Woman entrepreneur processes online sale with product in hand
From merchant accounts to third-party payment processors, there are several methods of accepting e-commerce payments at a small business. — Getty Images/amenic181

As an e-commerce business owner, you'll have to be able to accommodate digital payments. There are many factors to consider, from the type of payment options you’ll offer to the kinds of fees you're willing to incur. Here's how to accept e-commerce payments for your online shop.

Payment methods for e-commerce shops

Merchant accounts

Merchant accounts, which are bank accounts used to accept e-commerce payments, are separate from personal and business bank accounts. These accounts are considered a line of credit due to the fact that they cover fees, such as transfer fees, that aren’t covered in a typical bank account.

Although you should always do your research first, setting up a merchant account at the same bank where you have your business accounts set up can be beneficial in earning perks and benefits from your bank. Oftentimes, there are incentives and bonuses you can receive by opening up a merchant account at a bank, which can have long-term advantages for your business.

Third-party payment processors

Due to their simple, easy-to-use functionality, third-party payment processors, such as Venmo, Stripe, PayPal and Square, have become common options, particularly for small businesses newly accepting card-not-present transactions. Although you often incur more costly fees in addition to the flat rate and have fewer protections, many businesses use third-party processors as a stepping stone, due to the quick and relatively low effort set up.

[Read: How to Accept Google Pay at Your Business]

Unlike when you open a merchant account, you don’t need to sign a long-term contract with third-party payment processors. They don’t normally require a credit check or extensive information regarding your business model, so you can begin utilizing these services much quicker.

E-commerce platforms

E-commerce platforms can make your business more accessible to a larger audience by allowing you to accept a wide variety of payment methods, such as all major credit cards, gift cards and more. In order to cover the online payment processing fees, e-commerce platforms such as Amazon, eBay, Etsy and Shopify often charge a monthly fee in addition to transaction fees. This can make e-commerce platforms a more costly option depending on your sales.

Setting up an e-commerce store can be done in two ways — either by creating a store from scratch or by adding e-commerce capability into your existing website. An e-commerce platform requires your employee identification number (EIN), as well as your banking information in order to receive payment.

[Read: A Complete Guide to Payment Gateways]

Setting up an e-commerce store can be done in two ways — either by creating a store from scratch or by adding e-commerce capability into your existing website.

What is a payment gateway?

A payment gateway is a software application, such as PayPal Payflow, Amazon Pay and Authorize.Net, works behind the scenes in conjunction with a merchant account, e-commerce platform or third-party payment processor and obtains the authorization of a transaction from your bank. The software encrypts customers’ information to keep it safe and confidential, and forwards it to the credit card company to be approved or denied.

Payment gateways are already built into certain payment processors like PayPal, but for other e-commerce payment methods, you may need to choose one yourself. It’s important to note that gateway providers often charge a monthly fee, in addition to per-transaction fees.

[Read: A Complete Guide to Payment Gateways]

Choosing the right payment gateway for your e-commerce shop

With so many options for payment gateways, there are some important factors to consider to find the best fit for your business:

  • Availability: Take a look at your customer’s location and make sure the payment gateway you choose is available to that market. Not all providers are supported in every country, so confirm with the provider before purchasing to ensure you don’t cut off an entire market.
  • Transaction fees: Payment gateways incur fees, typically per transaction processed. Each gateway will incur different fees based on factors like location, payment method and transactions per month. Consider the fees you would incur by looking at your customer base and observing their purchasing habits.
  • Recurring payments: Some e-commerce businesses will require the ability to set up recurring payments for things like subscription services, recurring bills and membership plans. Not all payment gateways have this ability, and some can only do the bare minimum when it comes to recurring payments, so you’ll want to choose accordingly based on your business’s needs.
  • Charges and fees: Small businesses in particular will want to consider the number of fees that are incurred by different payment gateways. Some charge non-transaction fees that can add up, including setup fees, account maintenance fees and more.
  • Security: Customers want to be sure their personal data will be protected from fraud and theft when making an online purchase. To make sure your payment gateway is secure for customers, choose a provider that follows security standards by maintaining Payment Card Industry Data Security Standard (PCI DSS) compliance.

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