Online Payment Processing and Ecommerce Payments

If you sell through your own website, you can choose and set up the services you need yourself, or you can work with a company that offers a complete solution for online payment processing.

Ecommerce Website or Marketplace ‘Store’

First and foremost, you need somewhere to sell from. You can sell goods and services through your own business (e-commerce) website, or in an existing electronic marketplace.

Ecommerce Website

A single business ecommerce website is a website for your individual business. No other businesses sell goods or services through your site. Business websites that can accept and process online orders are known as ecommerce sites. You can either build an ecommerce site from the start, or you can transition an existing website into an ecommerce site.

When you have your own ecommerce site, online credit card processing is in your control.

Electronic Marketplace

An electronic marketplace, such as Amazon or Etsy, is a website where multiple businesses sell goods and services, and consumers can browse or search all of the products available from all the businesses.

Businesses selling through an electronic marketplace usually have their own “store” where consumers can shop that business’ products, but the products will also show up in search results for specific goods. In an electronic marketplace, there is less set up for businesses, as the infrastructure for selling is already in place, but there’s also less customization and less flexibility.

In this article, we’re going to focus on how to take credit cards through your own ecommerce website.

Components of Ecommerce

What makes e-commerce complicated for businesses new to online payments is that there are several components. Below is an overview of how to take credit cards online, including an introduction to the pieces of e-commerce and how they fit together.

Merchant Account

A merchant account is essentially a line of credit that allows you to accept credit cards. You need a merchant account to take credit cards whether online or in a physical store.

Merchant accounts are provided by credit card processors and are subject to certain terms of use. For taking credit cards online, you’ll need a merchant account that is authorized for online payment processing. If you already have a merchant account for your brick-and-mortar store, you may be able to work with your processor to add online processing.

Note that you should NOT use an in-person merchant account to begin accepting payments online without first contacting your processor to set up online processing. Doing so may be a violation of your merchant processing agreement and could result in termination of your merchant account.

Payment Gateway

A payment gateway is essentially what allows a website to connect with payment processors so that businesses can take credit cards online. You can think of the payment gateway as the internet version of a credit card machine. Instead of swiping a card through a machine, your customer ‘sends’ their card through the payment gateway. This short video from 2Checkout explains:

There are two important compatibility considerations for payment gateways: processor support and shopping cart integration. Your gateway will need to work with both your processor and the shopping cart you use.

Shopping Cart

A shopping cart is the general term given to software that allows customers to choose items that they want to purchase, similar to how they would take an item from a shelf in a retail store and place it in their cart. Because an online shopping cart is actually software, the cart your business uses on its website has to be compatible with your payment gateway in order to accept payments online. It’s a good idea to choose a shopping cart and payment gateway at the same time, or at least confirm compatibility before choosing them individually. Fortunately, many major carts and gateways are compatible, allowing you to find the right combination for your business.

Hosted Payment Pages

A hosted payment page is a webpage, maintained by your gateway provider, where customers enter their payment information. When your customers go to the checkout option on your site, they’ll be directed to the hosted payment page to enter their credit card information. Because your provider hosts the page, not you, the payment information goes directly to the provider. That means it isn’t stored anywhere on your website. This is particularly helpful for compliance with security requirements.

Many gateway providers offer hosted payment pages. Hosted payment pages are usually customizable, allowing you to match them to your site for a seamless look. The level of customization varies by provider, but can range from simple color scheme matching to full branding possibilities.

What cards can I accept with online payment processing?

Many gateway providers allow you to accept all major credit cards, including MasterCard, Visa, Discover, American Express, JCB, and Diners’ Club, as well as signature-based debit cards. Additionally, payment gateways are often able to accept digital payment options such as PayPal and Apple Pay.

Check with your specific gateway provider for a list of payment types accepted by your gateway.

Accepting PayPal

Many business owners incorrectly think that if they want to accept PayPal, they have to use PayPal for all of their online transactions. In fact, there are multiple ways to accept PayPal while also using another processor of your choice. You can add PayPal as one option in addition to other methods of payment. For more details be sure to check out the article below.

Related Article: Accepting PayPal Through Your Site.

Optional Features

Different gateways and providers offer different features, allowing you to find the right solution for your business. Some available optional features may include payments services, logistics, and equipment.

Payments

Recurring Billing
If you offer goods or services on a recurring, scheduled basis (such as monthly product “clubs” or subscription services) you may benefit from a recurring billing option. With recurring billing, you’re able to automate the process of charging customers for their scheduled bill.
Multi-Currency Support
For businesses that have international customers, some gateway providers offer support for accepting payment in multiple currencies. Specific currencies that can be accepted will vary by provider.

