The back end of your e-commerce store holds more leverage to the growth and success of your online business than you think. Not selecting a good payment processor could easily flush all your marketing and lead generation efforts down the toilet.
If your customers have a frustrating checkout process, they will easily abandon their carts, leaving you with no sales. Choosing the right e-commerce payment processor will do more than enhance cash flow. It will also enhance customer satisfaction and drastically increase your rate of closing sales. It could also increase the number of return customers, which is music to the ears of every e-commerce business.
If you look around, you will find plenty of companies offering secure payment processing. But seeing how sensitive this is, you can’t afford to pick the first one you find. You need to do some due diligence to find the one that fits your business needs like a glove. And it all starts with having the right information on e-commerce payment processing.
What is e-Commerce Processing?
As an e-commerce store owner, you need to know plenty, especially if you have a lean team or run everything in your store. Even terms that seem basic might be a learning opportunity that could improve your store’s performance and take you to the next level.
E-commerce payment processing is the process that happens when a business accepts payments from its customer using an eCommerce portal. The payment can be made through a gateway or secure terminal that protects the customers’ financial information while creating a pathway for remitting the funds to the merchant.
From the customer’s end, the e-commerce payment process is a quick process that takes a click of a button and a few seconds. But in the real sense, this is a culmination of multiple communication points between the customer, the merchant, the payment processor, the merchant account service, and the customer’s and the merchant’s respective banks.
Although the process is quick, it involves the transmission of sensitive data, not to mention it becomes the financial lifeline for your business. From this perspective, it’s easy to see why you should pay special attention to e-commerce processing and take the time to find the right platform to handle payments for your online store.
E-Commerce Processing Vs Traditional Payment Processing
online stores already traditional payment processing might think it’s the same as e-commerce processing. Although both provide the same solution, they are slightly different.
Traditional payment processing involves the merchant’s integrating a third-party payment gateway into the checkout process. At checkout, the customer is redirected to an online payment page run by a third-party payment gateway. The customer can input their payment details to complete the package on this page.
The e-commerce payment process is way more convenient and simpler for the customer and the business. It is a one-stop shop that cultivates more trust between the customer and the merchant because the customer is never redirected to another website. Instead, everything is integrated into the business’s website and done in-house.
Customers can become skittish about trusting another website to process their payments. They are less confident with the security of the third-party gateway website and might abandon the cart altogether.
By considering purchasing from your store, it means the customer trusts your store, and there’s a high chance they will be more comfortable processing the payment from your website.
Although having a traditional e-commerce processing method is something, e-commerce payment processing is the gold standard and could significantly impact your bottom line.
E-Commerce Processing Vs Payment Gateway
When considering an e-commerce processing platform, you must differentiate between e-commerce processing and payment gateway. The two components play vastly different roles within the payment processing course.
Most people struggle to understand the respective roles and functions of the two components. And because they are an essential part of e-commerce payment processing, getting everything right is critical.
What is a payment gateway?
A payment gateway is a consumer-facing interface that collects payment information from customers and sends it to the payment processor.
From the perspective of e-commerce processing, payment gateways are the options that customers see on the checkout page of your online store.
Some payment gateway options include:
- Pay iO
- Stripe
- PayPal
- Apple Pay
- Amazon Pay
What is a payment processor?
A payment processor is an intermediary between you, the customer’s bank, and your bank. The payment processor works in the background and relays transaction information back and forth between the customer’s card-issuing bank and your bank.
Payment processors come in many forms. A card-issuing bank can serve as a payment processor and also some companies offering payment gateways also have payment processors.
In simple terms, a payment gateway is a customer-facing interface used to collect payments from customers. In contrast, the payment processor works in the background as an intermediary between the different parties.
Three Primary Elements of e-Commerce Processing
To understand how e-commerce processing works, you need to understand the three basic components of the technology.
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Payment gateways
Payment gateways are the mechanisms that connect your e-commerce website to online payment processors. Think of it as a courier that safely and securely ferries e-commerce payment information from your website over the secure payment processor.
Payment gateways look different to the customer depending on how your website is set up. In some, the customer might interact with the gateway right from a special input field on your website, while others might take the customer to a new page where they input their financial information.
The crucial task of the gateway is to authorise payments and ensure you receive payments on your end.
You can host the transaction on your server, but it’s more complex and requires special technical skills. With a payment gateway, you don’t need to build this kind of functionality on your own.
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Payment processors
The second element is the payment processor – an entity that receives payment information from the payment gateway and then executes the technical work with the information received.
The duty of the payment process is to verify that the customer has the necessary funds to pay for what they’ve ordered. It will then execute the transaction by taking funds from the customer at the issuing bank and depositing them into your merchant bank account. All the while ensuring the security and safety of the transaction.
The payment processor sounds similar to the payment gateway. But they perform different tasks and are both necessary for processing payments.
The gateway is more like a messenger that takes information and verifies while the processor is the IT that ensures the money goes where it’s meant to be.
In some cases, one provider can be the gateway and the processor. But you can also opt to use different services for each part of the transaction.
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Merchant account
The last critical element of payment processing is the merchant account, or your business bank account, which you’ve set up to receive funds from the online store.
How Does e-Commerce Processing Work?
Understanding the three elements of e-commerce payment processing makes it easier to understand how the system works. At either end, it can be simply explained as money leaving the customer’s account and appearing in your account. But in the real sense, there are numerous moving parts that ensure this happens quickly, securely, and consistently.
- Open payment gateway – The process of e-commerce payment processing begins when the customer enters their payment information and submits the online payment information. In most cases, this is credit or debit card information. However, if your site supports other forms of payment, other currencies, or even cryptocurrency, the information also counts as the start of e-commerce payment processing. Once the customer submits the information, your e-commerce site opens a payment gateway.
