The vast majority of payments for an online retailer come from debit and credit cards. There's currently no other widely accepted payment method that offers the combination of speed and convenience for both retailers and customers while also offering a layer of security. All online merchants have to accept credit and debit cards if they want to capture any noticeable amount of market share and be successful in the long term. Payment acceptance and processing is, however, an area that is unfamiliar to many new ecommerce store owners. While many have experience or familiarity with the products they sell, they're less likely to be versed in the intricacies of credit card processors and other considerations.

There are plenty of different options available to ecommerce retailers, and the best fit has a lot to do with the individual characteristics of a business and personal preference. Here are some definitions of commonly used terms in the payment acceptance and processing field, followed by a look at the different options available to retailers:

  • Merchant account: A merchant account is a type of bank account used by ecommerce and brick-and-mortar businesses to accept credit and debit card payments. Establishing a merchant account can involve an in-person session at a bank or credit union, where business information is vetted by an employee of the institution. Payment processors can also be directly involved in the setup and use of a merchant account, but this isn't required. Fees are often a component of a dedicated merchant account.
  • Payment gateway: The gateway allows an ecommerce store to pair with the merchant account and lets all the individuals and organizations involved successfully complete a transaction. A remote payment via credit or debit card requires the participation of a variety of different parties beyond the buyer and seller, possibly including the banks of both sides or the card issuer in the case of a credit card. Having a gateway in place facilitates the purchase. Payment gateways also commonly involve a fee of some kind.
  • All-in-one solution: This system allows businesses to combine a merchant account and a payment gateway into a single platform. An example of an all-in-one is PayPal. They all allow for quick and easy setup. Sometimes, shoppers will have to be directed off of an ecommerce website to a separate payment processing page to complete a transaction.
  • Simplified credit card processor: Similar to an all-in-one solution, a simplified credit card processor also integrates into an ecommerce store and can provide a seamless experience for shoppers.

The approaches listed cover the realm of effective payment processing options for new ecommerce stores. The right type of processor to use comes down to a variety of factors, with some of the most important being ease of setup and use, payment of one-time and monthly fees, customer expectations, and the level of support and troubleshooting offered.

The merchant account and payment gateway combination likely offer the highest level of customer service to new merchants, something that can be useful for those inexperienced with the field. This traditional method also means fees for both the account and the payment gateway, although these may be mitigated or waived in some - but certainly not all - instances. In general, security rules and customization are more extensive with this combination. However, those two attributes may not be at the top of a new ecommerce retailer's list. Additionally, it will take at least a few days to get a new account and gateway set up as officers from the relevant institutions review relevant documents and connect the gateway, account and store.

The all-in-one solution is popular in part because it's been shown to be a preferred choice of online shoppers: PayPal, the largest provider, processes a majority of all online transactions. The basic options offered by this and other all-in-one solution businesses don't charge monthly or startup fees except for additional components that are specifically added by users. They're also easy to set up. The only cost paid to them for a basic setup is transaction fees. A downside of these processors is that they may require a customer to visit a separate page for transactions, which can be a jarring experience for some visitors.

Simplified credit card processors, like Stripe, are also easy to set up and can begin accepting payments in just minutes. Additionally, they are inexpensive, have rates similar to all-in-one solutions and often a complete lack of any setup or monthly fees. The downside is that support can be more time-consuming and often doesn't occur in real-time, but instead over email or through troubleshooting manuals.

Businesses should consider the advantages of drawbacks and choose an option that makes the most sense for them.

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