What is ECommerce Payment Processing?

ECommerce Payment Processing

ECommerce payment processing is the process of accepting electronic payments for online transactions. Internet-based shopping and banking have immensely grown over the years. Therefore, eCommerce payment processing has become vastly popular. Click for more here.

The common goal amongst all eCommerce businesses is to ensure the payment transactions are successful and the process is simple and hassle-free for customers.

How eCommerce Payment Processing Works

The eCommerce payment processor is the bridge between the merchant and the bank. It plays a huge role in a merchant’s business as it approves the transactions; without their green signal, no payment will be successful. Before their money goes into the business merchant’s account, it first goes through a series of steps.

This process ensures the validity of the customer’s form of payment. The payment processor goes through a checklist to verify that the customer is able to make the transaction successful; these include:

  • Verifies with the bank the customer’s balance
  • See if there are adequate funds available to complete the transaction
  • Check if their card is valid when swiped at a credit card terminal

The three elements of eCommerce payment processing include:

  • Payment Gateways: customers can make payments for their online purchases through an online payment service integrated into the eCommerce platform. Payment gateways serve as a super convenience for merchants as it helps protect them from hackers and scammers. Shape Security reported in 2018, approximately 90% of the total login attempts on online retailers’ websites were legitimately hacking attempts.

The two main functions include:

  • Takes the customer’s stored payment data and sends it directly to the payment processor.
    • Without involving the store’s website, it accepts the payment information directly from the payment processor.
  • Payment Processor: On behalf of customers, a company that liaises with and puts funds in your merchant account.

The three main functions include:

  • Transmits the data of the payment between the merchant’s bank and the customer’s bank
    • Supplies merchants with the equipment needed to accept card-based transactions
    • Assists in creating a merchant account by yourself or collaborating with a third-party merchant service provider
  • Merchant Accounts: the arc that communicates with your bank. The merchant account is connected to the store’s gateway, and the customer’s payment information is directly charged.

When all boxes are checked off, the processor then authorizes the payment, and the translation is made successful through direct debit.  An eCommerce payment processor also takes the task of security for the merchant as they assure the transaction’s validity and assure they comply with the PCI standards and rules.

When a customer is ready to complete their order and follow through with a transaction, on their end, it is a simple click-and-pay job. On the backend, the payment processor is busy working through a slew of steps to verify the transaction in a timely manner. These steps of the checkout process include:

Step 1: The customer enters their credit or debit card information while paying for their product(s) or service(s)

Step 2: The information entered by the customer is secured by the payment gateway and then sent to the payment processor

Step 3: The payment processor is hard at work verifying that all the information that the customer entered is legitimate (i.e., the validity of the credit/debit card number) and if there are sufficient funds for the payment. Based on the information gathered, the payment processor either rejects or accepts the customer’s payment.

Step 4: In the case of the payment being accepted, the payment processor then sends the approval to the payment gateway. The merchant can then see if the payment was successful on the backend of their website.

Step 5: The funds are then transferred to the merchant’s account. The transaction has now concluded.

This is quite a lengthy task for the payment processor, but the entire procedure of online payment processing takes only seconds. This is why the eCommerce payment processor has become a safe haven for merchants, as it is the most seamless and secure process for online transactions. 

eCommerce Payment Processing Solutions: Your Choice

The Payment Card Industry (PCI) is a non-profit global standards group that is committed to promoting trust in commerce that encourages credit card acceptance. The PCI governs the financial backing of the payment card data security and determines the amount of protection needed for the merchant.

Payment card providers tend to have specific criteria for the merchant to follow on how to handle a consumers’ credit card information, so it is advised that shops either buy or build a PCI-compliant credit card form.


There are some payment processors that do not use the customer’s credit/debit card information, rather they employ a “card hash,” which is not synonymous with the customer’s credit/debit card number. The Payment Card Industry (PCI) handles the customer’s credit/debit card information with care by utilizing “tokenization” to ensure their safety.

Tokenization is when the processor only looks at a number, which leaves the merchant unaware of the customer’s credit card number and the payment processor is then uninformed of the customer’s credit card information.


The types of fees will vary depending on the type of provider used. When using an eCommerce solution, there are three specific fees a merchant must charge when they are using an eCommerce payment solution, such as transaction fees, set up fees, and monthly fees. Some providers may also require a membership fee.

To find the most suitable eCommerce solution for your business, it is advisable to define your budget and sales revenue projection. This helps merchants avoid over budgeting and save money in the future.

It is imperative to be mindful of online payment progress and to be knowledgeable on which features are a must-have for suitable payment solutions. Whether you are an upcoming business or already well established, as payments are a core component of your success as business owners, it is important to be well versed on eCommerce payment processing. 

Article and permission to publish here provided by Anna Larina. Originally written for Supply Chain Game Changer and published on March 18, 2022.

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