Selecting a payment processing system that works for your business and your customers may have far-reaching effects, like improved productivity, happier clients, and more business.
It’s true that some alternative platforms and payment processors may provide the features you want for processing transactions; the catch is that doing so will require a lot of manual labor and come with all the complications of using an outdated system. Teams of accountants, marketers, business analysts, and attorneys are often needed to implement such payment systems.
So why would an eCommerce business take this on? When doing business, it’s often more cost-effective and profitable to outsource rather than customize an existing solution to your business’s specific needs. This is where eCommerce Payment Processors come in.
What is eCommerce Payment Processing?
When a company takes payments from clients through an online storefront, this is known as eCommerce payment processing. For this purpose, a secure terminal or gateway is used, which prevents unauthorized parties from gaining access to customers’ private financial details while still allowing them to pay the merchant.
Customers may be under the impression that making a payment through an online store only takes a few seconds and a click of a button, but in reality, the process involves extensive back-and-forth between the customer, the merchant, the payment processor, the merchant account service, and the customer’s and the merchant’s banks.
How Does eCommerce Payment Processing Work?
- Online purchases often begin when a customer enters their credit card or debit card details in a checkout form on your site or app. The payment gateway encrypts the customer’s financial information before sending it to the processor.
- The processor then communicates with the issuing bank to verify whether or not there are adequate money in the linked account, and the transaction is either permitted or rejected based on the bank’s response.
- The authorization or refusal is sent from the payment processor to the payment gateway, which in turn notifies the online store. Order confirmation is sent to the consumer, often through email, if permitted.
- After that, the customer’s credit or bank account is debited and the purchase’s proceeds are transferred to the merchant.
Three Elements of ECommerce Payment Processing
In the process above, there are three main parties responsible for the successful completion of the transaction. These three parties are the Payment Processor, Payment Gateway, and the Merchant account. Let’s delve a little deeper into each of their roles.
A payment processor is a financial services company, such as a credit card provider, that enables the complete eCommerce transaction chain. All transaction data is sent between the customer’s bank or credit card company and the merchant’s account through the payment processor.
The payment gateway is a digital platform that connects your online store to a merchant services provider. Merchant services are tools and systems that enable retailers to securely accept electronic payments.
The payment gateway permits data flow between the payment processor (and hence the issuing and receiving banks) and the customer-facing website.
Through the use of the payment gateway, authorization or decline information is also sent back to the online retailer’s website.
An online retailer may accept electronic payments from clients with the use of a merchant bank account. This happens after consumer payments have been approved and settled, which means monies have been transferred into the merchant account from the customers’ credit or debit card institution.
After one to two business days, the earnings are transferred to the merchant’s own business banking account. Businesses must first develop a working connection with a merchant services provider in order to secure a merchant account. Such a company provides eCommerce hardware and software solutions, such as virtual terminals and digital merchant accounts.
What Is Payment Tokenization and Why Is It Important?
Payment tokenization is the method through which your eCommerce business saves consumer payment information for subsequent use. Storing credit card information directly is not recommended since hackers would have easy access to it in the case of a data breach.
However, tokenization provides a safe method of storing the data. Instead of keeping the real credit card information of your clients, your site stores a randomly generated alphanumeric code that symbolizes and substitutes consumer information in your system. When billing clients, your platform will then utilize the token rather than card numbers.
Tokenization is a critical feature for any eCommerce firm that accepts subscription payments or enables consumers to keep payment information for quick repeat checkouts.
Let Paradox Media help you with your Shopify or WooCommerce payment processing, so that your customers get the best checkout experience time and time again. And to guarantee that you have peace of mind as a merchant with regard to the safe payment processing of all funds due to you.
The 10 Most Popular ECommerce Payment Processing Companies for High Volume Payments
Flagship Merchant Services
Let us help you with your Shopify or WooCommerce payment processing.
So how do you choose the right eCommerce payment processor? There are many features and options to take into consideration. You should first compare your options and determine the best possible option for your particular situation. You’ll want to pay attention to the support your payment processor offers you. Are you planning to grow your business? You’ll also want to look at their customer service and any support materials they provide.
When deciding on the features you need from your eCommerce payment processor, you can expect to pay a fee. This could range from a single processing fee, or an annual fee, or a flat fee for your web store.
You also need to decide how your eCommerce payment processor will work within your business. You can choose to integrate with your existing CRM system, or your eCommerce software, or you can simply implement a self-service portal where you will enter your information. All of these are valid considerations to have when choosing the right payment processor for you.