When you’ve decided to move forward with an e-commerce store, it’s a happy moment, you’re probably thinking of the customers and the sales you’ll be having and the fact that you’ll have an online and digital business. It’s a very happy moment. Now it’s time to get down to the intricacies of running an e-commerce store.
One of the most arduous steps is selecting a payment processor, and that is the payment engine that will process the payments from customers and transfer the money to your specified bank account. This gets quite complex, however a lot of the e-commerce platforms out there, specifically Shopify, will handle this process for you.
Although, you might be in the large group of people who may not be able to rely on the Shopify payments infrastructure for one reason or another. So, it is time to start researching the options available and there are numerous options available. And this is where it begins to get complicated and this is where it may be beneficial to consult with an experienced professional. But it is a process that you can individually manage yourself.
The Payment Gateway
In building an e-commerce website, if it is possible to leverage the integrated offering of such a platform like Shopify and to a lesser extent, Etsy and Squarespace, then that is the best option. An all-in-one managed system provides the various structural elements that ensures security, performance, and integrity in an e-commerce business. There are two main elements within the payment processing function, now let’s delve into the complexity and perhaps simplicity of these two.
If there is no option to work with an all in one payment provider or a single payment processing provider, then we’re going to have to be familiar with the payment gateway and selecting what to work with within our e-commerce store. In most cases, banks are offering separate payment gateway for their clients with merchant accounts. You can also ask for assistance from your bank in setting up the payment gateway.
The payment gateway is the technology network that connects your store, i.e. the payment networks including Amex, Visa, MasterCard, and the various other forms of payment that your customers will be using, the routing infrastructure that screens for fraud and transaction integrity, and other payment provisions necessary to process a transaction.
In most cases if you are working with a merchant account provider (discussed below), then they may also be able to provide you with their own designated or recommended payment gateway. On a recent client project that I worked on, it was the case that we were not able to engage the services of Shopify’s payment infrastructure, and so we developed a relationship with a merchant account provider who recommended utilizing their payment gateway. And that is what we did.
The Merchant Account provider
In an e-commerce store if you’re not utilizing an all in one solution like Shopify, Etsy or Shopify, then you’re going to have to be familiar with a merchant account provider. A merchant account is the account that’s going to hold all the money that comes from the transactions from your store before it is transferred to your bank of business. This is different from your business bank account, and sometimes there maybe confusion between the two.
The specific difference is that when transactions occur on your e-commerce store the money doesn’t immediately go into your bank account, it first goes to a merchant account and then to your bank account. The reason being that if you’re getting transactions every minute, Routing that activity continuously into a bank account is not efficient. Consequently a merchant account holds it for a day or two and then transfers the batch of funds into your designated business bank account.
Again if you can find and work with a single provider payment processor that is the best option. Generally today the only reason why you may not be able to work with a single provider payment processor is if you are selling particular items that may not be supported by an all-in-one payment processor. This was the issue with a client, and we had to spend a bit more time in developing the relationship with an external merchant account provider and payment gateway partners.
Integrated Payment Processor
An integrated payment system is a payment processor that combines both a merchant account and a payment gateway to provide a total solution. We are in a very fortunate time whereby we have numerous platforms that offer us not just a singular integrated payment system but also the e-commerce infrastructure as well. For example Shopify offers all of this in one package, Etsy, Squarespace, Magento’s commercial option and even WordPress.
Furthermore, if you’re looking for just the payment function and not the e-commerce aspect, then the best in class option is Stripe which I have written about in an earlier article. Stripe provide the whole payment stack which you can use for your e-commerce business.
Here is the summary that would help you consider and pick the best payment processing system that is perfect for your online or offline business:
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- Consider the options when it comes to whether your store requires a payment gateway or merchant account provider separately, or whether it would be best to consider an integrated payment processor.
- Online payments such as Shopify Pay, Paypal, and others offers convenience but then, consider the transaction costs also. Each provider usually has their own rates.
If you’d like to learn more about your payment processing options within your e-commerce store certainly feel free to pose the question and we can discuss the best option for you.