Introduction 

It may be quite satisfying to start an internet business, especially if you work hard to create a beautiful website and a clever marketing plan.  However, you must make sure you have the right e-commerce payment processing solutions in place if you want to maximize those important aspects of an e-commerce firm.

It can be difficult and perhaps perplexing to understand how e-commerce payment processing operates.  Although it is true that the technological components are complex, you don't need to be an expert in order to grasp the fundamentals that enable you to launch your internet business.

Here, we'll talk about how payment processors and gateways cooperate to enable safe online transactions.

Ecommerce payment processing basics

The operation of e-commerce payment processing is made possible by two key components.  Together, these components make it easier for customers to complete the online checkout process and guarantee the security of the transaction.  These components of online payment processing for e-commerce include:

•  The portal for payments
•  The person who handles payments

Payment gateway

An online payment service that is incorporated into an e-commerce platform, like a retail website, is called a payment gateway.  An e-commerce platform and a payment processor are connected by a payment gateway.  The client information needed to move money from the customer's account to the merchant account is gathered by this gateway.

Customers can pay for their online purchases using the payment gateway service, which frequently provides a range of payment methods, like credit or debit cards and online payment processors like PayPal or Stripe.

Payment processor

The payment processor communicates the payment details to the e-commerce company's merchant account after receiving them from the payment gateway.  The payment processor acts as a go-between for the online retailer and the merchant account.  On behalf of the consumer, the payment processor transfers funds from the customer's account to the merchant account.

Through online transactions, payment processors send the payment information from the client's bank to the merchant's bank.  Additionally, they supply the physical equipment needed for brick-and-mortar businesses to take credit or debit card payments.

How payments are processed in e-commerce

Opening the payment gateway is the first stage in the e-commerce payment process.  This occurs when a consumer starts an online transaction and inputs payment information, including credit card numbers.  This occurs after customers hit the checkout option after adding something to their basket.

The payment gateway sends the encrypted payment information to the payment processor in the second phase.  In order to verify the transaction, the payment processor subsequently gets in touch with the bank that issued the card.  After the bank approves the payment, the purchase amount is subsequently taken out of the customer's account.

The payment processor subsequently notifies the payment gateway that the card-issuing bank has approved the payment (or not, for example, if there is not enough money in the account).  At this point, even if the money hasn't yet reached the merchant account, the payment gateway will also inform the e-commerce website of the bank's permission.

The money that has been taken out of the customer's account and sent to the merchant's account is the last stage.

Also read: What is the SWIFT banking and payment system? How it works in 3 steps

Factors to consider when choosing an ecommerce payment processing solution

1. Is the processor compatible with my ecommerce platform?

• Whatever payment processor you choose needs to work with your chosen ecommerce partner, whether that's Shopify, BigCommerce, or another competitor.
• Those big providers have many processor options, but smaller ecommerce platforms may have a more limited variety that integrates with their service.

2. Is the processor secure?

• This factor has two components. First, you need to know as the ecommerce merchant that your processor has measures in place for fraud protection and denies suspect transactions. It should also provide encryption for all data.
• Second, customers should feel safe and secure, too. They expect a seamless experience with a gateway that blends seamlessly into your site, including your branding. Being sent to another website or an out-of-date interface can make customers feel uneasy.

3. Is the processor PCI compliant?

• Any provider that deals with credit card information must be compliant with the Payment Card Industry Data Security Standard (PCI DSS).
• The PCI is the gold standard for credit card transactions and has 12 key requirements for processors, including encryption and other protections, to protect against fraud and theft. Meeting these requirements is mandated by credit card companies.
  
  

4. What types of payment does it accept?

• Customers want options when it comes time to pay. It’s standard to accept major credit cards like Visa and Mastercard, but also consider a processor that allows less-accepted credit cards like American Express.
• As well, there are newer online payment forms to be considered, such as buy-now-pay-later providers like Klarna and Afterpay, or mobile payment options like Apple Pay, or even cryptocurrency like from Bitcoin wallets.

5. Does it create tokens?

• Tokenization is a way of securing online payment information. When a customer pays, a token is created that identifies their unique information, protecting it from data theft.
• The benefit here is also that tokens allow for customer information to be securely saved for a faster checkout the next time they place an order. Faster checkout is always a win, and tokenization helps achieve that.

6. What kind of fees will you pay?

• All processors will come with transaction fees, but how that pricing is structured can vary.
• Typically, you’ll pay a flat fee plus a percentage for each transaction, though others may charge a flat monthly rate instead. Your ecommerce platform may also have lower, pre-negotiated transaction fees with various payment providers.
• You also need to look at what transaction fees you might be hit with for disputed purchases, chargebacks, or credit card payments from different countries with different currencies. You’ll want to compare different providers to find a fee structure that makes the most sense for your ecommerce business.

We are able to assist

Transfi provides an online payment system that is ideal for both one-time and recurring purchases.  Our system makes it simple for your clients to make payments and for your company to accept recurring payments, like subscriptions, through Direct Debit.

Your company will be able to accept one-time payments via Direct Debit once clients have been set up for their payments.  As an alternative, your clients can make same-day, ad hoc payments via Instant Bank Pay, which is facilitated by Open Banking.

Contact our financial specialists at GoCardless if you have any questions concerning e-commerce payment processing or any other area of your company's finances. Learn how Transfi can assist you with regular or ad hoc payments.