2024 guide to eCommerce payment processing

Learn how eCommerce payment processing works and how to choose a payment processing solution - updated with 2024 data.

This guide walks you through how ecommerce payments are processed, plus how to choose a payment processing solution.

Once upon a time, businesses only accepted hard currency: cash and coins. And for a long time, this system worked. But the telecommunications revolution has changed consumer expectations. We think globally now — and we expect our orders to move at the speed of a swipe. And things are still evolving, so here’s  a quick guide to the latest in eCommerce payment processing.

By 2026, the majority of consumers (51.7%) will prefer to make payments through a digital wallet — even more than those who prefer credit cards. In fact, one-third of North American Gen Z consumers want to place payments through social media.

DataChartWhen it comes to online retailers, consumers expect merchants to accept a variety of payment types, including:

  • Credit cards
  • Debit cards
  • Digital wallets
  • Bank transfers or ACH transfers
  • International orders/unique currencies
  • Cryptocurrencies

As things get simpler for consumers, they get more complex for eCommerce merchants. Thankfully, you don’t have to be an expert on the intricacies of eCommerce payment processing to offer a variety of payment methods on your site. There are plenty of world-renowned payment processors you can use for your business — you just have to know how to choose which processor is best for you. 

What is eCommerce Payment Processing?

First, let’s start with a definition. eCommerce payment processing is the system you use to accept payments from different vendors and payment types. Think of it as a sort of digital cash register, but with a lot more options.

The payment processor typically skims a small fee off the top for the infrastructure they provide. This comes off of the eCommerce merchant’s end, rather than from the consumer. That’s why so many eCommerce merchants shop around with different payment processors, looking for the features and pricing that make the most sense for them.

How does eCommerce Payment Processing Work?

We’ll share flexible eCommerce payment processing options you can use to start selling right away. But before we do, it’s probably a good idea to familiarize yourself with some unique vocabulary you’ll encounter as you research eCommerce payment processing options:

  • Merchant account: This is where the payments will go once you accept them. If a customer pays via credit card, the funds go to the merchant account first. After they’re cleared, you can transfer them to your business bank account.
  • Payment gateway: This is the infrastructure of the payment when someone orders from you online. The customer provides their details to your gateway, which then submits them to your payment processor for authorization. Once approved, the gateway sends out notifications to both parties (payor and payee) that a transaction has occurred.

To borrow a concept from space exploration, think of payment gateways as the hatch room between space and the pressurized cabin. It’s a bad idea to simply open the door in space. The same is true for giving out your intimate financial information to any online merchant. This “buffer zone” helps make the digital payment process possible, creating an additional layer of security and convenience for both parties.

eCommerce Payment Processing 

When a customer enters their payment information (such as a credit card number) to make a purchase on an eCommerce site, it starts a chain of events. 

PaymentProcessFirst, the payment gateway facilitates a secure connection between the site where the customer is making the purchase and the payment processor, and transfers the customer’s credit card information to the processor (using security measures called tokenization). 

Next, the payment processor receives the data and communicates with the credit card provider to ensure there are enough funds to cover the transaction, approves or denies the transaction, then displays the results to the customer through the payment gateway.

Finally, if it’s approved, the payment processor moves the funds from the customer’s account to the merchant account or bank and completes the transaction. 

Even though it seems complicated, this communication between gateway, processor, customer financial institution, and merchant accounts takes place within seconds. Although fast, this process can make or break a customer’s experience with a specific brand, site, or retailer. That’s why it has become so important for payment processing systems to continually improve.

eCommerce Payment Processing and Your Consumers 

 With so many payment options available, each individual consumer likely has their preferred payment method, and you could lose out on a sale if your eCommerce payment processing system isn’t equipped to handle a certain method. Customers also may be discouraged from purchasing if the process feels risky, complex, or difficult. By implementing an effective eCommerce payment processing solution, you can meet your consumers’ needs and allow them to use their personal preferences. 

Consider the following areas when weighing what payment processor will be best for you and your customers:

  • Security. According to Statista, digital wallets would be even more popular if it weren’t for consumer security concerns. Many consumers choose their payment methods to avoid fraud and identity theft — and your processor should be capable of handling that kind of security.
  • Automating finances. If a customer pays with a credit card and uses personal finance software like Personal Capital or Mint, they can automatically track what they’re spending. 
  • Evolving preferences. Your target demographic can have a dramatic effect on the types of payments you accept. One study found that for people 65 and older, 33% preferred using cash. In the 25-34 age group, that preference shrunk to 18%, with a majority of these consumers preferring debit cards instead. 

Top eCommerce Payment Processors

As you browse through words and concepts — gateways, transaction fees, merchant payments — the process of choosing a processor can start to feel overwhelming. 

Here are insights into some of the top eCommerce payment processors you might encounter as you make your search:. 

  • PayPal. One of the oldest and most popular payment processors online, used for both eCommerce and peer-to-peer fund transfers.
  • Amazon Pay. Not limited to the Amazon platform, this processor seeks to bring the fast convenience of Amazon-style payments to third-party merchants.
  • Apple Pay. A Digital Trends report put Apple Pay at about 65% popular usage — and growing. That means more consumers are expecting to pay their tab simply by using their phones.
    • Google Pay. Like PayPal, it’s easy to set up peer-to-peer transactions on Google Pay, or accept online payments as a business.
  • Buy Now, Pay Later (BNPL). While this isn’t a specific eCommerce payment processor, BNPL payment solutions are becoming more popular as they allow consumers to spread payments over time through installment plans, gaining popularity for their flexibility. You’ll typically need a primary payment processor before adding on BNPL services like Klarna or Sezzle.

As you browse this list, don’t feel intimidated by the choices. The most important thing is to choose a payment processor that appeals to your customers and makes the most sense for your business. 

How to Choose an eCommerce Payment Processing Service 

Ready to get started? Here are some essential steps for picking out a payment processor that makes sense for your business:

  • Look at your customers. What are they already using to pay? What does your target age demographic tend to prefer to use to pay? Be sure to identify your customers’ needs. Find a payment processor that accepts these payment types.
  • Review the prices. Estimate your costs when it comes to processing payments — is it cheaper to seek out flat-fee subscriptions in addition to cheaper transaction fees, or to find a solution that only charges transaction fees?
  • Contrast and compare. Narrow the list down to one or two finalists, and then stack their features up against each other directly. This is when it’s time to think about your needs as an eCommerce store. What are the most important offerings and services for you?

With this information in hand, you’ll have what you need to start accepting payments online! 

If you’re offering wholesale transactions, NuORDER offers buyers a streamlined checkout experience with flexible payment options and features tailored to their needs. Learn more about B2B payments built for wholesale or request a demo.

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