A Comprehensive Guide to E-commerce High-Risk Payment Processing
Introduction
The ancient Greek philosopher Heraclitus once said that change
is only constant. We witnessed the realism of the cited quote for ourselves.
Before the wide spread of the internet, the market existed only offline, but we
saw how it changed. Today, almost all businesses have an online presence. It
isn't an exaggeration to say that it's hard to survive in a competitive market
without an online presence. For instance, global business-to-business (B2B) and
business-to-consumer (B2C) e-commerce sales vaulted $26.7 trillion in 2019,
which was equal to 30% of the global gross domestic product (GDP) that year.
Covid-19 intensified this trend, and days are close when half of the world
trade will be made via e-commerce.
As an offline business require some essentials to operate, an
online business or e-commerce also requires some necessities. These include the
goods or services you want to offer, a website or app and payment processing.
In this article, we will explore the payment processing part of e-commerce and
guide you on how to acquire the best payment
processor.
What is E-commerce Payment Processing?
E-commerce payment processing is
an umbrella term for many payment solutions involved in completing an online
transaction in eCommerce. It consists of several payment solutions, including
an e-commerce merchant account, payment gateway, credit card processing, etc. A
full-stack payment processor, like WebPays, can provide all payment solutions
in a single place, whereas some only provide one or two services. Let's
understand these solutions one by one.
(Round-up: A merchant should choose a
full-stack payment processor for the best optimisation and better performance.)
What is an E-commerce Merchant Account?
An ecommerce merchant account (EMA) is nothing but a simple
online bank account that allows merchants to accept and hoard payment from
customers. Unlike traditional bank accounts, it accepts payments in multiple
payment methods and currencies. It is the first place where customer payments
reach. After payment settlement, this payment can be transferred to any regular
account.
(Round-up: Banks and traditional financial institutions
regard online businesses as high-risk, so they hesitate to provide their
payment solutions to them. That is why merchant service providers play a vital
role in developing ecommerce by providing payment solutions.)
What is an E-commerce Payment Gateway?
An ecommerce payment gateway plays a role of a road or bridge
between your website or application, merchant account, payment processor and
card networks. It securely transfers the payment from customer accounts to
merchant accounts. Unusual to traditional payment gateways, it allows merchants
to accept payments in multiple payment methods, including credit cards, debit
cards, prepaid cards, e-wallets, digital currencies and local payment methods.
An EMA also enables merchants to accept payment in multiple currencies.
(Round-up:
The payment gateway manages currency conversion and settles funds in the
preferred currency of merchants. It is also responsible for securing payment
during transactions. It can be customised as per merchants' needs.)
How Does E-commerce Payment Processing Work?
E-commerce payment processing
involves the secure and efficient handling of online transactions between
customers and merchants. Let's see how it works:
1.
Customer
Initiates Purchase: When customers
purchase something from your online store, they proceed to the checkout page.
Here, they provide necessary details like shipping address, contact
information, and payment method.
2.
Payment
Method Selection: The customer chooses
their preferred local or alternative payment
methods from the options available, which could include credit/debit
cards, digital wallets, bank transfers, or other localized payment options.
3.
Transaction
Data Encryption: Before transmitting
payment information, the gateway encrypts the data to ensure it remains secure
during transmission.
4.
Authorization
Request: The payment gateway forwards
the payment details to the customer's bank or card issuer to request
authorization for the transaction.
5.
Authorization
Response: The customer's bank or card
issuer reviews the transaction request and determines whether the customer has
sufficient funds and if the transaction seems legitimate.
6.
Transaction
Approved or Declined: Based on the
authorization response, the payment gateway informs the merchant whether the
transaction is approved or declined.
7.
Confirmation
to Customer: The customer receives an
order confirmation, indicating whether the payment was successful or not.
8.
Settlement: If the transaction is approved, the customer's bank or
card issuer transfers the funds to the merchant's account, initiating the
settlement process.
What Features of an E-commerce Payment Processor Must Have?
When you are looking to acquire an
eCommerce payment processor, you must look at some crucial features. In this
section, we have mentioned the most important factors in choosing an eCommerce
payment processing provider. Let's have a glance:
..1.
Security:
Best high-risk merchant
accounts must prioritize security to
protect sensitive financial information and customer data. It should comply
with industry standards such as PCI-DSS, GDPR and implement SSL encryption and
tokenization to safeguard transactions. It should also provide advanced fraud
and chargeback prevention tools to secure merchants from any fraudulent
activities.
..2.
Multiple Payment Methods:
It should provide credit card
processing and support other various payment methods, including digital wallets
(e.g., PayPal, Apple Pay, Google Pay), mobile banking (e.g., iDEAL), bank
transfers, ACH, e-checks, and other localized payment options to cater to a
diverse customer base.
..3.
Seamless Integration:
The e-commerce payment platform
should be easy to integrate into the eCommerce platform or website. APIs and
developer-friendly documentation make the integration process smooth.
..4.
Mobile Optimization:
With the rise of mobile commerce,
the payment processor should be optimized for mobile devices, providing a
seamless and user-friendly payment experience for customers using smartphones
and tablets.
..5.
Fast and Reliable Transactions:
The payment processing system must
be quick and dependable, ensuring that transactions are processed without
delays or interruptions.
..6.
Recurring Billing and Subscriptions:
For businesses offering
subscription services or recurring billing models, the processor should support
automated and scheduled payments.
..7.
International Support:
If the business operates globally,
the best payment processing companies should be able to handle
international transactions, support multiple currencies, and adapt to local
regulations.
..8.
Transparent Pricing:
The payment processor should offer
clear and transparent pricing structures with no hidden fees. It should also
provide competitive fees without compromising the quality of services.
..9.
Customer Support:
There is no limited time zone in
e-commerce, so an e-commerce global payment gateway provider should offer
round-the-clock customer support. It should provide prompt and helpful
assistance to merchants and customers in multiple languages.
..10.
Account Management:
Merchants should have access to a
user-friendly and powerful dashboard to manage transactions, view sales
reports, and handle refunds or disputes.
..11.
Scalability:
As the company expands, the
payment solution provider should be able to manage growing transaction volumes
without sacrificing performance.
By having these features, an eCommerce payment processor can facilitate smooth and secure online transactions, contributing to the success of the eCommerce business and providing a positive experience for customers.
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