A Quick Guide To eCommerce Payment Processing

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 we’re still evolving. In this blog, join us as we give you a quick guide to eCommerce payment processing.

By 2024, the majority of consumers (51.7%) will prefer to make payments through a digital wallet—even more than those who prefer credit cards. And one-third of Generation “Z” consumers in North America even want payments through social media.

For the eCommerce store, payment processing is no longer a matter of simply accepting cash and putting it in a box. An online merchant for accepting payment has to be responsive to multiple payment types, including:

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

As things get simpler for the consumer, they get more complex for the eCommerce merchant. Fortunately, you don’t have to be an expert. There are plenty of world-renowned payment processors you can use for your business. You simply have to know how to choose which one is best for you. Here’s how to do it.

What is eCommerce Payment Processing?

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.

Typically, the payment processor skims a small fee off the top for the infrastructure they provide. This comes off of the eCommerce merchant’s end, rather than the consumer’s end. 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 the way they do business.

How does eCommerce Payment Processing Work?

Below, we’ll introduce you to 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 payment processing vocabulary:

  • Merchant account: This is where the payments will go once you accept them. If a customer pays via credit card, the funds first go to the merchant account until cleared, where they can then transfer 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 purposes. Once approved, the gateway then 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 their credit card number) to make a purchase on an ecommerce site, a chain of events begins. First, 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 number 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 that there are enough funds to cover the transaction, approves or denies the transaction, and then displays the results to the customer through the payment gateway.

Finally, If the transaction is 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 institutions, and merchant accounts takes place within a matter of 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.

Why Do Consumers Want Better Payment Processing?

These days, fewer and fewer consumers expect to do their shopping with an envelope full of cash. If you have effective payment processing, you can meet your consumers’ needs to use their personal preferences. This helps them realize some potential benefits:

  • 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 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 preferring debit cards instead. 

Who Are the 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. That’s why we’ll simply introduce some of the top payment providers;

  • 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 phone. Don’t be surprised if this expectation shoots up in the coming years, either. 
  • Google Pay. Like PayPal, it’s easy to set up peer-to-peer transactions on Google Pay, or accept online payments as a business.
  • CDGcommerce: An online payment processor that aims to give a “mom and pop”-style charm to its merchants.
  • Braintree: A PayPal service, this eCommerce payment processor is focused on features that drive up conversion.
  • NuORDER. NuORDER enables credit card payment processing in a plan that reimagines buying and selling. For example, one major feature is that NuORDER enables buying and selling through digital trade shows—which may be an option you can’t find with other processors. It also doubles as order entry software at the point of sale for in-person B2B transactions.

As you browse this list, don’t feel intimidated by the choices. There may be more overlap than you think. CDGcommerce, for example, integrates with Apple Pay and Google Wallets. BrainTree? Apple Pay and Google Pay. The important thing is to choose a payment processor that appeals to your customers and makes sense for your business. For wholesale transactions, NuORDER gives buyers a streamlined checkout that offers flexible payment options. For more information on B2B payments built for wholesale, check out this blog.

How to Choose an eCommerce Payment Processing Service 

Want 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 paying with? What does your target age demographic tend to prefer to use to pay? Make sure that you identify your customers’ needs and find a payment processor that accepts these payment types.
  • Review the prices. Truth be told, any processor on the list above will do just fine for you. What you need to do is estimate your costs when it comes to processing payments: is it cheaper for you to seek out flat-fee subscriptions in addition to cheaper transaction fees, or find a solution that only charges transaction fees?
  • Contrast and compare. Whittle 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 the eCommerce store. What’s most important to you—and which processor does a better job delivering?

With this information in hand, you’ll have what you need to start accepting payments online. For more information on eCommerce payment processing, wholesale best practices, industry news, and more, be sure to subscribe to our blog today.

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NuORDER is dedicated to providing thoughtful, informative B2B eCommerce industry insights. Brands use NuORDER's platform to deliver a seamless, more collaborative wholesale process, where buyers can browse products, plan assortments and make smarter buys in real-time.