Setting Up an Ecommerce Business: Understanding Payment Processing
Starting your ecommerce business is going to be an exciting time. You’ve worked on your products, you’ve created your portfolio, and you have sourced your products. Your new website is up and running, and it looks fantastic.
Now, it’s time for you to figure out one of the most important steps: getting paid. Opening an ecommerce business involves many steps, and ecommerce payment processing is one of the most crucial steps.
However, it’s pretty normal to find the whole process complex and difficult to navigate unless you’re a financial wizard. This blog will break down the different online payment methods and what terms like online payment gateway and merchant service actually mean.
Online Payment Solutions for Ecommerce Businesses
As you probably already know, there are several online payment solutions available that ecommerce businesses employ. Ecommerce grew by 44% in the US last year.
Many people think a slowdown is coming after recovering from the pandemic, but 2022 is expected to be the first 1 trillion US dollar year for ecommerce in the US. With such growth, it’s only natural that ecommerce businesses can choose from multiple payment options.
Credit cards remain one of the most popular choices for online and offline retail stores. However, according to Statista, credit cards are on the second number with a 23% market share when it comes to ecommerce transactions.
Digital wallets are currently on top when it comes to ecommerce transactions, with 45% of transactions occurring through digital wallets such as PayPal, Apple Pay, Google Pay, and Amazon Pay.
Although not as popular as credit cards or digital wallets, debit cards are still a popular choice for online shoppers. Finally, digital currency is another popular choice for online shoppers to shop with Bitcoin or other cryptocurrencies.
Several other alternatives are available, but these are the popular options that the customers will expect to see on your online store.
How Payment Processing Will Work on Your Online Store
There’s a lot of concepts to grasp if you want to understand how payment processing works. But for the sake of simplicity, we’ll only discuss the three main elements that you need to know.
Online Payment Gateway
Payment gateways are used by ecommerce businesses to serve as the courier between their website and the payment processor.
Payment Processing Company
Payment processors take the information from the payment gateway, verify that the customer has the funds, and deposit the funds in the merchant account.
Merchant Service
For an online business, it’s essential to have a merchant account where the payment processor will deposit the funds.
If this all sounds like too much work, don’t worry because payment service providers such as CardLogic, will manage the entire process for you!
At CardLogic Systems, we act as merchant service providers, which means that we’ll provide integrated payment solutions for your business. Contact us now to learn more.
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