Your Complete Guide to Choosing an Ecommerce Credit Card Processor

Your Complete Guide to Choosing an Ecommerce Credit Card Processor

In the ever-changing world of shopping trends, Ecommerce has hit the big time. In fact, research has shown that 86% of customers shop for goods and services online, and use their credit cards to make those purchases. Even more telling is the fact that over 60% of shoppers list cards as their preferred payment method.

This is certainly good news for online merchants, as these findings indicate that Ecommerce plays an increasingly important role in the evolving shopping landscape. From an online merchant’s perspective, however, you know those card payments don’t magically transfer themselves into your business’ bank account. 

So, how do they get there?

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Why You Need an Ecommerce Credit Card Processor 

To complete each online sales transaction, you need a mechanism for the customer to order your product or service, and another system that processes their credit card payment. Your Ecommerce shopping cart takes care of the first task, but the second process requires a cooperative effort.

In a nutshell, you need a way to get the funds from your customer’s (the cardholder’s) bank to your (the Ecommerce retailer’s) bank. Your merchant account begins that several-step process. A retailer’s merchant account is a bank account that accepts credit card payments from your customers. Also called a “payment gateway,” this go-between account routinely authorizes customers’ payments for the goods or services you sell.

To complete the actual online payment, however, you must engage the services of an ecommerce credit card processor. These companies handle the nuts-and-bolts of the online shopping transaction. 

Essentially, your payment processor transmits relevant data between your Ecommerce shopping cart, your bank, the customer’s card, and their bank. This sequence is designed to occur at lightning-fast speed – in fact, within a couple of seconds. When complete, your customer enjoys a seamless sales transaction, and the funds will soon flow into your bank account.

Accepting Online Payments: How It Works 

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Each online payment transaction begins when a customer browses your Ecommerce store, and decides they want to purchase one or more products. After they click “Submit” on their shopping cart checkout, the payment process begins.

View The Key Players in Your Online Payment Transaction

Cardholder: Your online advertising or SEO campaign worked – congratulations! You have a customer who wants to purchase your product or service, and pay with their credit card. We’ll call them the cardholder.

Ecommerce Merchant: Also known as an Ecommerce retailer, this term refers to the online business offering the product or service for sale.

Payment Processor: This important player acts on behalf of the Ecommerce merchant. The payment processor handles the actual card processing functions.

Merchant Bank: This is the Ecommerce retailer’s bank (e.g. your bank), and the destination for all completed credit card payments. The merchant bank sends the transaction’s payment authorization request to the cardholder’s bank. Next, the merchant bank transmits the “Approved” or “Denied” response to you. 

Cardholder Bank: This is your customer’s bank, and is the institution that issues their credit card. In credit terms, this bank provides the customer with a specific amount of credit with which to make purchases. Card-issuing banks can include conventional banks, credit unions, and other types of financial institutions.

View The Steps Involved in Your Online Payment Transaction

  1. The buyer completes their Ecommerce shopping cart order. Next, they begin a “Submit Payment” sequence on their computer, cell phone, or mobile payment processor. 
  2. The payment processor securely routes the transaction data to the buyer’s credit card company or bank.
  3. The buyer’s bank assesses their available credit, and approves or denies the transaction. If it’s approved, the payment processor receives the transaction for processing. 
  4. The processor stores the transaction funds in a holding account for later transmission to the online retailer (less any applicable fees).
  5. The processor saves the transaction, and transmits a copy to the Ecommerce retailer and the buyer.
  6. The Ecommerce retailer processes the order, and sends the products or services to the buyer.  
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Typical Ecommerce Credit Card Processor Fees

Naturally, you want to find the best price ecommerce credit card processor, but keep several caveats in mind. First, be aware that Ecommerce credit card processing charges are generally higher than in-person card fees. This higher charge results from Ecommerce payments’ increased fraud risks.

