A new online store might be thrilling. But, it’s time for one of the most crucial steps—getting compensated. You’ve designed and acquired your stuff and constructed an excellent website.
Starting an online business requires a thorough knowledge of how e-commerce payment processing functions. But let’s be honest, if you’re not an expert in finance or technology, you may find the entire idea of e-commerce credit card transactions confusing and challenging to understand. The great news is that we can simplify things for you because we are here.
You’ll discover how a payment gateway interact in this blog post, and we’ll provide you with a few examples of payment options you can use while setting up the BigCommerce shop.
Online Payment Methods
Reviewing some of the various payment options that people favor for online purchases can help us understand how payment processing functions.
- Credit Cards: One of the most well-liked and user-friendly payment methods, both online and off.
- Users can submit their bank account information for direct debit, which is the equivalent of paying with cash or a cheque.
- Wallets such as PayPal and Apple Pay are examples of alternative payment methods.
- Digital currency: Only a tiny minority of customers use Bitcoin or another coin to make payments.
You can also offer your clients ACH and invoicing as additional online payment methods throughout the checkout process. However, as you can observe from the table below, the most popular options are credit cards, alternative transactions, and direct debit.
Three Components of Online Shopping Payment Processing
It’s better to speak about payment processing now that you are aware of the several payment methods you can choose to accept on the online store. Although there is undoubtedly more to it than this, by briefly defining each of the components, you may quickly summarise the concept:
- Payment gateways serve as a conduit for sending customers’ payment information from your e-commerce site to the payment service.
- Payment gateways should retrieve the data, check the customer’s finances, and transfer the funds into the merchant account.
- Get the funds once they have been processed using a merchant account.
Even though they officially perform different functions, the terms “gateway” and “processor” are occasionally used synonymously, which adds to the confusion.
Furthermore, PSPs, also known as merchant service providers (MSPs), can control the entire end-to-end procedure, including managing technical connections and money deposits.
Once the user is finished adding things to the shopping cart, let’s examine the stages for a typical transaction to show how the payment systems function in tandem.
Step 1: At the point of purchase, the customer inputs their credit or debit details.
Step 2: The payment gateway will secure the data before being sent to the payment gateway.
Step 3: To confirm that the client has the necessary funds to complete the transaction, the payment processor contacts the credit card network.
Step 4: The credit card issuer for the customer either approves or denies the payment request.
Step 5: The consumer can check whether the transaction was authorized on the merchant’s website after the payment processor transmits the findings (approved or rejected) through the payment gateway.
Step 6: The payment gateway releases the money to the bank or payment service.
The thing that sometimes surprises people the most is how quickly everything happens, even though a lot is going on.
Important Things Ecommerce Payment Processors Should Know
It’s now time for the payment gateway to properly make payment after you’ve gathered and transmitted the data. Most of the processes occur here, including verifying with the credit card issuer, authorizing the price, and depositing the funds into your bank.
The following general information regarding the payment processor:
They must adhere to PCI compliance
The Payment Card Industry Data Security Standard should be followed by every business that receives, handles, saves, or sends credit card details (PCI DSS). In other words, you and the payment processor need to abide by these rules.
Be sure to question payment processors regarding their PCI compliance strategy when evaluating them.
Tokens for private payment data ought to be made
It’s essential to go into more detail about how it functions. Your payment processor must employ tokenization to protect the consumers’ payment details, especially if you permit consumers to keep their payment details for use during subsequent purchases or to repeat billing.
It works by the processor converting the banking information into a token it could use to recognize the specific consumer as soon as the credit or debit card data is received. By doing this, you’re guarding against hackers who might try to steal private payment information for you and your clients.
The forms of payment they accept
At least in the eyes of your clients, this is most likely the most crucial component of the payment processor. But does it enable you to handle the payment options that your clients prefer?
The fees that they want
Now, it’s what you give the most thought to. Of course, you don’t want to be forced as a small business to pay enormous fees for the payment gateway, but sometimes it’s hard to understand the rates.
Do You Require a Merchant Account for Online Sales?
Some companies are seeing the necessity for ecommerce merchant services to enable them to customize their services to consumers’ demands due to the increased complexity and modernization of ecommerce.
An ecommerce merchant account may assist you in providing the appropriate digital payment alternatives for your clients if you handle payments digitally, which, if you’re reading this, you presumably do or intend to.
You can control and cut down on the costs related to several payment channels with the use of merchant accounts.
And lastly, e-commerce merchant accounts are committed to making their operations extremely safe and now handle payments using the most significant level of encryption. By doing this, you can ensure that you’re giving your consumers the most precise and secure setting possible for processing their credit card transactions.
Conclusion
You are prepared to choose one or more of the options accessible to you now that you are aware of the ecommerce platform’s payment acceptance possibilities.
Payments are essential to your Online store’s payment process, whether you’re a startup or an established company.
