The Ultimate Guide to Ecommerce Payment Solutions

According to the Worldwide Retail Ecommerce Forecast 2024 by eMarketer, eCommerce will account for 21.0% of retail sales in 2025, amounting to $6.862 trillion. This is expected to grow to 22.6% and reach $7.956 trillion by 2027.

Like most business owners, your instincts tell you to hop on the bandwagon and launch an online store for your business.

But launching your eCommerce store is just half the equation—accepting payments efficiently and effectively is a whole different ball game.

It’s like a duck floating on water. On the surface, it seems effortless, with customers only taking a few seconds to initiate and complete payments. Under the surface, however, is where all the hard work happens—different entities working in tandem like duck feet to keep it all together.

That’s why you need an eCommerce payment solution to ensure the duck’s feet paddle calmly under the water and steer it in the right direction. 

This ultimate guide will teach you everything you need to know about eCommerce payment solutions. From different types of online payment gateways and key features to look for, to tips to help you choose the right payment solution for your business and implement it.

TL;DR

• An eCommerce payment solution allows online businesses to accept payments securely and efficiently. Types of payment systems include hosted gateways, self-hosted gateways, and API-based payment systems.
• Key features to look for in an eCommerce payment solution include security and fraud protection, payment method variety, integration capabilities, chargeback protection and dispute resolution, and global payment support.
• You can identify the right solution for your business by prioritizing your business needs and goals. Evaluate your business size, transaction volume, industry considerations, total cost, and customer experience.

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Understanding Ecommerce Payment Solutions

An eCommerce payment solution is the underlying infrastructure that allows eCommerce businesses to accept and process card and online payments seamlessly and securely. It’s the bridge between an eCommerce website, its customers, and the bank.

There are multiple ways for your eCommerce customers to pay for your products on your website. They can range from traditional payments, such as credit/debit cards and ACH payments, to modern alternative methods, such as digital wallets, mobile transactions, Buy Now Pay Later (BNPL), and cryptocurrency.

Implementing an eCommerce payment solution helps you accept multiple payment options and accommodate various customer needs.

The eCommerce payment solution infrastructure involves several key players. Here are the players and how they work together:

• Payment gateway – The customer-facing application connecting the eCommerce store to the payment processing system. The customer enters their payment details and the gateway securely transmits the data to the network.
• Payment processor – Handles the technical aspects of the payment. It’s the third-party service that serves as the link between the payment gateway, acquiring bank, and issuing bank or card network. It works in tandem with the customer’s bank or credit card provider to verify and authorize the transaction.
• Acquiring bank – Acts as the link between the merchant and the issuing bank. It forwards the customer’s payment details to the issuing bank, gets transaction authorization, and collects the funds on behalf of the eCommerce business.
• Issuing bank – The financial institution that issues credit or debit cards to the customers on behalf of the card network. While the acquiring bank is the merchant’s bank, the issuing bank is the customer’s bank. It validates the customer’s payment information and pays the funds to the acquiring bank.

Types of Ecommerce Payment Solutions

There are various types of payment solutions differing based on how they’re integrated into your eCommerce site. Some offer hands-off support from the payment gateway provider while others require regular maintenance and support.

That said, let’s dive into the different types of eCommerce payment solutions:

Hosted payment gateways

Hosted payment gateways are provided by a payment service provider (PSP). When a customer initiates a payment on your checkout page, they’re redirected to the PSP’s platform to enter their payment details and complete the payment. The customer is then sent back to the eCommerce site after the payment is processed.

A hosted payment gateway is your best bet if you don’t want to handle your payment gateway’s integration and maintenance. They’re easy to integrate and set up, with the host taking care of data security measures, including PCI compliance and fraud protection. 

However, since the payment occurs away from your site, it’s hard to control the entire customer checkout experience.

Self-hosted payment gateways

These gateways host the payment page directly on your eCommerce site, giving you more control over your checkout process and buyer’s experience. Unlike hosted payment gateways, self-hosted solutions collect customer payment details directly on the merchant’s site. The details are then encrypted and transmitted to a third-party payment gateway for authorization.

But with more control comes great responsibility. Businesses using self-hosted gateways must handle data security measures and comply with industry standards like PCI DSS. In other words, you must be capable of taking care of the arising security responsibilities. 

As for the benefits, self-hosted gateways enable a faster checkout since the entire payment process is completed on the eCommerce site.

API-based payment solutions

These solutions are hosted on the eCommerce site via an application programming interface (API), allowing businesses to handle payment details and processing directly. While they require programming knowledge, API-based gateways offer a fully customizable checkout and can be integrated with various setups including mobile devices.

