Key takeaways

  • Learning how to accept payments online is essential for expanding market reach and providing convenience to customers.
  • Choosing a provider that offers both a merchant account and a payment gateway simplifies the setup process.
  • Adopting different payment methods, such as payment links, invoicing, and subscriptions, can improve customer satisfaction while also increasing conversion and minimizing outstanding balances.
  • Offering different payment methods such as credit and debit cards, ACH payments, digital wallets, and cryptocurrency helps your business cater to diverse customer preferences.

What is online payment processing?

Online payment processing is a system that enables businesses to accept payments over the internet. This process involves various technologies and financial institutions that ensure funds are securely transferred from the customer’s account to the merchant’s account.

Here are some of the main components of online payment processing:

Merchant account

A merchant account is a type of business bank account that allows businesses to accept and process electronic payments. It temporarily holds the funds from a transaction before they are transferred to the business’ bank account. Setting up a merchant account involves signing up with a merchant service provider or a payment processor. 

Payment processor

Payment processors handle the transactions between the customer’s bank and the merchant’s bank. They facilitate the communication and transfer of funds, ensuring that the payment is authenticated and processed correctly. Payment processors also manage the settlement of funds and handle any issues that arise during the transaction. 

Related: See the best payment processors and the cheapest payment processors to find one for your business.

Payment gateway

A payment gateway is a technology that captures and transfers payment data from the customer to the acquiring bank. It acts as an intermediary between the merchant’s website and the payment processor, ensuring that the transaction data is transmitted securely. Payment gateways play a critical role in authorizing payments and providing a seamless checkout experience for customers.

In many cases, a single provider can handle all the functions of a merchant account, a payment processor, and a payment gateway. This consolidation simplifies the setup process for businesses, reduces the complexity of managing multiple accounts, and often leads to cost savings through bundled services. 

How does online payment processing work?

Online payment processing involves a series of steps that ensure secure and efficient transactions. Here’s a concise breakdown of how it works:

  1. Customer prepares to make a payment: The customer initiates a payment on a website, through an invoice, a payment link, or other digital methods.
  2. Payment information is entered: The customer enters their payment details, such as credit card information or digital wallet credentials.
  3. Data is encrypted and sent: The payment gateway encrypts the payment data and sends it to the payment processor.
  4. Transaction is authorized: The payment processor communicates with the customer’s bank (issuing bank) to verify the payment details and authorize the transaction.
  5. Transaction confirmation: The payment gateway sends a confirmation to both the customer and the merchant, finalizing the purchase.
  6. Funds are transferred: Once authorized, the funds are transferred from the customer’s bank to the merchant account (acquiring bank) via the payment processor.

This process typically occurs within seconds, providing a seamless and secure payment experience for both parties.

4 steps to accept payments online

Setting up online payment processing is essential for any business. Here are four steps to start accepting online payment effectively:

1. Set up a merchant account and payment gateway. 

Choose a provider that offers both a merchant account and a payment gateway. This will simplify the setup process and streamline your payment operations. Providers like Stripe and PayPal offer comprehensive solutions that bundle these services together, making it easier for businesses to get started. 

If you already have a merchant account, ask your merchant service provider which payment gateway they work with or choose a compatible payment gateway to integrate with your existing setup.

2. Integrate with your platform

Connect the payment gateway to your website or application. Some platforms like Shopify also offer a built-in payment gateway which does not require any integrations. If you prefer to use a third-party gateway, most provide APIs, plugins, and integration tools that work seamlessly with popular e-commerce platforms and custom websites. Ensure the integration is smooth and the checkout process is user-friendly to minimize cart abandonment. 

3. Ensure security and compliance

Implement necessary security measures such as SSL certificates and encryption to protect sensitive payment information. Additionally, ensure compliance with industry standards like PCI-DSS to safeguard your customers’ data and build trust.

