Electronic Shopping Carts & Payment Processing
Last Updated: 06-24-2010 , Posted: 06-09-2005
A Quick Reference
From Basic Forms to Shopping CartsAn electronic shopping cart is a critical aspect of en e-commerce business. The shopping cart is the software (or series of scripts) that allows users to select products from your Web site, save them and check out when they are done shopping. In the early stages of electronic shopping, the shopping cart was usually a basic HTML form from which a customer selected the products he wanted to purchase. Long before using a credit card over the Internet was widely accepted, it was common to find that you would need to print the form and mail it along with a money order or credit card information to the company. Over time, as e-commerce grew and online stores began to offer hundreds, if not hundreds of thousands of products, obviously a better method for storing a customer's purchases and placing an order was needed.
The shopping cart acts as the user-interface for the customer to shop. It allows users to place items in a "shopping basket". The cart remembers these items for a predetermined length of time, usually 15 to 30 days unless the shopper removes the items from the cart. Today's shopping carts are really designed for the ease-of-use of the shopper. Extra features such as different color or size options, quantity of order, and matching item links can be integrated into the shopping cart. Once a shopper enters her shipping address, taxes and shipping costs can also be tallied from within the shopping cart. For the merchant, the shopping cart also provides important information, which is often transparent to the shopper, including a cart number to track the order, and even a cookie to provide you with some limited tracking details about your customer.
Within the genre of shopping cart software, merchants have many options to choose from. Some shopping cart software is designed to run on your own Web server, while others may run on the application provider's (hosted) servers. It is important to remember that a shopping cart is just one part of the e-commerce Web site, and as a stand-alone tool it usually will not provide payment processing. Once the customer completes her "check-out", the shopping cart delivers the order to the payment gateway, the service that automates the payment transaction between the shopper and merchant. Shopping carts are not storefronts (although they are integrated into storefronts, which we will discuss later).
Some key factors that you will need to consider before choosing a shopping cart include the following:
Finding Shopping Cart Software
The Yahoo! Electronic Commerce Software Directory is just one of many places where you can find lists of E-commerce Shopping cart software (a Google search will provide some excellent sources as well). A good way to start your search is to look through some shopping carts online and start a list of the features and functions you see, that you feel would be important in your own cart. Additionally you should consider if you plan to host the cart yourself, or use a software provider for the service. Use the check-list above, and read the "features" pages from the software cart vendors Web pages. From there, do product specific searches and to view the cart in use on other store Web sites. Looking for product reviews of the software can also help narrow you narrow down your choices. While there are simply hundreds of shopping cart software packages available . knowing your requirements will soon limit the choices and make deciding on one product much easier.
How Payment Processing WorksBefore being able to accept credit card transactions and other forms of online payments, a merchant will need to set up a merchant account with a bank. A merchant account is the industry term for a business banking relationship whereby you and a bank have arranged to accept credit card payments (usually, a local bank can suffice for this kind of relationship). Setting up a merchant account usually involves the bank understanding your business and working with a third-party processor to arrange a mechanism for accepting payments. For more information on setting up merchant accounts, we recommend you take a look through the eBiz FAQ at ECommerce-Guide.com to get you started in the right direction.
As mentioned previously, once the customer checks out with the items in her shopping cart, the order also has to be verified for payment. This task is performed by the electronic payment gateway — a third-party service that is actually a system that processes, verifies, and accepts or declines credit card transactions on behalf of the merchant through secure Internet connections. The payment gateway is the infrastructure that allows a merchant to accept credit card and other forms of electronic payments via the Internet.
When a merchant submits a payment transaction to the payment gateway (on behalf of the customer) it is sent through a secure connection from the Web site. The customer will simply submit his order, and will then see some type notification that the order has been submitted on the next screen. Behind the scenes however, there is a lot more going on. The transaction information is actually routed from the Web site to the merchant's bank processor, which submits the information to a Credit Card Interchange. The Credit Card Interchange is the organization responsible for managing processing, clearing and settlement of credit card transactions. The Credit Card Interchange then routes the transaction to the customer's credit card issuer where it is either approved or declined based on the balance available of the card. If the transaction has been approved, the funds are re-routed back to the Credit Card Interchange, who provides the merchant's bank processor with the transaction results. The transaction again goes to the payment gateway, which is responsible for saving the information and sends the results of the transaction to both the customer and merchant. In the final step the Credit Card Interchange sends the funds to the merchant's bank for deposit. While this payment processing routine may seem lengthy, the whole process would normally be completed in a few seconds.
From the merchant's perspective you need to ensure certain criteria are met before you can accept credit card and other forms of Internet payments at your electronic store. Other than the obvious (such as a Web site and products to sell), you'll need to ensure you have a merchant account with a financial institution, and that you have selected an appropriate shopping cart software as well as a payment gateway to handle the transaction.
Integrating Carts & Payments into Storefront SolutionsFor merchants not interested in the research, design and implementation time requirements, there are many storefront services available. A storefront is the commonly used term to describe a complete electronic commerce solution for merchants. Storefront service providers (also called Merchant Service Providers) are able to provide a complete solution which may include some of the following . depending on the specific storefront provider's services:
By paying monthly or yearly user fee and a set-up fee, storefronts offer merchants without Web design and electronic commerce experience a way to get started. Be warned however, that these types of total solutions can be limiting in that you may not have a choice of payment gateways, and that high traffic Web sites may have additional hosting fees to pay. Usually, when setting up a storefront account you will pay a one-time set-up fee then pay monthly, based on a selected plan often with predetermined bandwidth, limits to the number of products you can list, or a set number of monthly transactions.
Once you weigh in all options, a merchant will need to have a merchant account, some type of shopping cart interface, and an account with a payment gateway to accept credit card and online payments on their Web site. With the electronic commerce industry growing by the day, so it seems, merchants can choose from a variety of software providers and third-party vendors to create a system that best suits their online business needs.