Just like self-hosted gateways, merchants using API-based solutions are responsible for security. On top of PCI compliance, you might have to pay extra for SSL (Secure Sockets Layer) certification.

Direct payment processing

Direct payment processing involves handling transactions without involving third-party payment gateways. This requires the merchant to become a registered payment facilitator or PayFac.

A PayFac is a payment service provider for eCommerce merchants. This model works by having a master merchant account (and master merchant ID) through having a relationship with an acquiring bank. This allows the provider to sign up sub-merchants who can transact under their merchant ID.

This means the sub-merchants don’t have to go through the lengthy and arduous underwriting process. The sub-merchant can begin accepting payments in as soon as 15 minutes from the application. This is considerably faster compared to a traditional merchant account provider.

On top of being a new pillar of revenue for your business, the PayFac model also gives you more control.  You control who you approve on your platform and the flow of funds from the buyer to the sub-merchant account.

It’s also great for small businesses because it can eliminate many headaches associated with Know Your Customer (KYC) requirements, Anti-Money Laundering (AML) regulations, application processing, and underwriting.

If you wish to become a PayFac, note that it has high initial setup costs since you must invest in infrastructure, security, and compliance. 

Key Features to Look for in an Ecommerce Payment Solution

Here’s what to look for when searching for a payment solution for your eCommerce business

Security and fraud protection

A Cart & Checkout Usability Research by the Baymard Institute reports that 25% of online shoppers abandon their carts since they don’t trust the site with their credit card information.

A good eCommerce payment gateway offers robust security to protect your business and customers from cyber threats. The solution should implement the following data security measures:

• PCI compliance – The Payment Card Industry Data Security Standard (PCI DSS) is a payment data handling regulation designed to keep cardholder data safe. Payment processors that comply with this regulation protect businesses from data breaches and credit card fraud.
• Encryption – Encryption converts plain text into coded characters that can only be decoded by authorized users. This protects sensitive payment data from interception by cybercriminals. Some encryption techniques to look for include Secure Sockets Layer (SSL), Transport Layer Security (TLS), and Advanced Encryption Standard (AES).
• Tokenization – Tokenization replaces customer data with a unique identifier, referred to as a token. This token is used in place of the actual payment data. If a hacker compromises the eCommerce site, they only access a useless token, instead of payment data.
• Fraud detection – Fraud detection and prevention measures identify and block any fraudulent activities in the payment system. For eCommerce payment systems, these measures include two-factor authentication, fraud filters, real-time transaction monitoring, card verification value, device fingerprinting, and address verification system.

Discuss security features with your provider before signing up for their payment gateway services. This protects your business from any liabilities.

Payment method variety

When looking for an online payment gateway, you need to prioritize and match your customers’ needs. And matching their needs means accepting multiple payment methods. Hotjar reports that a tenth of online customers abandon their carts because they don’t find their preferred payment methods.

Investing in a payment processor that supports a wide range of payment options helps you access a wider pool of clients with differing payment preferences. Besides, you won’t have to sign up for different systems to get your payments in order.

Generally, look for a payment processing system that helps you accept credit and debit cards, digital wallets, bank transfers, ACH, and BNPL payments.

Your best bet is a system that doesn’t limit you to 2-3 accepted payment methods. This way, your customers won’t abandon their carts once they realize their preferred payment methods aren’t available.

Keep in mind that you might not need all these options now. But your business needs might change over time. Investing in a system that can accommodate your growing needs means you don’t have to invest in another system down the line.

Integration capabilities

Since you probably have other tools in your tech stack, you don’t want to keep switching tabs or windows to reconcile invoices or transfer data. Look for an eCommerce payment system that offers plug-and-play integrations with your existing tech stack to minimize development costs. 

Ensure the system seamlessly integrates with your eCommerce platform, whether Shopify, WooCommerce, Magento, or BigCommerce. Ensure it integrates with accounting software like Xero, QuickBooks, and FreshBooks for streamlined financial tracking and tax reporting.

Your sales team would also love it if your payment solution integrates with CRM tools like Hubspot, Zoho, and Salesforce to monitor customer transactions and customize outreach efforts.

On top of that, look for a payment provider that offers clear API documentation and integration support to reduce the time spent on configuration.

Transaction fees and pricing models

All payment service providers charge a fee for their services. And different providers adopt different pricing models, so you want to find a provider that matches your budget.

