In 2023, the e-commerce market is expected to reach $6.15 trillion.
If you want to capitalize on part of this market, you may want to break into the market. But first, you’ll need an e-commerce payment system.
However, there are many e-commerce payment systems out there for you to choose from, and it can feel overwhelming trying to choose the right one for your business.
Thankfully, we’re here to help you out. Keep reading, and we’ll fill you in on all you need to know about e-commerce payment processing and what to look for when choosing one.
What Is an E-Commerce Payment System?
The best e-commerce payment system will take payments for goods and services without requiring customers to use checks or paper cash. This system gives e-commerce businesses flexible options to accept payments from their businesses.
If you are using one, your business will accept payments without needing a physical card reader. It also accepts payments in a secure, fast, and easy way.
You’ll sign up with an e-commerce payment processing vendor. You can use their system and then set it up. Typically they charge a small fee per transaction to use their system.
There are two parts to this service: the payment gateway and the payment processor. The payment gateway is the software that links your shop to the network that processes the payments.
The payment processor is the merchant service. It will take the transaction and move it through the digital network while also working with your bank.
Most customers use credit cards, and this system allows you to accept payments with those credit cards. Some of them will even accept cryptocurrency payments as well.
How Does It Work?
There are three main components when getting payments online. There is the payment processor, payment gateway, and merchant account.
The payment processor is the provider that will facilitate the transaction. This will convey all of the data and handle the communication between the customer’s bank and the merchant’s bank.
The payment gateway is the platform that you will connect to your e-commerce site. This will also help with the transfer of data, and it’s what the customer will see when they make a purchase on your website or app.
The merchant account is the bank that lets you receive electronic payments from your customers. You’ll receive the funds whenever a transaction from a customer is authorized by the payment processor.
When a customer is checking out online at your site, they’ll be prompted to enter their debit or credit card information into the gateway. They’ll enter this through a form that’s embedded in your store.
These forms are encrypted so that their payment information is held securely. Once they enter their information, the payment information will be sent to the payment processor through the payment gateway.
The processor will then tell the customer’s bank to make sure that there are enough funds associated with the customer’s account. Depending on the amount of funds, the transaction will then be declined or authorized.
The payment processor will then communicate the bank’s decision to the gateway. Then, the gateway tells the bank of the merchant on whether or not the payment can go through. If it’s authorized, then the customer will get an order confirmation through a receipt.
If it’s authorized, then the funds will be taken from the customer’s banking account or their credit account. The funds will then be transferred to the merchant’s account. The funds will normally be transferred to your account in one to two business days.
When you’re considering types of payment systems there are many factors you need to consider. Choosing the right one will ensure that your customers have a good customer experience when purchasing on your site, but it will also help you get all of your funds properly.
One of the biggest factors you’ll want to consider is the cost of the payment system. The price will vary depending on the vendor and the system. There are also costs and fees associated with setting up the processor.
There may also be monthly fees and fixed or variable fees for each transaction. Each vendor will charge this differently, so it’s important to understand all the costs associated with it before signing up for anything.
You’ll want to take a minute to look at your budget and also calculate how much you’ll be paying in fees for each transaction. Find a vendor who has a payment structure that works for you.
For example, if you’re a small business and won’t have many sales, you may want to find a processor that charges a fee per transaction. If you’re a larger company, then paying a fixed monthly fee would probably save you money more than a fee for each transaction.
On top of these fees for using the system, many processors will also charge you fees for things like chargebacks. A chargeback happens if a customer complains to their bank that the transaction was fraudulent. Then, the bank will reverse the payment.
A processor may also charge fees if customers use international cards as a payment. This is why it’s important to look at the fine print with each payment processor. A lot of them may seem like a good deal on the surface, but you’ll also need to understand how the fee structure works because it could end up being costly.
2. Payment Options
You’ll also want to choose a payment processor that gives you different payment options so that you can attract as many customers as possible. When you have multiple options, you’ll attract more customers, and they can use a payment option that fits their needs.
