requirements and higher processing fees than a retail account because of the riskier nature of online transactions for underwriters. To protect themselves against chargebacks, contested billing, refunds and other costly situations, merchant banks usually require online businesses to keep a minimum deposit (reserve) available in their accounts.
More about accepting credit card payments online
Ecommerce businesses almost always must accept credit card payments to be competitive. This means that a seller must have a payment processor in place who will collect money from credit cards and deposit into merchant bank accounts.
Ecommerce businesses pay fees in exchange for the ability to accept credit cards. Annual fees, transaction fees, interchange fees and chargeback fees make up just some of the fees businesses face. Besides the fees, banks that offer merchant accounts may require a business to keep a certain minimum balance called a reserve. Banks intend to use reserve amounts to make sure that merchants can issue refunds and pay for chargebacks.
The reserve varies among banks and among different products. For example, computers and electronics often have higher return rates from customers, so banks usually require a higher reserve balance for businesses who sell that merchandise.
Historical data pertaining to a business has a dramatic effect on the rates paid for a merchant account. Time in business, credit history, tax history, policies and business volume are just a few factors that could make accepting credit cards cost more or less.
Alternative payment processors
Some payment processing companies make accepting credit cards easy without the traditional requirements for a merchant account. These companies are ideal solutions for low volume ecommerce businesses. Example of this type of payment processor include PayPal and Amazon Payments. Ecommerce sellers pay a higher fee for this type of service, but 3rd party processors make accepting credit cards easy without many of the traditional requirements for a merchant account. These companies are ideal solutions for low volume ecommerce businesses because many online shoppers already have one of these accounts to shop large online retailers or online auction sites.
Transaction charges using a third party payment processor often cost more than they would with a traditional merchant account, but they often do not require a reserve balance. When checking out with an alternative payment processor, customers can choose to pay from their account balance or pay with a credit card. Many online shoppers prefer to pay with these services because they can pay for orders using their credit card in a way that does not disclose their card number to the merchant.
Ecommerce hosting solutions
Web hosting providers make starting a new ecommerce business easy. These companies usually offer preconfigured ecommmerce server packages that come with a shopping card, domain name, web space and SSH certificates. Some of these companies even offer their own transaction processing, making them a one-stop shop for setting up a business online.
These service providers offer a path for growth that help ecommerce businesses manage costs as they grow. For example, shared hosting packages can expand to accommodate more products, downloadable files and more bandwidth. When necessary, ecommerce businesses can expand to dedicated servers hosted by data centers so they can seamlessly grow into more success.
Conclusion
Starting an ecommerce business requires an understanding of basic terminology, credit card processing and ecommerce hosting. The information here will help new businesses get started well.
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