Although each Ecommerce credit card processor utilizes its own fee structure, the following fees are common throughout the industry:

  • Transaction fee
  • Batch processing fee 
  • Customer statement fee 
  • Annual service fee 
  • Customer support fee 
  • Payment card industry (PCI) compliance fee 
  • IRS fee 
  • Early contract termination fee   

Understand How These Ecommerce Credit Card Processing Fees Can Impact Your Bottom Line:

Payment Card Industry (PCI) Compliance Fee 

Some card payment processors charge a PCI Compliance Fee, which relates to your business’ compliance with electronic data protection requirements. Ideally, your processor will provide the resources for you to be PCI compliant. If they don’t, you should not be assessed this fee.

Transaction Fee 

Your payment processor will always charge a transaction fee, which will be a certain dollar amount or percentage of each transaction. Pay special attention to this fee, and ensure that it fits your business stage and monthly transaction volume. If you fail to do that, you’ll throw away money that could be better spent elsewhere.

Check Verification Fee 

If your Ecommerce credit card processor allows you to accept virtual checks, you’ll likely have to pay a per-check verification fee. This fee is piggybacked onto the transaction fee, so you’ll be double-charged for these online transactions.

Finally, don’t let your money-conscious mindset draw you into a too-good-to-be-true payment processing deal. If the service fees are considerably lower than the industry standard, they’re likely introductory fees, and will gradually creep higher. Take these payment processors off your short list, and go with a reputable provider instead.

How to Find the Right Ecommerce Credit Card Processor

Whether you’re just launching your Ecommerce business, or ramping it up to the next level, finding the right ecommerce credit card processor can help to fuel your business’ growth. With so many providers and services on the market, however, you should perform your due diligence to pinpoint the best partner for your business’ needs. 

View these general guidelines, plus five valuable tips, on finding the best credit card processor for ecommerce.

General Search Guidelines  

To begin your search for the best ecommerce credit card processor, first identify your overall business goals, and determine your current business stage. Next, look for a company that has a strong history of working with businesses similar to yours. Some payment processors have tailored their services to a specific industry, such as crafts or online auction services.

Next, carefully examine your business profile. If you’re operating a higher-risk business, that can influence your choice of an Ecommerce credit card processor. Finally, take an objective look at your current and projected transaction volume. If you ignore this advice, and exceed your allowed monthly sales volume, you could be charged a higher fee for the remaining transactions.

Multiple Payment Options

When a customer completes an Ecommerce shopping cart order, and is ready to pay for their purchase, they want a payment option that works for them. If you don’t offer that payment vehicle, they’ll often abandon their cart and shop elsewhere. And, believe it or not, some customers still balk at using their credit cards for online purchases.

By offering multiple payment options, you’ll increase the chances that customers will complete their Ecommerce purchases. To increase the payment options’ visibility, prominently display those company logos on your Ecommerce website’s homepage.

Quick Access to Funds

After each customer completes their online purchase, your Ecommerce credit card processor transfers those sales proceeds into a holding account. After deducting the preset fees, the processor sends the net proceeds to your business’ bank account. 

The question is: when will you receive those funds? Although each processor operates differently, it’s common to receive your net proceeds within a couple of days, and generally no longer than a week.

However, let’s say the payment processor detects suspicious activity on your account, and they put a “hold” on your funds while they investigate further. In most cases, resolving the issue shouldn’t take long, and you should receive access to your funds very quickly.

Strong Fraud Prevention Program

Several major retailers have recently experienced serious data breaches, triggering a massive wake-up call for any business that accepts credit cards for customers’ purchases. In other cases, dishonest (and very clever) online fraudsters will pay you with money from a hacked account, often requiring costly adjustments later. And, the very nature of card-not-present transactions increases the chances of stolen card use.

Each of these incidents will impact your bottom line, and collectively they’ll put a real dent in your profits. To decrease the chances of fraudulent card activity, choose an ecommerce credit card processor with top-notch fraud protection. Ensure that the provider automatically flags risky transactions, and securely encrypts and stores all card activity details. Ideally, the provider will use overlapping layers of security for maximum data protection. 

