If you’ve been manually processing payments up until now, you must be wondering: is there a better way?
If you’re like many small organizations, you collect payments mainly through cash or checks. While this might be working for you at the moment, adding online payments provides a number of advantages to you and your supporters.
Meet expectations
People are increasingly comfortable paying online. When members, customers or supporters are ready to sign up, register for an event, or make a donation, they want to do it quickly and easily. In fact, websites that don’t support online payment can be seen as being out of step.
Speed up the process
Online payments are faster than manual payments, since you don’t have to wait for the check to arrive or for it to clear. The whole process – from submitting an online payment to updating your bank account – can take a matter of seconds. The end result is improved cash flow for your organization, and almost immediate confirmation of transactions. Prospective members won’t have to wait to join your organization, and participants will know right away whether they have successfully registered for an event.
In addition, the online payment service lets you know right away if the person making the online payment has sufficient funds to cover the transaction – rather than finding out a week later when the check bounces.
There are several terms that are used almost interchangeably when describing online payments:
payment gateway
payment processor
payment provider
payment service or payment system
merchant account
Though they are distinct, with subtle differences, they all refer to a company, service, or application that acts as a financial middleman between your website and your customer, and between both of you and your bank accounts. Each facilitates the completion of online transactions, and the processing of online payments.
To fully understand how online payments work, let’s follow a transaction from start to finish. In this way, you can see how your website, your member or donor, and your payment service provider all interact.
To get started with online payment processing, you typically need:
a merchant account – though some payment systems (such as PayPal) do not require a merchant account or can provide you with one
an account with a payment service provider
a web page with a button (e.g. Join, Donate, Buy) that initiates the transaction process – you can use code provided by your service provider or specialized shopping cart software
Once you’ve set up your web page and connected it to an online payment system, visitors to your site will be able to pay online for products or services. The online payment process begins when the visitor clicks the button to pay online for membership fees or an event registration, or to make a donation or purchase something from your online store.
On the online payment form that appears, the visitor enters their credit card information and submits the transaction request. Depending on your online payment service provider, the form may appear on your website, or your purchaser may be redirected to a form on your service provider’s website.
The transaction request, along with the credit card information entered by the purchaser, is securely transmitted to the payment gateway operated by your payment service provider. The information is encrypted so that no one – including you – can view the purchaser’s personal and financial information.
Your payment service provider will then use a secure payment processing service – either their own or one provided by another company – to verify the purchaser’s credit card details and confirm whether the purchaser has sufficient funds to complete the transaction.
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