Common eCommerce payment solutions pricing models include:

• Flat-rate pricing – Providers with this model charge a fixed percentage per transaction regardless of the amount or other factors. For example, a provider might charge 3% per transaction, making it predictable. This model might become expensive in the long run, especially with high transaction volumes.
• Interchange-plus pricing – This model includes interchange fees charged by credit card networks like Visa and Mastercard plus a fixed markup. Markup is typically a percentage of the transaction amount plus a fixed rate. The downside of this model is that it can be difficult for business owners to read and understand statements with high levels of detail.
• Tiered pricing – Different rates apply based on different transaction categories—qualified, mid-qualified, and non-qualified. Qualified payments have the lowest rates. The rate rises as the payments are downgraded to mid-qualified and non-qualified. Transactions are categorized based on the provider’s criteria. 

Also, consider that not all payment methods have the same transaction costs. For example, credit card payments have higher transaction fees compared to other payment methods.

Ultimately, weigh the cost of signing up to a payment solutions provider against the potential benefits to make an educated decision.

Chargeback protection and dispute resolution

Most business owners view chargebacks as a cost of doing business. But they ultimately hurt your business’s bottom line and affect your reputation. A good provider should have chargeback protection and dispute resolution tools.

Look for a payment system with integrated chargeback alert services like Verifi (by Visa) and Ethoca (by Mastercard) to give you early warnings about potential disputes before they gradually morph into chargebacks.

Some providers have fraud liability protection measures like automatic refunds to protect your eCommerce business from fraudulent transactions.

Also, look for a system with automated chargeback management and dispute resolution to minimize revenue loss.

Global payment support

If you have international clients, you want a payment solution that supports multiple currencies and global payment methods. Multi-currency processing allows your customers to pay in their local currency and also reduces the time and effort required in currency conversion. 

Also, prioritize localized and region-specific payment methods. For example, if you have customers in China, you want to have a payment solution that accepts Alipay. Similarly, if you have customers in the Netherlands, choose a system that supports iDeal.

Just like multiple payment methods, you might not need global payment support now. But it would be nice to have it as an option as your business expands.

How to Choose the Right Payment Solution for Your Business

With the multitude of options in the market today, selecting the right eCommerce payment software for your business can be overwhelming. These tips will help you get started on the right foot:

Evaluating business size and transaction volume

The size of your business and average monthly transaction volume play a key role in determining the ideal payment solution for you. Start by evaluating your business’s needs. This helps you choose a provider that meets your current needs and future growth plans.  

Ask yourself the following questions:

• What’s your industry? Does the provider specialize in eCommerce payments?
• How many transactions do you accept every month? Do you experience seasonal spikes or fluctuations in sales volume?
• What payment methods do your customers prefer?
• Do you process international payments?

Since you run an eCommerce store, it makes sense to prioritize an online payment processor. On the other hand, brick-and-mortar retail stores may require physical POS solutions.

Keep in mind that the right solution for a startup or SMB may not necessarily be the best for large firms or high-volume enterprises.

For example, a small online boutique with 100-200 monthly sales could prioritize a payment solution with easy setup, low monthly fees, and pay-as-you-go pricing. A growing fashion brand processing payments worth about $50,000 in monthly revenue would opt for a scalable solution with low fees for high-volume sales. A SaaS company with subscription billing would opt for a solution with enterprise-level support, custom pricing, and fraud protection.

Calculate your average monthly transaction volume and compare the costs against different payment processors.

Industry-specific considerations

Different industries have unique payment processing needs. Here’s a breakdown of some industries and considerations to make:

• Subscription-based businesses – Businesses in the SaaS, streaming services, fitness, telecommunication, and utility industries must prioritize solutions with recurring billing features and automated invoicing. 
• High-risk industry – CBD, adult, gambling, cryptocurrency, and online pharmacies are considered high-risk businesses. Since many payment processors don’t support them, it’s important to look for high-risk merchant accounts or specialized payment service providers to avoid account freezes and compliance issues.
• Digital goods & services – Businesses that sell ebooks, software, and online courses should consider processors that support instant payouts and fraud detection. Online course creators should opt for payment processors with direct integration with their platforms.

The rule of thumb is to evaluate whether a payment processor has restrictions in your industry before signing up.

Understanding the total cost

The total cost of a payment solution isn’t just about the transaction or monthly fees. In fact, some payment processors may seem cheap at the surface level, but a deeper analysis of the total cost may unveil a different story.