4. Test and optimize

Thoroughly test your payment system to identify and fix any issues before going live. Once the system is operational, continuously monitor transactions and gather data to optimize the payment process. Regularly update your security measures and adjust your setup based on customer feedback and transaction performance.

Best ways to accept payments online

Choosing the right methods to accept online payments can significantly enhance the customer experience and streamline your business operations. 

Here are some of the best ways to accept payments online and the different use scenarios for each one:

On your website

Integrating a payment gateway directly into your website is one of the most seamless ways to accept payments. This allows customers to complete their purchases without being redirected to another site. Popular e-commerce platforms like Shopify, WooCommerce, and Magento offer easy integration with various payment gateways. Custom solutions using APIs are also available for businesses with unique requirements.

Payment links are versatile tools that enable businesses to request payments through various digital channels. They are particularly useful for businesses that do not have an online store but still need to accept payments online. Here are some ways businesses can use payment links:

  • In an email: Businesses can create and send payment links directly to customers through email. This method is convenient for both parties and ensures a secure payment process.
  • In a text message: Merchants may use SMS to send payment links to customers’ mobile phones. This is especially effective for on-the-go payments and quick transactions.
  • Through messaging apps: This method allows businesses to accept payments through popular messaging apps like WhatsApp, Facebook Messenger, and WeChat.
  • In social media posts: Payment links can be embedded in social media posts on platforms like Instagram, Facebook, and X. This allows followers to make purchases directly from your social media pages.

Sending an invoice or setting up subscription

For businesses that rely on invoicing and recurring payments, setting up an online invoicing system is crucial.

  • Creating and sending online invoices: Use tools like QuickBooks, FreshBooks, or Xero to generate and send professional invoices to customers. These platforms often integrate with payment gateways, enabling customers to pay directly from the invoice.
  • Setting up recurring payments: For subscription-based businesses, recurring billing is essential. Platforms like Helcim and Stax offer robust solutions for managing subscriptions and automated billing cycles, ensuring consistent cash flow and customer retention.

To cater to diverse customer preferences and provide convenience, offer multiple payment methods such as credit and debit cards, ACH payments, digital wallets like Apple Pay and Google Pay, and even cryptocurrency. Determine the payment methods you want to offer and ensure that your chosen payment gateway or processor can accommodate your preferred payment methods.

Read more: Best Credit Card Payment Apps in 2024

Best payment processors for accepting online payments

Choosing the right payment processor is crucial for optimizing your online payment strategy. The best payment processors offer a combination of competitive pricing, robust security, and seamless integration with your existing systems. Here are some top payment processors to consider:

Helcim

Helcim is known for its transparent pricing and excellent customer service. It offers a variety of payment processing solutions, including online payments, in-person payments, and invoicing. Helcim supports a wide range of payment methods and provides features such as recurring billing and subscription management. It also offers seamless integration with popular e-commerce platforms.

Visit Helcim

Shopify Payments

Shopify Payments is a built-in payment processor for Shopify users, offering a seamless and fully integrated payment solution. It supports various payment methods, including credit and debit cards, digital wallets, and local payment options. Using Shopify Payments eliminates the need for third-party payment gateways and simplifies transaction management for Shopify store owners.

Visit Shopify

Stax

Stax offers a subscription-based pricing structure and interchange-plus pricing with no percentage add-on, which helps significantly reduce transaction costs. It provides a comprehensive suite of tools, including advanced reporting, seamless integration with major e-commerce platforms, and robust security features. 

Visit Stax

Stripe

Stripe is known for its powerful API and ease of integration, making it a favorite among developers and tech-savvy businesses. It supports a wide range of payment methods, including credit and debit cards, ACH payments, and digital wallets. Stripe also offers advanced features like subscription billing, fraud detection, and international payments.

Visit Stripe

Pros and cons of accepting payments online 

Accepting payments online offers numerous benefits for businesses, but it also comes with some challenges. Here’s a look at the key pros and cons:

Pros

  • Increased sales: It is convenient and gives businesses a wider market reach.
  • Improved customer experience: Seamless checkout, variety of payment methods.
  • Better record-keeping: All transactions are automatically tracked and recorded.

