How does Ecommerce payment processing works (2024)

FAQs

How does Ecommerce payment processing works? ›

It is the payment processor that takes the money from the customer's account and places it in the merchant account on behalf of the customer. Payment processors transmit the payment data from the customer's bank to the merchant's bank via online transactions.

Types of ecommerce payment methods

Globally, credit and debit cards and digital wallets are the most popular ecommerce payment methods, but other payment methods, like bank transfers and cash on delivery (COD), remain popular in certain regions.

Payment gateways: act as the courier between your ecommerce website where the customer enters their payment information and your payment processor. Payment processors: take the information from the gateway, verify that the customer has the funds, and deposit the money in your merchant account.

Using secure communication methods and tokenization, payment gateways communicate between your online store/website and your bank. Customer data is collected, validated, approved, and then the payment is accepted, debiting your customer's account.

What is ecommerce payment processing? Ecommerce payment processing is everything that happens once an online store accepts payment from a customer. This includes authorizing the online transaction, securely transmitting credit card information, and ensuring the ecommerce merchant receives the funds.

Cards are still the most-used payment method, with American Express, Mastercard, Visa as large global card schemes. Even though they're recognized globally, other payment methods like online banking, direct debit, digital wallets, or Buy Now Pay Later (BNPL) are more common elsewhere.

The Pure Payment System is a link based payment solution. By using this system, the merchants can make payments through phones and fax machines. This kind of payment system is popular in the hospitality sector in the world. The pure Payment model is useful only for the merchants.

An ECOM (e-commerce) transaction is a digital financial exchange that occurs when you buy and sell goods and services through online platforms. E-commerce transaction meaning involves the transfer of funds electronically in exchange for products or services, conducted via e-commerce websites or mobile applications.

What percentage does eCommerce take? ›

In 2023, e-commerce comprised over 15.6 percent of total retail sales in the United States.

Customers find the products or services and place orders. A payment processor enables the exchange of the goods or services electronically via payment options like credit cards or digital currencies. The customer receives a confirmation email or SMS along with a printable receipt.

When using a payment gateway, customers and businesses need to work together to make a transaction. Once your customer has placed an order, the payment gateway verifies the customer's card details and checks if they have enough funds in their account to pay you.

Order processing means managing and fulfilling customer orders. This process can include verifying customer information, authorizing payment, preparing goods for shipment, and tracking the order once it has been shipped.

Buyers may wish to be able to pay quickly in order to take advantage of any early payment discounts available. This process is known as the order-to-pay cycle. For suppliers, the quicker the invoice can be processed the faster they can be paid for providing their product or service.

Through this payment order procedure, any affected person can claim from a debtor the non-payment of an amount owed as long as it is liquid, due, determined and enforceable.