It is crucial to understand how ecommerce payments work before you open an online business. Let’s face it, if your financial knowledge or technical skills are not up to par, the entire process of ecommerce credit card processing can be confusing and difficult. We’re here to help you.

This blog will explain how payment processors and gateways interact. We’ll also share examples of payment solutions that you can use to set up your Ecommerce store.

Online Payment Methods

Let’s first look at how payment processing works. Next, let’s go over some of the payment options customers prefer to make online purchases.

• Credit cards: This is one of the easiest and most popular ways to pay online and offline.
• Direct Debit: Customers have the option to enter details about their bank accounts, which will allow them to pay in direct debit.
• Alternative Payments Methods
• Digital Currency: Very few people pay with Bitcoin or any other cryptocurrency.

You have a few options available to your customers when they pay online, including ACH and invoice. As you can see, credit cards and alternative payments are preferred by most people.

Three Elements for Ecommerce Payment Processing

We now know which types of payment you can offer to your online store. Let’s talk about payment processing. Although there is more to the subject, it’s easy to sum up the idea by quickly defining each element.

1. Payment Gateways: Act as the courier between your website and the payment processor.
2. Payment processors: Take the information from your gateway and verify that the customer has funds. Then deposit the money into your merchant account.
3. Merchant accounts: Once funds are processed, you will receive them.

People sometimes confuse the words processor and gateway by using them interchangeably, even though technically they do different things.

Payment service providers (PSP), also known merchant services providers (MSP), are able to manage the entire process from technical connections to depositing money. Below are some examples of PSPs that Ecommerce merchants might use.

How do Ecommerce Payment Processors (Gateways and Merchant Accounts) Work Together?

After we have explained each element, let us review the steps of a standard transaction. This will allow you to see how the payment system works together after the customer has added items to their shopping basket.

Step 1. The customer enters their credit or debit information at checkout.

Step 2. The payment gateway secures the data and sends it to the payment processor.

Step 3. The payment processor checks with the credit card network to ensure that the customer has the funds to cover the purchase.

Step 4. The customer’s credit card issuing bank either accepts or rejects the payment request.

Step 5. The payment processor then sends the results (approved or denied) through the payment gateway, so the customer can view on the merchant’s website if the transaction was approved.

Step 6. The payment processor issues the funds to either the merchant account or the merchant’s bank.

The best thing about the entire process is its speed.

Let’s discuss how payment gateways work in your ecommerce store to secure and collect payment information from your customers.

Information Collecting with Ecommerce Payment Gateways

As stated, the primary function of the payment gateway was to link the customer’s payment information with financial institutions that process the payment. Small business owners have four options to collect payment details from their Ecommerce store. Some are more customizable than others.

1. Hosted widgets

This scenario uses an HTML component to display information at checkout. There are two types you can use for hosted widgets:

• Embedded iFrame elements: Your checkout page’s content is hosted outside Ecommerce. You cannot control its look and feel.
• DIV components: Your checkout content is stored inside Ecommerce. It can dynamically generate using java script.

2. Hosted fields

Hosted fields are another way to keep customers on your checkout page and provide additional security for credit card information.

This option allows the form fields to be hosted outside of Ecommerce, but still displayed on the checkout page. Once the credit card information has been entered, the gateway tokenizes it and passes the token to the payment processor. Ecommerce does not handle credit card information in raw form.

3. Native hosted component.

This option allows the customer to remain on the page while Ecommerce renders the fields on checkout. Ecommerce then uses an API integration (server-to-server) to connect to the PSP. This can be done with PSPs such as CyberSource and Authorize.net.

Ecommerce Payment Processors

Once you have transferred and collected the data, the payment processor will process the payment. Here are the most important activities, including authorization from the credit card company to pay the money and checking out your account.

These are some things you should know about your payment processor.

1. They must be compliant with PCI.

Any company that processes, stores, transmits, or accepts credit card information has to comply with Payment Card Industry Data Security Standard. These requirements must be met by you and your payment processor.

Ask payment processors about their PCI compliance approach when you are reviewing them.

2. They should also create tokens to protect sensitive payment information.

This was already covered, but it is worth explaining in detail. Tokenization is a method that your payment processor uses to protect your customers’ payment information. This is especially important if your customers have the option to save their payment information for repeat purchases and recurring billing.

This works by the processor converting the card numbers into tokens that can be used to identify specific customers. This protects you and your customers against hackers who might try to steal sensitive payment information.

You can enable stored payment options for customers depending on the Ecommerce plan you have and the payment service provider that you select.

3. They accept all forms of payment.

This is the most important aspect of your payment processor, at least for your customers. It should allow you to accept payment methods that your customers prefer.

While Visa and Mastercard are accepted around the globe, American Express and Discover are not. Customers might also prefer Klarna if they are purchasing more expensive products. Klarna allows customers to split the payments and buy now, pay later. To ensure that customers complete their purchase, you should offer as many options as possible.

4. What fees they charge.

This is the most important thing that you care about. You don’t want your small business to be compelled to pay astronomical fees to their payment processor. However, it can sometimes be confusing to understand the fees.

Companies will typically charge a percentage as well as a fixed transaction fee. Some companies may charge a monthly subscription fee instead of transaction fees. You might also be charged additional fees for international payments, dispute resolution, or chargebacks.

You can use this information to estimate your costs and choose the right payment processor for your ecommerce store.

Are You in Need of an Ecommerce Merchant Account?

Some businesses recognize the importance of having ecommerce merchant accounts to tailor their offerings to customers’ needs, despite the increased complexity and modernization of online commerce.

An ecommerce merchant account is a great way to offer your customers digital payment options.

Merchant accounts are also a great way to manage and lower fees for various payment gateways.

It is crucial ecommerce merchant account be focused on security and use the highest-grade encryption to process payment. This will help you to ensure that your customers have the best possible environment for their card transactions.

There are many options available if you have limited funds and are interested in setting up a credit-card payment processing system to help your business. Balanced Processing Partners provide a wide range of services to assist businesses with credit card processing.

Call at (800) 354-6256 for more information. The qualified consultants will assess your business and offer suggestions to help you keep within your budget. You can also email us at [email protected].