Cons

  • Higher transaction costs. Online transactions are generally more expensive than in-person ones.
  • Technical challenges: Online payment systems are subject to integration issues and downtimes.
  • Regulatory compliance: Subject to more complex PCI-DSS compliance and data privacy laws.

Choosing the right online payment solution

Selecting the appropriate online payment solution is crucial for your business’s success. The right solution will meet your needs, provide security, and offer a seamless experience for your customers. Here are key factors to consider when choosing an online payment solution:

Assess your business needs

Evaluate the specific requirements of your business. Consider factors such as the volume of transactions, the types of payments you need to accept (e.g., one-time payments, subscriptions), and any industry-specific needs. Understanding your business’s unique requirements will help you narrow down the options and choose a solution that fits.

Compare transaction fees and costs

Transaction fees can vary widely between payment processors. Compare the fees charged for different types of transactions, including fixed fees, percentage-based fees, and any additional costs for features like chargeback protection or international payments. Opt for a solution that offers transparent pricing and fits your budget.

Also read: The B2B Payments Guide: Overview & Solutions

Consider security and compliance

Security should be a top priority when selecting any payment solution. Ensure the provider complies with industry standards like PCI-DSS, which is essential for protecting payment data. Look for additional payment security features such as encryption, fraud detection, and two-factor authentication to further safeguard transactions.

Look for integration capabilities

The payment solution should easily integrate with your existing systems, including your website, e-commerce platform, and accounting software. Seamless integration ensures a smooth customer experience and simplifies your backend processes. Many payment providers offer APIs, plugins, and extensive documentation to facilitate integration.

Check for scalability and flexibility

Your payment solution should be able to grow with your business. Consider whether the provider can handle increased transaction volumes and whether they offer additional features that you might need in the future, such as support for multiple currencies or additional payment methods.

Evaluate customer support and service

Reliable customer support is essential, especially when dealing with online payment processing issues. Choose a provider that offers robust customer support, preferably 24/7, and has a reputation for responsive and helpful service. Good customer support can save you time and prevent revenue loss in case of technical difficulties.

Read reviews 

Research reviews from other businesses similar to yours to get an idea of the provider’s reputation. Look for testimonials that mention reliability, ease of use, and customer service. Additionally, seek recommendations from industry peers or business networks to find a trusted solution.

Frequently asked questions (FAQs)

To start accepting digital payments, set up a merchant account and integrate a payment gateway with your website. Customize payment options to include credit/debit cards, digital wallets, and bank transfers to cater to customer preferences and streamline transactions.

The costs of online payments typically include transaction fees, which are usually a percentage of each sale plus a fixed fee per transaction. Additionally, there may be monthly fees for using a payment processor or gateway, setup fees, and charges for additional services like fraud protection or currency conversion. It’s important to review and compare these costs across different providers to find the most cost-effective solution for your business.

The safest way to accept payments online is to use a reputable payment processor that complies with PCI-DSS standards, implements encryption for data security, and offers fraud detection features. Additionally, ensure your website has an SSL certificate to protect sensitive customer information and regularly update your security measures to guard against vulnerabilities.

Payment processing times vary depending on the payment method and provider. Credit and debit card transactions are typically processed within a few seconds to a few minutes, while bank transfers (ACH) may take 1-3 business days. Some payment processors offer instant or same-day settlement options, but this can depend on your specific account setup and the payment provider’s policies.

Andrea Herrera Avatar
Andrea Herrera
Staff Writer
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Andrea is a retail expert writer at Fit Small Business, contributing to the payments section. Before joining Fit Small Business, she was an actuarial specialist and freelance writer. She also has experience helping online businesses with order and payment processing. Andrea has more than 11 years of experience writing online content on various topics ranging from marketing to business.