Other fees to be on the lookout for include:

• Setup fees – Initial one-off costs charged for account setup, configuration, and integration.
• Chargeback & dispute fees – Charged when a customer disputes a payment and the transaction is reversed. Typically ranges from $15 to $25.
• Currency conversion fees – Extra fee for international payments paid in foreign currency that need to be converted into USD
• Refund fees – Some providers charge a fee for businesses that issue a refund to cover the cost of returning funds to the buyer.
• PCI compliance fees – Paid to maintain compliance with PCI DSS security standards
• Termination fees – Some providers lock you into a fixed contract. Termination fees apply if you wish to exit such a contract within a certain period.

Evaluate the provider’s transparency when it comes to the total cost. Steer clear of providers that keep these fees hidden. Undisclosed costs negatively affect your profits.

Also, some providers lock premium features in high-end pricing tiers. Understand the features you get for your subscription plan to avoid surprises when you need specific features.

While you might want a cost-effective option, the lowest fee may not be the best choice, especially if it comes with compromised services or limited capabilities.

Customer experience and ease of checkout

A better checkout flow and design can increase conversions by up to 35.26%, recovering $260 billion in lost orders. 

Focus on payment solutions with smooth cart checkout, customizable checkout pages, and automated recurring billing to maximize conversion rates.

It should be well-designed and easy to use even for customers who may not be familiar with online payments. Ensure it’s optimized for users who prefer shopping and completing transactions on mobile devices.

If you sell on multiple channels, ensure they’re well-synced. For example, the payment solution should accommodate a user who adds a product to the cart on their mobile app and wishes to complete the purchase on a web browser on their desktop.

Different types of payment gateways offer different levels of customer experience. Self-hosted and API-hosted solutions offer a smooth experience since your customers don’t have to leave your website to complete a payment.

On the other hand, hosted gateways disrupt the shopping experience with the redirect to a different site.

Test your checkout process on different devices and use heatmaps to identify bottlenecks and optimize your conversion funnel.

Implementing an Ecommerce Payment Solution

Successfully implementing an eCommerce payment system involves more than just adding a checkout button—it calls for thorough analysis and planning. Here’s a step-by-step guide to help you adopt the system effectively:

Setting up payment processing on your eCommerce site

Setting up your eCommerce payment solution starts with choosing the right payment processor. Consider the transaction fees, security features, integration options, and variety of payment methods when choosing an ideal provider.

Once you’ve spotted an ideal payment services provider, follow these steps to set up payment processing:

1. Create a merchant account – Some providers, like Stax, will require you to create a merchant account while others include one automatically. Find out whether it’s a requirement and act accordingly. Remember, if your business is deemed a high-risk industry, you might need a specialized merchant account to avoid payment delays or holds.
2. Integrate the payment gateway – This step depends on your eCommerce platform. If using Shopify, WooCommerce, or Magento, you can install plugins for easy integrations. Note that some payment solutions offer full customization but require developer support.
3. Configure payment settings – Enable multiple payment options you wish to accept, including credit/debit cards, Apple Pay, Google Pay, ACH, BNPL, and local methods. If you accept international payments, select supported currencies.
4. Configure security settings – Enable 3S secure authentication, tokenization, and fraud detection tools to minimize the risk of chargebacks. You can also add other security preferences like address verification (AVS) or card verification (CVV) checks.

Look for the provider’s documentation for specific guidance on payment settings configuration for a streamlined setup process.

Testing and optimizing checkout for conversions

Before launching your payment processing system, conduct thorough testing to ensure seamless transactions, smooth refunds, and an effortless customer payment experience.

Simulate multiple purchases on various devices to verify end-to-end payment processing. Ideally, you want to mirror your customers’ behaviors and patterns. Your experience will be their experience.

You can also leverage crowdsourced or beta testers using real devices to make purchases. This guarantees full testing coverage. Record and implement their feedback.

For example, you can reduce the number of form fields to only ask for essential information. You can also have guest checkout to avoid compelling customers to create an account.

Save payment details and enable the auto-fill feature for returning customers.

While it may seem obvious, it’s easy to ignore payment confirmation verification. Test all purchase funnel elements to ensure the smooth sharing of data between merchants, customers, and financial institutions. After that, confirm that the customers receive successful payment verification to avoid cloned orders.

Also, test time-outs. What happens if a session times out before completing or fully processing a transaction? Evaluate and understand the triggers of a time-out. If you have one, offer time-out notifications to your customers and include simple steps to resume and finalize the purchase.

Leverage A/B testing for different checkout layouts, button colors, and payment methods to find what converts best.

Monitoring payment performance and security risks

Implementing an eCommerce payment solution isn’t a sprint—it’s a marathon that requires continuous evaluation and monitoring to maximize efficiency and minimize revenue loss.

