eCommerce Payment Processing 101

Few decisions are as critical for starting your online business as choosing how you’ll accept payments from customers. Understanding the basics of eCommerce payment processing can save you money and headaches down the road.

Here’s what you should know about the cost, payment methods to accept and choosing the right payments partner so you can make an informed decision for your small business:

Understand the basics of eCommerce payment solutions

When a customer buys something from your store, they’re not paying you directly. The payment travels through a digital system designed to verify the transaction, transfer funds and protect both parties from fraud — all in a matter of seconds. Here’s what happens after a customer clicks “buy now”:

• The payment gateway securely captures their payment information and sends it to the payment processor
• The processor communicates with their acquiring bank and the customer's card issuing bank to authorize the transaction and begin the movement of funds from the customer to your payment processor
• Once the authorized transaction is settled with the card issuing bank, the funds are delivered through the acquiring bank and the payment processor to your business's depository bank account.

Many modern solutions combine these services into one streamlined offering with a single integration.

Know the real cost to process online payments

Every payment you accept will cost you money. It’s the cost of doing business. Most small businesses can expect to pay up to 3.5 percent plus 30 cents per transaction for standard credit card processing*. Payment processors typically offer three pricing models:

1. Flat-rate pricing

Charges the same percentage for all transactions, which makes it simple to understand but potentially more expensive for high volume businesses

2. Interchange-plus pricing

Separates the card network fees from the processor’s markup, which offers transparency and potentially lower costs for larger businesses.

3. Tiered pricing

Groups different card types into categories with different rates but can be confusing and potentially more expensive than the other options.

Some payments partners have solutions that allow you to pay-as-you-go, but beyond transaction fees you should also expect:

• monthly fees
• setup costs
• potential penalty fees.

For new businesses with unpredictable sales volumes, picking a payments partner that allows you to avoid monthly fees may make the most sense initially. A partner that offers payment optimization services can help cut down on interchange and credit card processing fees.

Which payment methods should you accept

The payment methods you accept will directly impact your sales potential. Research consistently shows that customers abandon purchases* when their preferred payment method isn't available, so covering the major five card networks is best practice:

• Visa
• Mastercard
• American Express
• Discover

Digital wallets like Apple Pay, Google Pay and PAZE have become increasingly popular, especially among younger consumers. These options often provide faster checkout experiences and can improve conversion rates. Many payment processors include digital wallet acceptance at no additional cost, making them easy wins for customer convenience.

Know the non-negotiables on security and compliance

Payment security isn't optional. The Payment Card Industry Data Security Standard (PCI DSS compliance*) is mandatory for any business that accepts credit cards, and violations can result in hefty fines and loss of payment processing privileges.

Fortunately, most modern payment processors can assist with your PCI DSS compliance, as long as your use their payment solutions and don't store sensitive customer data. When evaluating processors, confirm what responsibilities remain with your business and look for a partner that:

• offers PCI DSS compliant solutions
• includes basic fraud protection features like address verification, card verification value (CVV) checking, and fraud detection.

Although no system is perfect, these tools significantly reduce your risk of fraudulent transactions and chargebacks.

Understand how electronic payments affect your cash flow

Unlike cash transactions, electronic payments don't appear in your bank account immediately. Most processors deposit funds within one to two business days of the transaction, though some offer next-day or even same-day funding for additional funding costs.

Several factors can delay payments or result in held funds. New businesses often experience temporary holds while processors assess the processing risk. High-risk industries, unusual transaction patterns, or customer complaints can also trigger holds or reserves where the processor hold or delay settlement of your funds as protection against potential chargebacks.

Choose your first payments partner

With the basics under your belt, you’re ready to pick your first eCommerce payments partner. When you evaluate your options, ask about contract terms, early termination fees and customer support quality. Is the set up intuitive and can you easily talk to a human when you want to?

Avoid payments partners whose offerings are limited or inflexible.  Your needs will likely evolve as your business grows — your payments partner should scale with you.

Consider which payments partner will integrate with your eCommerce platform and the integration complexity. Most major platforms like Wix* and WooCommerce* offer built-in integrations. Don’t have a platform yet? See if Elavon Business Solutions — built on the Wix platform — is a good fit for your business.

Take the next step to get started

Most processors require identity verification and business validation before approving accounts. Prepare by gathering necessary business information:

• Tax ID number
• Business bank account details
• Business registration documents

eCommerce payment processing is a crucial foundation for your online business, but with the right payments partner it should feel intuitive, streamlined and scalable. Consider the total cost of ownership including setup time, ongoing support needs and availability of features you might need as your business grows. Start with a reputable processor that offers transparent pricing and good customer support — available on your terms — then optimize your setup as your business grows.

With the right payments partner you won’t have to become a payments expert. Instead, focus on what matters most: getting back to your passion — your business.

Launch your store, accept payments and grow your online business your way—with Elavon Business Solutions. See which plan fits your vision best.