Introduction to online payment systems for ecommerce

One of the key parts of setting up an ecommerce business is working out how you’re going to take payments from your customers. We take a look at how you take payments on marketplaces, and the different online payment systems you can use if you’re running your own ecommerce website.  

Online payment systems for eBay, Amazon and Etsy

eBay, Amazon and Etsy all have their own restrictions for taking payments; however, when you begin selling online this can make it a lot easier to get started.

eBay: To sell on eBay you have to offer PayPal. Alongside this you can offer your buyers the option to pay by cheque, postal order, credit card (if you have your own processing capability), or Escrow. 

Amazon: The only way to take payment on Amazon is through it’s own system, Amazon Payments - this enables buyers to pay using their debit and credit cards. 

Etsy: Etsy’s main payment method is Direct Checkout, which lets customers pay with credit or debit cards, Etsy gift cards, Apple Pay, and PayPal (you don’t have to have your own PayPal account). 

Payment gateways and merchant accounts

To process online payments on any other ecommerce platform you will use a payment gateway and a merchant account:

Payment gateways: Either authorises or declines the payment transaction from a credit, debit card or an online payment such as PayPal. Services such as SagePay are just the payment gateway meaning you would need to set up your own merchant’s account.

Merchant account: Where funds are held before they’re deposited into your bank account. PayPal and Stripe are a couple of the payment services that offer the payment gateway and merchant account combined - usually an easier option for smaller online sellers as a merchant account can be difficult to set up.

Find out more about merchant accounts here. 

Hosted and non-hosted payment gateways

The two most common types of payment gateways are hosted or non-hosted.

Hosted: Redirects your customer away from the checkout page to a securely ‘hosted’ payment page. Once payment has been taken the customer is returned to your website. Hosted payment gateways are usually more suited to small and medium businesses because they’re easier to set up, cost-effective and secure. Because the payment gateway takes the payment you have less responsibility for the security of important data, so you can meet the Payment Card Industry Data Security Standard. The main downside to hosted payment gateways is that the customer is taken away from your website, which may distract them.

Non-hosted: Customers will be able to enter their payment details directly into your website. This is often a more expensive and complicated option, where you are completely responsible for protecting card details and data, therefore it’s most popular among larger businesses. 

For more information about different types of payment gateways take a look at this article. 

Popular online payment systems

When you open a shop on Shopify it will come with Shopify Payments (powered by Stripe) already set up by default. Shopify, as well as other ecommerce platforms such as WooCommerce and Magento, are also all compatible with a wide range of payment gateways.

PayPal
PayPal is one of the best known online payment systems - it can add credibility to your ecommerce website because it’s a familiar, trusted brand. People also prefer it because they don’t have to enter their card details again.

PayPal offers a payment gateway combined with a merchant account so there’s no need to set up your own. It has three options for accepting online payments; Standard, Pro and Express Checkout. With PayPal Standard, shoppers are redirected to the PayPal website to pay, while Pro takes payments directly on your website, and Express Checkout can be added to your existing checkout if you already have a solution for processing card payments. Shopify and WooCommerce only support Pro and Express. 

Amazon Payments
Amazon Payments on your own website lets buyers use the credit card, debit card, bank account, or Amazon Payments Account balance, that’s already linked to their Amazon account. Amazon is a payment gateway and merchant account, and it has the advantage of being a familiar brand, which will reassure some customers, but it could also distract customers from your own brand. 

Worldpay
Worldpay is an online payment gateway that accepts all major credit and debit cards, as well as PayPal, in over 116 currencies. You can either use a Worldpay hosted payment page, or an integrated payment page. If you don’t have a merchant account, Worldpay also helps you to set one up.

Stripe
Stripe was created for developers, which can make it seem intimidating for non-developers, however, it’s simple to use as a plug in on an ecommerce platform. Stripe offers a customisable payment form that can be embedded into your website. It also combines the payment gateway and merchant account, so you don’t need your own merchant account.

Online payment systems: Summary

• eBay, Amazon, and Etsy have their own payment systems or requirements. 
• You need a merchant account and Payment gateway to process payments. For smaller ecommerce businesses, a payment system that combines these is usually easier. 
• Hosted payment gateways are easier for smaller ecommerce businesses because you don't handle the card details, and they're easier to set up. 
• Most ecommerce platforms offer a number of payment gateway plugins: Shopify, WooCommerce, Magento.