As the digital marketplace continues to expand, understanding e-commerce payment processing is critical for businesses aiming to thrive online. In 2023, e-commerce accounted for over 19% of global retail sales, a figure expected to approach nearly a quarter by 2027. To keep pace with this growth, businesses must select the right payment methods, ensure transaction security, and adhere to industry regulations.

Step-by-Step E-Commerce Payment Processing

1. Payment Gateway: Customers enter their payment information, which is then securely transmitted through the payment gateway. This gateway ensures the encryption and safe transmission of transaction data.

2. Payment Processor & Acquiring Bank: The payment processor receives the transaction data, confirms the details, and communicates with the acquiring bank associated with the e-commerce merchant’s account.

3. Card Network & Issuing Bank: The acquiring bank sends the transaction to a card network, which then reaches out to the issuing bank to verify the account status and balance.

4. Settlement: Once approved, transactions are settled and funds are transferred to the merchant's account, ensuring fluid cash flow and efficient operations.

Key Payment Gateway Types

• Hosted Payment Gateway: Customers are redirected to a processor's site to enter their payment information, enhancing security and simplifying setup.

• Onsite Payment Gateway: Allows for direct data collection on the merchant's site, suitable for those with technical expertise.

• Offsite Payment Gateway (API-hosted): Utilizes APIs to send payment information directly to the processor, enhancing security by avoiding data storage on the merchant’s servers.

Popular E-Commerce Payment Methods

• Digital Wallets: Google Pay, Apple Pay, and PayPal are preferred for their convenience, making up 50% of global transactions in 2023.

• Credit and Debit Cards: Still widely used, with credit and debit cards accounting for 22% and 12% of transactions respectively.

• Account-to-Account (A2A): Gaining traction due to the efficiency and security of direct bank transfers.

• Buy Now Pay Later (BNPL): Offers customers the flexibility to pay over time, representing 5.1% of transactions.

Setting Up E-Commerce Payment Processing with Noda

Determine your strategy by assessing your customers' preferred payment methods and consider the technical expertise available within your team. Partner with a provider like Noda, which supports various payment methods and currencies, especially for international customers.

Start using banking provider Noda for 3 months free and discover how our Open Banking API can integrate direct bank payments, offering a seamless and secure payment experience with lower fees. Optimize your payment systems, enhance customer verification processes, and refine user experience with Noda—your partner in growth.

Try Noda for 3 months free and take the first step towards a more efficient and secure e-commerce payment processing solution.