Payment Processing: How Payment Gateways Enable Payments

The most nervous part of establishing an online business is probably processing payments. It not only keeps the lights on in your company but also handles private client data. The benefits of choosing a payment processing system that best suits your needs and those of your clients may be enormous: operational effectiveness, client retention, sales growth, and more.

E-commerce payment processing: what is it?

When a company receives payments from clients via an e-commerce platform, e-commerce payment processing takes place. It’s done via a secure terminal, or gateway, which guards consumers’ private financial data and provides a conduit for money transfers to the seller.

In reality, the e-commerce payment process involves several channels of interaction between numerous players, including the payment processor, merchant account service, and both the customer’s and the merchant’s respective banks, even though most customers may believe it only requires a few seconds to complete after clicking a button.

Processing payments for online stores vs. traditional methods

Traditional payment processing includes a third-party payment gateway being integrated into the checkout process by an online vendor. Essentially, the consumer is sent to the third party’s own website’s payment page online, where they enter their payment information to finish the transaction.

The processing of online payments is incorporated into your company’s website. Because it is a one-stop shop, there is more trust between the client and the business. Customers lose trust in the confidentiality of their private financial data and tend to leave their online shopping carts empty when they are forcibly sent to a third-party website to complete a transaction.

In fact, the Baymard Institute, an e-commerce research organization, discovered that 18% of consumers are likely to quit a flow of checkout since they don’t trust a website with financial data.

How are payments processed in e-commerce?

Many online transactions begin when a consumer submits credit or debit card details during the checkout process, typically using a form that is integrated into your website or mobile app. The payment gateway sends encrypted payment information input on your website to the processor.

The transaction is either accepted or rejected when the processor informs the bank that issued the customer’s credit or debit card to check if there is enough money in the related account.

Then, the payment processor informs the payment gateway of the authorization or refusal, and the payment gateway, in turn, relays it to the e-commerce merchant’s website. If the order is accepted, the customer receives an official receipt, frequently in the form of email notifications.

The money needed to make the transaction is subsequently transferred to the merchant’s account after being debited from the customer’s credit or bank account.

The parties involved in an online sale include the following:

Payment processor

A financial services company that handles the whole chain of e-commerce transactions is known as a payment processor. All transaction information is sent between the merchant’s account and the customer’s bank or credit card company through the payment processor.

Payment gateway

The payment gateway is a platform that connects your e-commerce website and a merchant services provider technologically. This makes it easier for data to be sent between the customer-facing website and the payment processor (and, consequently, banks that issue and accept currency).

The payment gateway also relays authorization or refusal information back to the e-commerce site.

Merchant account

An online retailer can accept electronic consumer payments using a merchant bank account. This happens after consumer Payments have been approved and remitted, which means that money has been transferred into the merchant account from the institution that issued the customer’s credit or debit card.

After one to two working days, the money is subsequently transferred to a company bank account owned by the merchant. Businesses must form a partnership with a supplier of merchant services in order to open a merchant account. Such a supplier offers software and hardware solutions, such as accounts for digital merchants and virtual terminals, to facilitate e-commerce transactions.

Factors for selecting an e-commerce processing platform

There are many business payment solutions on the market. Before selecting a provider, any owner of an e-commerce business should take a number of factors into account, including the level of security the provider offers, its capacity to handle a variety of payment methods, the locations of your customers, and any fees or costs you may be charged for using the provider’s service.

Security

Your website will require a Secure Sockets Layer (SSL) certificate in order to handle payments securely. A “layer” of safety for online transactions and communication is provided by an SSL certificate, which is a code that is added to your web server. The SSL certificate encodes the connection when a client’s web browser accesses your company’s website, thereby protecting consumer information from snoopers.

Once you’ve installed an SSL certificate on your website, you should confirm that your e-commerce payment processor complies with “Payment card industry” (PCI) standards. Credit card providers need compliance in order to guarantee the privacy of credit card payments processed by your processor.

Allowing for a variety of payments

Your greatest choice for e-commerce processing payments will be able to handle a range of payment methods, including PayPal, Venmo, and e-checks, in addition to credit and debit cards.

Accepting payments from abroad

If you intend to have consumers from other countries, you should pick a solution that can handle international payments. Your payment gateway must support credit and debit cards from a variety of foreign banks and provide currency conversion for consumers. The gateway needs to provide assistance in navigating different tax regimes.

Expenses and fees

There are three primary costs involved with utilizing an e-commerce payment processor:

• Setup expenses. The typical start fee charged by processors ranges from zero to $250.
• Monthly recurring fee. These typically range from $10 to $50.
• Transaction charge. Processors often charge a fixed fee, generally no more than 25, plus 1% to 5% of each transaction.

Conclusion

One of the most crucial choices a business owner can make is choosing the best online payment processing system. To get the ideal solution for you, you need to take into account all of your company and client demands as well as your financial situation.

One of the safest methods to make the best decision is to list these factors in advance and compare them to the offerings of other providers.