Logistics

Discount and Coupon Support
Ideal for businesses who run promotions on products or want to entice customers with special coupons, the option for offering discounts and redeeming coupons is available with some payment gateways.
Shipping and Tax Calculations
Some services include a shipping calculator to provide accurate cost estimates at the time of purchase, ensuring you’re not losing money by guessing at what shipping should be for your customers.For businesses that are required to collect sales tax, some services will automatically calculate the tax for you and your customer at checkout.

Equipment

Accounting Software Integration
Some gateways can integrate or export information easily to popular accounting software, such as QuickBooks, helping to ease the task of reconciling sales made online.
Virtual Terminal
A virtual terminal allows you to enter payment information online on behalf of a customer, using your existing computer. Virtual terminals are most commonly used for card-not-present transactions, such as telephone and mail order payments.
Support for Accessories
Accessories for online payments are usually designed for use with a virtual terminal, and may include card readers and receipt printers. These accessories can help increase the functionality of a virtual terminal.

Consider the features that will be beneficial to your business before you purchase e-commerce services.

Related Article: Options for Recurring and Subscription Billing.

Setting Up Ecommerce Services

Once you’ve decided to take credit cards online and familiarized yourself with the components of ecommerce, you’ll need to choose services. If you have experience with coding or have a programmer you work with, you’ll be able to take advantage of a range of shopping carts and ecommerce options that require programming. Otherwise, you may want to consider a template-based ecommerce option. Template based ecommerce site builders allow you to create customizable, basic ecommerce sites using pre-made themes and can take credit cards the same way as e-commerce sites from scratch.

Site Builders

With ecommerce site builders, such as Shopify, businesses can create an ecommerce website with no programming knowledge, using common elements like drop-down layout choices, or drag-and-drop elements. Once the ecommerce site is created, owners can log into an administration panel to manage inventory. Specific features vary by builder, but may include the ability to add and manage products, set prices, run reports, and more. Site builders may host the ecommerce site as well.

Remember, ecommerce site builders still require you to use a payment gateway and a processor for accepting payments. These site builder services are usually compatible with a range of popular gateways, but you’ll also need to ensure that the gateway is supported by your processor.

Complete Solutions

Some businesses prefer the simplicity of a ready-made out-of-the-box solution. For ecommerce, there are companies that offer a complete packages designed to help you set up and run your ecommerce store with little or no experience and without having to choose each individual ecommerce component.

What’s included with a complete solution varies by company. Some include an ecommerce site builder, shopping cart software, and a payment gateway. Some, like Volusion, can even serve as the card processor for a truly complete solution.

Can I accept credit cards with my existing website?

If you already have a website and don’t need an e-commerce site builder, some services offer the ability to add a “buy” button to your existing site for a lower monthly fee. Note that with a “buy” button, you’ll still need other components (such as a payment gateway and merchant account with a processor) in order to take credit cards online.

You can implement “buy” buttons in different ways, depending on the provider. Some providers will even give you code to copy and paste into your site. Others allow programming the button yourself.

Online Payments and Fraud

When taking credit cards online, it’s important to stay compliant with security regulations to help reduce the risk of fraudulent transactions. As card-not-present transactions, online payments can be particularly susceptible to fraud if proper precautions aren’t taken. Gateway providers usually offer a variety of tools to help businesses detect and prevent fraud.

Encryption and Tokenization

Encryption
A security process that scrambles information into a code that can only be unscrambled with an encryption “key.” With encryption, information may still be intercepted by thieves or unauthorized parties, but it can’t be read without the key to de-encrypt the information.
Tokenization
Tokenization is one security method you can use in online payment acceptance. It refers to an automatic process of replacing sensitive information (like a credit card number) with a “token” or unrelated information so that it can’t be used to make fraudulent transactions. The transaction is completed using the token, not the actual card information. If thieves intercept tokens, they’re useless, because they are not the card information and can’t be used to make a fraudulent purchase.

Additional Anti-Fraud Tools

Address Verification Service (AVS)
AVS is a process that checks for a match between the address provided by a customer making an online purchase and the billing address on file with the bank for that credit card. AVS settings in a payment gateway can prevent transactions from processing if the addresses don’t match. Get full details in our article on Using Address Verification.
CVV
Card Verification Value (CVV) helps reduce fraud by ensuring the person entering the credit card information actually has the card. Visa, MasterCard, and Discover credit cards have a 3-digit code on the back of the card, at the end of the signature panel. American Express cards have a 4-digit code on the front of the card. Customers enter this code when checking out online.
MasterCard SecureCode and Verified by Visa
Additionally, security for consumers and businesses is available with the MasterCard SecureCode and Verified by Visa programs. With MasterCard SecureCode and Verified by Visa, consumers enter their specific security code to validate their purchase. Businesses may be able to help reduce their risk of fraudulent online transactions and chargebacks by implementing these additional security options when taking credit cards online.