Compatibility with Existing Software

Ideally, your Ecommerce business software will operate seamlessly in the background, causing little downtime due to system malfunctions. If you utilize programs from different providers, they’ll function well together without a hiccup. 

So, when you’re searching for the best ecommerce credit card processor, look for a company whose software is compatible with your existing systems. Although many processors utilize universal software, confirm that their package will mesh with your platform’s shopping cart. In addition, look for a processor that accepts digital wallet payment methods, as many shoppers opt to pay for purchases with their smartphones.

24/7 Live Customer and Tech Support 

In a perfect world, your Ecommerce store will process your customers’ online orders and payments without a hitch, setting the stage for a quick shipment and great social media reviews. Most of the time, that scenario does occur, and everybody is happy.

When your system malfunctions (and it will), you want a live customer service person who can actually solve your problem. A live chat platform is also useful, but only if someone’s on the other end when you need them.

You want the associate to be well informed about the company’s services, and they should speak in terms you can understand. If they can’t fix the issue, you want live tech support that’s just a click away. And, you want these services available around the clock, every day of the year.

When choosing the best credit card processor for ecommerce website, realize that the cheapest short-term option isn’t necessarily the best choice. List the pros and cons of each short-list candidate, and go with the provider that delivers the best all-around package and will support your business’ growth.

Payment Processing: Online vs. Offline

Once you recognize the need for a credit card processor for ecommerce, compare the difference between online (or real-time) and offline (or delayed) card payment processing.

Online Payment Processing

Online payment processing is very straightforward. Your customer completes their online order, and takes their online shopping cart to the checkout station. The customer verifies that they want to complete their purchase, which begins the multi-step payment sequence.

Next, the shopping cart routes the transaction data to the payment gateway, which sends the details to the customer’s and retailer’s banks. Once the customer’s bank authorizes the transaction, the card is charged, and the funds are funneled into the payment gateway’s holding account. After they deduct the processing fees, the net proceeds are sent to your business’ bank account.

Online (real-time) payment processing has two big advantages. First, the customer’s card is charged immediately, which provides you with incoming funds and sets the stage for fast product delivery. However, if the customer orders an out-of-stock item, or changes their order after it’s processed, you’ll need to process a separate refund or revised transaction.

Initial Steps of Offline Payment Processing 

An offline Ecommerce transaction follows the same initial steps as an online transaction. The customer orders their items, and is routed to the shopping cart’s checkout station, where they verify that they want to complete their purchase. Next, the customer transaction details travel to the payment gateway interface.

However, let’s say you lose Internet connectivity at that highly inconvenient moment. Remember, your payment gateway has securely collected the transaction details. So, the order is completed although the funds have not yet changed hands. The payment processor then sends you (the Ecommerce retailer) a message about this pending transaction.

With an offline transaction, you can manually change the order to reflect an out-of-stock situation or item change. If you have a second means of processing card transactions, you can manually charge the customer’s card at your convenience. 

An offline card processing system allows you to have more transaction completion flexibility, and you can make changes to the order if needed. However, the customer’s card could eventually be declined, and you’ll have to manually update their order. That will require extra work on your part.

When choosing an Ecommerce credit card processor, remember that not all service providers allow offline payments. And, some processors may require you to complete an offline transaction within a certain period of time, which can vary from 24 hours to seven days. 

Need Help Finding Ecommerce Credit Card Processor?

We’ve got you covered. Payment Depot doesn’t just enable you to process transactions for your ecommerce site, but we save you money while you’re at it.

The image below is from a comparison we did for a real ecommerce Payment Depot member. Before he switched, he was paying an extra $1,200 a month to his processor because he wasn’t paying wholesale.

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Looking at the statement, we see that the other processor not only charged a markup on top of the wholesale cost, but the processor also had higher costs on transactions, chargebacks, PCI, and hidden fees. Their rates and miscellaneous costs make this processor not even close to the best merchant account for ecommerce.

Whether you’re starting a new ecommerce store or you’ve been operating for years, Payment Depot provides the best merchant account for ecommerce merchants.

Want to save 40% on payment processing? Let's Talk!