Track these key payment performance metrics to optimize performance:

• Uptime – Track how well and often the system performs optimally.
• Payment failure and success rates – Monitor failed transactions and optimize retry strategies.
• Chargeback rates – Keep chargebacks below 1% to avoid penalties.
• Average Order Value (AOV) – Identify customer preferences and trends to improve upsell strategies.
• Fraud rate – Track how many transactions are flagged as fraudulent.
• Payment processing speed – How long does it take for information to transact from the API to the gateway and from the acquiring bank to the issuing bank?
• Capture rate – Tells you how many transactions from your online store have been approved and successfully settled.

On top of that, regularly review your system’s transaction logs and reconcile transactions. Stay proactive and resolve issues and discrepancies fast. Also, keep the gateway updated with the latest security patches to fix system vulnerabilities that hackers could take advantage of.

You can schedule monthly security audits and payment reports to identify fraud trends and optimize performance.

Future Trends in Ecommerce Payments

Whether you own an eCommerce business or you’re considering launching one, staying ahead of the curve helps your business stay on top of the competition—and stay there. 

Here are some key trends shaping the future of eCommerce payments:

The rise of AI-driven fraud prevention

AI has evolved from just a buzzword to the driver of efficiency in most industries, including eCommerce. As online transactions increase, so does the risk of fraud. The U.S is the most fraud-prone country with 34% of online customers reporting that they’ve been victims of fraud.

Traditional tactics of fraud detection are no longer sufficient. AI-driven fraud detection and prevention is becoming the new standard. AI enhances fraud detection through:

• Real-time fraud analysis – AI can be deployed to continuously monitor transactions and detect suspicious activities faster than manual reviews.
• Behavioral analysis – AI can monitor user behavior, such as typing speed and purchasing patterns, to spot anomalies.
• Machine learning algorithms – Payment systems can improve over time by learning from past data breaches and fraud attempts.

For eCommerce businesses, this means lower chargeback rates, reduced payment declines, and fewer fraudulent transactions. It will also improve customer trust due to the enhanced security measures.

While it’s important to choose a payment processor with AI fraud prevention to safeguard transactions, ensure that it doesn’t add friction to the checkout experience.

Growth of alternative payment methods

Online customers continue to demand faster, more flexible payment options. This has led to an increase in alternative payment methods, such as:

• Cryptocurrency – Companies globally are increasingly adopting crypto payments. Bitcoin, Ethereum, and stablecoins are particularly gaining traction in eCommerce due to lower payment processing fees, global accessibility, and no chargebacks. Look for a payment processor that allows you to accept crypto payments while instantly converting them to fiat currency.
• Open banking – Open banking and Account-to-Account (A2A) payments allow direct bank transfers without traditional card networks, leading to lower costs, faster payments, and reduced risk of fraud. Consider integrating open banking payments and reducing reliance on credit card networks.
• Super apps – Super apps like WeChat, GrabPay, and Alipay combine multiple functions, like financial services, under one ecosystem. For example, in China, users can send money and pay for products and services using WeChat Pay. Super apps enable faster checkout, strong user engagement, and built-in loyalty programs.

If you’re targeting international markets, include region-specific super apps in your accepted payment methods.

Embedded payments and the role of fintech in eCommerce

Embedded payments seamlessly integrate into non-financial platforms, allowing users to pay without leaving your app or online store. 

For example, eCommerce merchants using Shopify Payments have access to built-in checkout solutions without third-party processors.

Embedded payments offer eCommerce customers a frictionless checkout since they can complete transactions without being redirected. They also allow merchants to include flexible payment options like BNPL.

Fintech companies are spearheading this trend by offering embedded payment solutions that integrate directly into eCommerce platforms.

Conclusion

An eCommerce payment solution isn’t just another business tool. It’s the lifeline of your online business’s bottom line. Without it, you’d lack an efficient way to accept payments from your customers.

If you’re setting up your online store and have no idea where to start, look for a payment solution that offers seamless integration, robust security, flexible pricing, and support for multiple payment methods and currencies.

Most importantly, define your business needs so you can focus on a solution that aligns with your goals. Your system should also align with your business model—whether you run a high-volume eCommerce store, a subscription-based service, or a global marketplace.

Finally, once you have a few payment solutions on your shortlist, compare them based on features, pricing model, and scalability.

Now that you’re ready to take your eCommerce payments to the next level, sign up for Stax Payments today and give your customers a seamless, fast, and secure checkout experience.

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