Lastly, it’s important to protect yourself from “friendly fraud” – where an authorized cardholder claims they didn’t receive goods or services as advertised and initiates a fraudulent chargeback – in addition to other types of malicious fraud. Experian publishes lists of the zip codes most commonly associated with fraud, which gives you an easy starting point to know which transactions may need additional screening or verification. To get those lists (and other tips) be sure to read our article on Friendly Fraud.

Best Processors for Online Credit Card Processing

When it comes to choosing the a processor for your online payments, don’t rely on “best processor” lists and charts. For one thing, your specific needs will dictate which solution is a good fit. It doesn’t matter what a best processor list says if the companies on it don’t specialize in your particular online payment needs. Additionally, most processors set pricing and terms on a case-by-case basis, so a list that claims X processor will give you great pricing is not necessarily accurate.

Should I just use Stripe?

Many businesses have heard of Stripe for online payments and wonder if that’s the best option. Like any company, Stripe could be the best fit, or a not-so-great fit.

Costs and Business Model

The first thing to note is that Stripe is a flat rate aggregator, meaning they don’t issue merchant accounts but rather set you up under their account. They do so at a “flat rate” – currently 2.9% + 30 cents per transaction. (Additional fees for things like chargebacks and recurring billing may occur.)

2.9% + 30 cents is on the higher side for many businesses. Competitive interchange plus pricing will often come out lower.

However, some people pay extra for Stripe because they prefer the simplicity of the flat rate pricing. That’s totally fine – just don’t confuse simplicity for low cost.

Additionally, some people like Stripe’s comprehensive documentation and prefer to pay more for that.

Potential Drawbacks

Stripe isn’t free from drawbacks. As mentioned, you don’t get your own merchant account. The “quick setup” approach means that Stripe doesn’t do upfront underwriting like traditional processors. That sometimes means that down the road, Stripe determines they can’t support a business and has to close that account. If you plan to sign up with Stripe, be sure to check their prohibited businesses list first. While you’ll likely be able to sign up initially, Stripe will catch on and close your account, which will be a frustrating headache. Some businesses report having 5 days or less to find a new processor.

It’s also worth noting that Stripe’s gateway is proprietary, so you can only use it with Stripe as your processor. If you want to switch processing companies in the future, you’ll need to change your entire system, gateway included. A universal gateway lets you switch processors more easily.

Finally, Stripe doesn’t have the best reputation for customer service. If you’re the kind of person comfortable with troubleshooting on your own or not inclined to call customer service much anyway, this probably won’t matter.

Summary

To summarize, if your priority is comprehensive developer-focused documentation, Stripe is generally considered the best. If you prefer simple processing statements with a set fee, that’s another place Stripe is great.

If your priority is account stability, low cost, universal gateway, or customer service, Stripe is probably not the way to go.

So, how do you go about finding the right online payment solution?

Choosing a Processor, Gateway, and Shopping Cart

It sounds confusing to think about choosing a processor, gateway, and shopping cart and making sure they’re all compatible. But if you take it piece by piece, you can find the solution that’s right for your needs so that you can take credit cards online easily and securely.

There’s no wrong way to go about choosing your services, but how to start depends on your priorities.

If Low Pricing is Your Highest Priority

If pricing is most important, you should start by finding a processor. The easiest way to ensure the best pricing is to work with a processor who offers competitive rates and fees.

If you start the other way, by choosing a gateway, you’re limiting yourself to only those processors who support that gateway, removing some of your ability to seek out the most competitive pricing. But if you search processors first, they will be able to quote rates for processing credit cards online, and offer information about what gateway(s) they’re compatible with.

You’ll then be able to look at those gateways to confirm it supports the features you need. However, if it doesn’t, you can determine if you want to work with a more expensive processor in order to get a gateway with different features, or if you’ll make do with the features available in the gateway supported by the lower-cost processor.

If Specific Features Are Your Highest Priority

If having specific features is your highest priority, you should start by choosing a gateway. Doing so will ensure that you’re able to take advantage of the features you need for your business. Once you’ve chosen your gateway, you’ll be able to find a processor who supports that gateway.

What type of features? You may need options such as recurring billing, built-in electronic invoicing, B2B level 2 and level 3 capabilities, or other ‘speciality’ features.

Once you’ve settled on a processor and gateway, you’ll be able to choose a shopping cart. Keep in mind that the gateway that you use will determine which shopping carts are compatible.

Costs

The costs for taking credit cards online vary greatly. Costs depend on the services you need, your business type, amount of products, and more.

E-commerce site builders and existing shopping carts generally have a flat-rate monthly cost. There are usually multiple packages available. More expensive plans offer more robust features or the ability to include more products. In addition, payment gateways may have a setup fee, monthly fee, and per-transaction fee.

If you’re looking for online payment processing through your website and want to find competitive pricing and the features you need, you can sign up at CardFellow to use our free processor comparison tools. You can save yourself time and money by utilizing our services instead of conducting hours of research on your own.