Everything You Need to Know About Accepting Online Payments

JetPay Communications

January 24, 2019

This year, forecasters estimate that global e-commerce sales will exceed more than $2.35 trillion. And the U.S. Department of Commerce has forecasted that e-commerce will represent more than 10 percent of all retail transactions performed in the United States by the end of 2018.

As such, business owners in every industry sector need to ensure that they have a quality and affordable online payment processing solution in place, or risk getting left behind. Accordingly, they need to understand the differences between built-in platform processors, payment gateways and payment processors.

To determine which of those three will best meet their needs, businesses first need to be equipped to receive online purchases.

What Businesses Need to Accept Online Payments

Just as retailers need a point-of-sale terminal to accept cash, checks and credit cards in the physical retail space, they also need a few things to process payments made through their websites. This includes:

  1. A registered website domain name that is owned by the business and a service that hosts the site’s web pages, including its webstore.
  2. An e-commerce platform that allows customers to purchase the business’s products.
  3.  An online payment processor that meets mandates such as the Payment Card Industry Data Security Standard.
  4. A merchant bank account that can receive online customer payments.

How Online Sales Work

Once a business is set up to receive online payments, those payments will be processed like so:

  1.  A customer goes to a retailer’s website, browses through their products and decides to make a purchase. Once the customer makes their selections, they will be taken to a checkout page to enter their payment information and confirm their order.
  2. The customer’s payment information is sent to an intermediary that facilitates a transaction between the payment processor and the merchant. This intermediary can is called a gateway and, if integrating directly with a payment process, can be bypassed in this process.
  3. This processor securely contacts the bank that issued the customer’s credit card, such as Wells Fargo or Bank of America, via its payment card network, such as Visa, MasterCard and or American Express.
  4. Depending on the customer’s balance, the issuing bank will either approve or decline the transaction and send a response to the intermediary via the card network.
  5. If approved, money will be transferred from the customer’s account to the merchant’s once settlement is completed.

The Three Payment Processors

Online credit card transactions are processed through Payment Processors, but can also be looped through either Platform Processors or Gateways on their way to the Payment Processor.

Platform Processors

A platform processor is built into the e-commerce platform that provides a company’s web store. For instance, if you choose to have your company’s web store hosted by the e-commerce platform Shopify, you have the option of using its in-house intermediary, Shopify Payments.

The main benefit of using a service like Shopify Payments is convenience. If your company already uses Shopify, Shopify Payments will allow you to monitor payments, establish an order placement/payment processing timeline and schedule payouts of funds collected.

The main drawback of companies like Shopify, is that they aren’t actually processing your payments. They can only forward your payment to payment processor.  Another drawback, is their fee structure. Depending on your company’s transaction volume, you’ll need to pay Shopify a flat monthly fee of between $29 and $299 and a per-transaction fee of 2.4% to 2.9% + $0.30 at the bare minimum.

Also, the sales reports companies that provide businesses with the key insights they need to shape advertising and budgeting are only available with Shopify’s standard and advance pricing tiers. Basic users aren’t provided with the same level of reporting.

Payment Gateways

Payment gateways, such as Stripe, can also serve as a business’s online payment processor. Stripe handles the same back-end functions as a built-in payment processor, but it isn’t limited by platform and it doesn’t do the actual credit card payment processing itself. Those functions are handled by a third-party company that the merchant never interacts with directly.

Stripe offers two pricing tiers: pay as you go and enterprise. At the pay-as-you-go level, partner companies only pay a flat fee of 2.9% + $.30 per successful credit card transaction and receive free real-time reporting. At the enterprise level, which is a more expensive, high-volume option, account management, migration assistance and dedicated support tools are available.

However, new user-friendly, Stripe may be a less-than-ideal solution for brick-and-mortar retailers for three reasons. One is that unless they utilize an e-commerce platform that integrates their chosen processor into its platform, owners will have to keep track of all the online orders the company receives through two different portals.

Two, its point-of-sale tool is still in the testing phase, meaning businesses using Stripe will need a separate payment processing solution for their POS transactions. And three, its fee structure has to cover credit card processing fees and its own operating costs, potentially making it a more expensive solution than dealing with a payment processor directly.


Payment Processors

Lastly, merchants may want to get their online payment reception services handled directly by a payment processor like JetPay.

In addition to offering retailers secure and expedient online credit card processing, JetPay also offers robust e-commerce features like recurring payment, batch processing, chargeback-reducing, dynamic descriptions, automatic account updating and mission-critical marketing tools like real-time reporting and in-depth analytics.

And as a full-service payments processor, JetPay can also handle all of your company POS credit card processing with cutting-edge terminals, PIN pads and EMV compliant chip card readers. Since JetPay handles payment processing directly, its merchants aren’t saddled with any unnecessarily padded fees.

If your company is interested in a comprehensive and cost-effective payment processing solution for both the physical and digital retail space, contact a JetPay representative today.

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