- Encrypted payment details sent to the processor – The information entered by the customer is sent through the opened secure payment gateway to the payment processor using a secure and encrypted channel. Your selected payment gateway handles all the heavy work, so you don’t have to.
- Payment is authorised or rejected – When the information gets to the payment processor, the processor checks the information’s validity and whether the customer has enough funds for the purchase and the transaction. The processor authorises the transaction if the information checks out, has no mistakes, and the customer has sufficient funds. If anything is a miss, the processor rejects the online payment.
- Payment processor informs the gateway of the authorisation or refusal – The payment processor relays the refusal or authorisation of the transaction to the gateway. The gateway then reports to your platform, and the customer can see the results.
- Money is credited into your merchant account – if the payment processor authorises the transaction, the value of the transaction is credited into your merchant account, which finalises the e-commerce payment process.
The entire five-step process and any other tasks along the way are completed in seconds. When set up properly, the process is nearly invisible to the customer and your e-commerce business. It allows you to focus on your store’s growth and on fulfilling the orders to ensure your customers enjoy a seamless shopping experience.
What to Look For in a Good e-Commerce Processing Platform
Seeing how important e-commerce payment processing is and the value it brings to your business, it’s a no-brainer that you need to ensure you work with the best e-commerce payment processing platforms available. With several options to choose from, all promising the best, finding the right one can be challenging. But there are a few factors you can consider that will help you settle on the right one. Here are a few questions to guide you through the process.
Is the processor compatible with my online store platform?
Your first consideration should be whether your chosen e-commerce processor is compatible with your selected e-commerce partner. That could be Shopify, BigCommerce or any other alternative.
Most big platforms will have many processor options, so finding a compatible one won’t be challenging. But if you work with the smaller platforms, you will have a more limited variety that can integrate with the service.
What data security protocols does the processor have in place?
E-commerce processing has two components. The first is to ensure that the processor has measures in place for fraud protection and can decline suspicious transactions. Also, the processor should provide encryption for all data.
The second component is the safety and security of your customers. They expect a seamless experience with a gateway that blends seamlessly into the site. But not at the expense of safety and security. They trust your brand, and being sent to another website, might make them feel uneasy.
Is the processor PCI-compliant?
Every e-commerce payment processor handling credit card information must be Payment Card Industry Data Security Standard (PCI DSS).
It is the gold standard for credit card transactions. It has 12 key requirements for every processor, including encryption and other protections designed to protect consumers and merchants against theft and fraud. These requirements are mandatory and mandated by credit card companies.
Does the processor create tokens?
If you allow your customers to save their payment information for repeat purchases or recurrent billing, you need an extra layer of security in the form of tokenisation.
With tokenisation, the processor converts account numbers into a token to identify the specific customer after inputting their credit or debit card information. This protects the merchant and customers from hackers attempting to steal sensitive information.
What types of payments does the processor accept?
Diversity is the standard currency when it comes to paying. Customers want as many options as possible. For your online store, that means completing more sales by capturing the customers’ preferred payment methods.
Credit cards like Visa and Mastercard are a standard. But you should also consider a processor that allows other less-common cards. New online payment options like cryptocurrency are an added plus.
What are the fees you will pay?
All processors have transaction fees that will affect your bottom line. How the pricing is structured varies.
Most options have a flat fee plus a percentage of each transaction. Others may charge a flat monthly fee instead.
With other platforms, you may get lower, pre-negotiated fees. Don’t forget to consider what transaction fees you might incur for disputed purchases, chargebacks or credit card payments from different countries with different currencies. It always helps to be patient and compare different providers to find the most practical fee structure for your business.
Best e-Commerce Payment Solutions
After gathering all the facts about e-commerce payment processing, you must decide which platforms you want to work with. There are many options available, but a few shine through. These are great places to start your search for an e-commerce payment processing partner.
Pay iO
Pay iO is a reputable fast growing fintech company in the UK. It has a rich network of payment options and features that make it the perfect fit for most online stores, big and small. What makes Pay iO such a unique option as an e-commerce processor is that it is designed for all types of businesses. It has all the features you need in a payment processor to scale your business and instil trust in your customers.
Pay iO’s features encompass small and big businesses and facilitates global payments and currency exchange. It offers modern convenience with exceptional ease and swiftness. Whether you sell in the UK alone or globally, Pay iO has the facilities and features to expand your business and grow with you. Pay iO thrives on innovation and provides access to other vital features like open banking that can help your business access funds faster. With a rapid onboarding process that keeps things simple, with Pay iO, you can quickly enhance your payment processing methods and run a more efficient and profitable business.
PayPal
PayPal is one of the earliest payment processors and a household name dating back to 1998. It is one of the most popular solutions and has an impressive global footprint. It is widely accepted as an online payment platform for e-commerce businesses of all sizes.
However, PayPal can be confusing because the platform is both an e-commerce payment processor and a personal payment platform where customers can send and store money. Although the service is supported by most other tools, it has some glaring shortcomings that could compromise the liquidity of your business.
Most notable among these is it is known to erroneously freeze assets which can temporarily cripple the affected business. Also, its features are geographically inconsistent.
Checkout Champ
This e-commerce payment processor works with Shopify, BigCommerce, and WooCommerce, among others. One of its top-selling features is the one-click upsells, which it says can boost conversion rates by 20% or more. It also offers free initial setup and migration for your existing solution. Its powerful internal e-commerce CRM is also worth noting. However, its aggressive pricing may lock out smaller businesses and early-stage startups.
These are some of the most reputable options available. But there are more options out there. It’s vital to weigh the upsides and downsides of each option before enrolling. The processors usually have an enticing sign-up package, but the costs dramatically ramp up after you sign up.