It can also increase your customer interactions, which can increase your chance of a sale as well. For example, if a customer doesn’t have a credit card, they may want to use a bank transfer instead. This will allow you to capture a customer that may not have many options to use a bank transfer.
According to some research, 30% of Americans don’t even have a credit card. If you use a payment processor that only accepts credit cards, you’ll be missing out on a large portion of potential customers.
Before you choose a payment processor, you should read reviews and find feedback from other users. Take time to research and compare the services of each provider.
This is also where you’ll want to compare the total costs including the fees. You’ll also want to find out how often the vendor experiences any technical issues and their system is down.
You’ll also want to look for people whose accounts had been unexpectedly closed or blocked. You should also find out what their customer service is like. If there is an outage, do they have great customer service and response times?
If you have any issues but can’t get ahold of their customer service, then you’ll be missing out on a lot of payments from potential customers.
There are many reviews that you can read on sites like Merchant Maverick. You can also look for external reviews on Reddit.
About 151 million Americans with credit cards were victims of fraud in just one year. As this fraud becomes more common, more people are being careful with whom they share their information.
That’s why if you are getting a payment processor, you need to ensure they have a secure system. You don’t want anyone to be able to hack it and then steal your customers’ sensitive information.
The payment processor should encrypt the data from each transaction. When they store that information, it needs to be encrypted as well. If your brand is caught up in a data breach, then it will be very challenging to get your customers’ trust back.
However, you also want to make sure that you choose a provider that can protect you from any fraudulent transactions. They should have screening tools in place to avoid any customers making fraudulent charges on your platform.
When selecting an e-commerce payment system, you’ll also want to focus on one that provides efficiency as well. If customers feel like the process is too challenging, then the customers will abandon the cart, and you’ll lose a sale.
For example, if the payment processor asks users to create an account to go to the cart, many guests will leave the checkout process. You should allow the option for a guest checkout as well.
You should also make sure that there are some customizable aspects. This will allow it to make it unique to your business and allow for different fields that you might need. If you can also get rid of any redundant need for information, you’ll also boost the rate of your sales.
6. Mobile Options
About 76% of Americans say that they buy things using their smartphone, so you’ll want to find a payment processor that allows for mobile purchases as well.
Mobile payments will eventually replace the need for credit cards, and you don’t want to be leaving out customers. With mobile payments, you can even convince people to use your branded app or go to your mobile-optimized website.
There are many different mobile payment options right now, like Apple, Google, and Samsung Pay. You should consider finding a vendor that allows for these types of payments to make the process even easier for your customers.
7. Multiple Systems
You may also want to have a vendor that gives you the option for multiple systems. One system might work for your small business now, but as you grow, you might need more flexibility.
It’ll make it easier to choose the options that you need if you work with a vendor that has multiple systems to let you use. For example, you may want to find a vendor that only accepts PayPal options.
But as you grow, you may want to let more customers with credit cards purchase from your business, so then you’ll need a vendor that has a processor that allows credit cards.
When you choose a well-known payment system, you’ll also get more trust from your customers.
Lastly, you’ll also want to consider hosting from the payment gateway. Some vendors will host it off-site, which is when the customer will be taken to a different website to enter their details.
It may be non-hosted as well, so that the customer can enter all of the details without having to leave your site. If it’s non-hosted, you have a higher chance of the customer finishing the sale since they won’t even have to leave your website.
However, each hosting option has its pros and cons. For example, one of the benefits of using a hosted gateway is that it will reduce the risk of storing sensitive information on your own website. If there is a leak, this will help protect you.
However, since it’s on another site, it could take longer for a customer to finish the payment process, which might make it harder to actually complete a sale.
If you’re still unsure of which option to choose, check out your competitor’s sites! Take note of whether you can check out on their actual website or if you’re taken to a different website. This can give you insight into the right choice for your business.
Discover More About How to Choose an E-Commerce Payment System
These are only a few things to know about how to choose an e-commerce payment system, but you’ll need to decide what your business’s needs are.
Once you figure that out, then you can start shopping around for the right payment system.
If you’re looking for a great place to start your research, check out our payment solutions!