WHAT IS ONLINE PAYMENT SYSTEM ?
An online payment system is an Internet-Based method of processing economic transactions. It allows a vendor to accept payments over the web or over other Internet connections, such as direct database connections between retail stores and their suppliers ( a common method of maintaining just-in-time inventories. Online payment systems greatly expand the reach of a business and its ability to make sales.
WHAT THE FACT OF ONLINE PAYMENT SYSTEM ?
Online payment systems typically are run by third-party corporations, such as PayPal, Google or Click2Pay. These companies make a profit by taking a small percentage of every transaction, or by signing contracts with institutions that need to make a large number of transactions.
WHAT ARE SIGNIFICANCE OF ONLINE PAYMENT SYSTEM ?
A large Internet storefront, such as Amazon.com, could not exist without the ability to take online payments. Online payment systems have leveled the playing field between large and small companies, as any of them can accept the same payment methods once they sign up with third-party payment processors.
WHAT YOU NEED TO UNDERSTAND ONLINE PAYMENT SERVICES ?
- WHY BOTHER WITH ONLINE PAYMENTS METHOD?
- UNDERSTANDING ONLINE PAYMENT TERMINOLOGY
- ANATOMY OF AN ONLINE TRANSACTION
- ONLINE PAYMENT OPTIONS FOR NON-PROFITS AND MEMBERSHIP ORGANIZATIONS
1 # WHAT BOTHER WITH ONLINE PAYMENTS METHOD ?
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.
a - Meet Expectations
People are increasingly comfortable paying online. When members or supporters are ready to sign up, register for an event, or make a donation, they want to do it quickly and easily. In fat, websites that don't support online payment can be seen as being out of step.
b - 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 or 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.
c - Save You The Trouble
Automated payments also save you the trouble of depositing the check and recording the payment manually. Once you set up online payments for your website, they are automatically processed. You don't handle or store any credit card information. Any updates to member records are handled automatically.
d - But At A Price
Of course, anything of value comes with a cost, and in this case, your payment provider will charge you a fee per transactions, and some charge other fees as well (such as setup fees or monthly fees). But if online payment helps you grow your membership or your fundraising, they'll be taking a slice out of your much larger pie, and everyone's a winner.
We'll explore the costs later, but now, before you start thinking about selecting a particular payment provider, it's important to understand some online payment terminology, including payment provider.
2 # UNDERSTANDING ONLINE PAYMENT TERMINOLOGY ?
There are several terms that are used almost interchangeably when describing online payments:
- Payment Gateway
- Payment Provider
- Payment Service or Payment System
- Payment Processor
- 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.
a - Payment Gateway
A payment gateway is a service that receives the online payment request from your website and directs it to the payment processor.
b - Payment Provider
A payment provider (or payment service provider) is the company that operates the payment gateway or payment processor services. In some cases, the payment gateway and payment processor are combined into a single service known by either name.
c - Payment Service or Payment System
Where a payment provider offers multiple gateways (with different features and pricing) each type is referred to as a payment service or payment systems. For example, PayPal is a payment service provider that offers a number of payment services or payment systems such as PayPal Payflow Pro and PayPal express Checkout.
d - Payment Processor
A payment processor is a service that validates the purchaser's credit card details (e.g., those of our member, donor, or supporter) and checks if they have sufficient funds in their account to cover the payment. If the customer has sufficient funds, the transaction is authorized, and the funds are transferred from the customer's account. The status of the transaction is transmitted back to the payment gateway which then sends a status message to your website.
e - Merchant Account
A merchant account is another term to understand When an online transaction is successfully completed, the funds are transferred from the purchaser's account to your mechants account, a special kind of bank account used exclusively to hold funds received from credit and debit card transactions. To accept online payments, you usually need to set up a merchant account with your payment provider. Funds accumulating in your merchant account are transferred to your organization's bank account on a regular basis.
3 # ANATOMY OF AN ONLINE TRANSACTION: WHAT IS THE PROCESS ?
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 payments, 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 service, visitors to your site will be able to pay online for products or services. The online payment process begins when the visitors 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 then submits the transaction requests. 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 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.
If the purchaser's credentials are valid and there are sufficient funds to complete the transaction, your payment service provider will initiate a transfer of funds from the purchaser's bank account to the merchant account associated with your website, and notify your website that the transaction has been approved. Depending on how your website is set up, that information can be used to automatically update records on your site (e.g., update your membership management or event registration database)..
If the transaction is declined for any reason (invalid credentials or insufficient funds) no funds will be transferred, but status information will still be sent to your website.
4 # THE SOFTWARE THOUSANDS OF MEMBERSHIP ORGANIZATIONS ARE USING TO PROCESS PAYMENTS
If you run a membership organization (like a club or association), there's a software solution that can save you time and money by automating all member dues, new member registrations and event fees.
That software is called Membership Management Software, which is an all-in-one management solution designed for small to medium-sized nonprofits. Here's what else it can do for you:
- Instantly process online payments, fees, and donations (it even has its own payment processor you can see)
- Give you a professional, easy to build website where you can host a news section, notices, resources, member directory, event calendar and more.
- Setup online volunteer, member, and event registration pages.
- Maintain a full contact database that's easy to search, filter, and update.
- Improve member communication through automated invoices, emails, newsletters, and maintenance requests.
- Provide you with financial reports, analytics, and membership summaries in seconds.
- Accept payments through a mobile app.
Membership Management Software eliminates the need for multiple systems and the processing work needed to maintain them all by condensing everything into one, easy-to-use solution.
@ Jackie San