A Beginner’s Guide to E-Commerce Payment Processing

There’s nothing more important for an online business than ensuring a proper way to get paid. Unlike brick and mortar shops, online businesses rely on e-commerce payments to operate money transactions. 

On the surface, the process may seem straightforward: a customer loads their online shopping cart, they insert their credit card information, and click “buy;” however, there are more specifics hidden behind the surface. 

Knowing how e-commerce payment processing works is crucial if you’re interested in opening an online business. To learn more, here’s a beginner’s guide into the basics of e-commerce payment processing. 

How Does E-Commerce Payment Processing Work? 

When it comes to e-commerce, there exist more players than just buyer and seller. Behind the scenes, online sellers use a third-party company to link their website with their customer’s financial institution, such as their bank or credit card provider. 

An e-commerce payment processor fulfills the third party’s responsibilities. As the middleman, these payment processors provide a secure portal (also known as a gateway) for sellers to receive funds from their customers. 

In short, payments are processed as followed: 

1. A customer browses your website, adds a product to their cart, and clicks “buy.”
2. The customer chooses which payment method they’d like to use. 
3. The payment processor collects the customer’s information and verifies it. 
4. The processor will then collect the money and transfer it to your business’s e-commerce merchant account.
5. The customer receives their order and your business receives its payment depending on whatever date you agreed with your gateway processor. 

What is an E-Commerce Merchant Account?

A merchant account is essentially like a bank account. Whenever a customer makes a payment, usually via credit or debit, said payment is then transferred into the business’s merchant account. For an online business, there exist two kinds of merchant accounts: a dedicated account and an aggregated account. 

A dedicated account is a merchant account used exclusively by the business owner. Dedicated accounts do not interact with payment processors and require an added amount of steps before being installed. When owning a dedicated account, it requires a couple of days for payments to be transferred into the bank account. 

Meanwhile, an aggregated account is a merchant account used between the business owner and its payment processor. In other words, aggregated accounts are the merchant accounts that come with payment processors. Once you select a gateway processor, you won’t need to sign up for a merchant account because the gateway processor will already do it for you. Aggregated accounts are often recommended for new merchants due to their practicality; once a transaction is cleared, it is instantly transferred into your business’s bank account. 

What are the Benefits of Opting for an E-Commerce Payment Processor? 

Gateway processors are reliable resources. Aside from transferring money into your business’s bank account, payment processors perform other functions to serve and protect your online business. For example, payment processors practice anti-fraud policies to protect your business’s safety and follow the standards set by credit card associations. 

There exist various benefits to opting for an e-commerce payment processor. Largely-speaking, a payment gateway provides an all-in-one resource to ensure all payments made online are verified and received. Meanwhile, when it comes to dealing with pesky tasks, like authorizing credit cards or dealing with customer disputes, they can be handled by the payment processor on your behalf. If payment problems occur, the gateway’s Customer Support can aid with assistance. Finally, fees can be negotiable depending on your business’s scale and experience, meaning gateway processors are flexible to novice online businesses. 

What Fees do Payment Processors Charge?

When it comes to fees, different payment processors have their own rules. Some charge an annual fee while others charge monthly fees. Look for payment processors that offer negotiable fees. Consider payment processors that operate under a monthly basis as they offer better and more versatile deals. However, aside from pricing, when choosing a payment processor, consider what other aspects they offer among their services, such as customer support, processing time, etc. 

Which Payment Methods Should my Business Accept? 

Generally speaking, most buyers use credit and debit cards as their preferred form of online payment. When you set up credit card processing for your online store, all transactions are handled by the payment gateway. That being said, depending on the scale of your business, you can open your business to other kinds of payment methods. For example, if your business operates on a global scale, it can be convenient to offer local payment options. As such, your business would then be required to search for a local partner that accepts and exchanges foreign currencies.  

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