Online Payment Processing for Your Online Business: Everything You Need to Know
eCommerce has become increasingly popular worldwide courtesy of unprecedented digital advancements in recent years. Be it the education sector or retail, it has revolutionized every industry today.
The idea of online payments was born in 1994 by founder and former CEO of Amazon, Jeff Bezos. Amazon was one of the first companies where products and services were exchanged via online payments. Today, however, eCommerce has become an indispensable part of the global retail industry. According to statistics, there are now about 12 to 24 million online stores in 2021, whereas the number of online shoppers globally has amounted to 2.14 billion in recent years.
Opening an online store is an exciting process, but once you’ve created your products, built an exciting website you need to consider your store’s payment system.
While setting up an online payment system may seem relatively easy, it’s arguably the most complex undertaking involved in the process.
So, What’s Online Payment Processing?
Online payment processing to the digital payment system for products and services purchased online. Simply put, it’s an online exchange of money between a business, selling its goods online and a buyer who’s looking to purchase the offering.
To set up an online payment system, you need to collaborate with a payment processor.
Payment Processor
A payment processor allows businesses to manage online transactions and accept digital payments. Payment processors work by transmitting data from customers’ debit/credit cards to their bank and the merchant’s bank. Payment processors handle card validity issues, card limits, and security.
If a customer has sufficient balance in their bank account, the payment processor will approve the transaction and the money will transfer seamlessly to your bank account. Payment processors constitute anti-fraud mechanisms that prevent fraudulent activities.
Online Payment Gateway
A payment gateway primarily connects a merchant’s account and the payment processor to the credit and debit card companies. It essentially works as a connecting medium between the merchant’s account and the shopper’s financial account. It collects the customer’s payment information and transmits it to the payment processor. While the payment processor works at the back-end, a gateway is typically regarded as the front-end of the payment process. You can either use a payment processor and gateway from the same company or deploy separate providers and integrate the flow.
How Online Payment Processing Works?
Let’s look at the step-by-step process involved in payment processing.
- First, the customer chooses a good or a service and completes the checkout. They need to enter their credit/debit card information on your website’s payment page.
- Once the card information is transmitted to the gateway, the payment gateway forwards it further to the payment processor.
- The payment processor verifies the credit card information of the customer and transfers the transaction details to the credit card network.
- After the successful completion of the verification process, the card network sends an authorization request to the customer’s issuing bank.
- The customer’s issuing bank runs verification checks to ensure that the transaction is secure and reliable, and checks if there are sufficient funds in the customer’s account. After confirmation, it submits a response to the credit card network indicating if the transaction has been approved or not.
- After receiving the transaction approval, the payment processor requests funds from the issuing bank. Typically, these funds are first transferred to the merchant’s account and then delivered to the business’s bank account in a few days.
We Can Help
When choosing a payment processing company for your online business, you need to consider various factors. From evaluating the card networks and eWallets supported by your company to reviewing their security features, automation billing specs, and integration alternatives, you need to carefully perform every step.
At CardLogic Systems, we offer merchant services, integrated payment solutions, and payment processing services at cost-effective rates.
If you’re looking for a reliable online payment processing company for internet businesses, reach out to us today!
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