Due to the covid 19 pandemic, online shopping has changed forever. These days, most of the people prefer to shop online. Online payments are growing 104 percent annually. Therefore, most of the people prefer to pay online and if the preferred payment methods are not available, they just give up on that online store. Therefore, your e-commerce must accept online payments.
You also need to make sure that people trust your online store, otherwise they won’t enter their credit card/PayPal details. There are different types of online payments preferred by online consumers. As a merchant, you have to keep everything in mind so that customers don’t abandon their shopping cart and leave your website.
What is online payment?
Online payments are basically online payments to a merchant’s bank account or any other wallet. There are many options when it comes to online payments such as Paypal, Apple Pay, Google Pay, Net Banking and many others.
To understand online payments, you must be fully familiar with these terms:
Payment gateway
It is basically a software application that enables and executes payments on a merchant’s website. Payment gateways accept or reject the payment method you use by sending information to the server. This helps you to continue with the payment or decline the greeting. In case your payment has been rejected by the payment gateway, please verify your payment method and try again.
payment processor
Basically, it sends the information to the card server to check if there is any fraud and check whether the customer’s account has the required balance in their account or not. After verification, the payment continues or is rejected. If it is rejected, check the balance or change the card and continue.
business account
It is basically a bank account created for business purposes that accepts online payments from users. To accept payments, merchants previously had to sign up for a merchant account, but now they can also do so through a payment aggregator, which is third-party software.
How does online payment actually work?
- The customer reviews the items and selects one, then adds it to the cart and goes to the checkout page.
- On the checkout page, choose a payment method, let’s say it’s a card, and enter your card information.
- The transaction information is then transmitted to the payment gateway, which transmits it to the payment processor.
- The payment processor transmits it to the card server to check for fraud and check the availability of the requested amount in the customer’s bank account.
- The card network then sends data to the bank’s server to ask it to release funds from the bank account.
- This information is then returned along with the funds and the payment is successful.
Types of online payment methods
The online payment network is expanding more and more. To get high approval rates, you need to make sure that you offer almost all types of payment methods and that you are flexible enough to offer them to local banks as well. Here is a list of the most used payment methods:
Card payment
Most customers nowadays pay with a credit or fake card. Statistics say that more than 60% of people prefer to pay by card. When a customer uses a card to pay, the merchant must pay the transaction fees. You may have noticed that when you buy something, the merchant asks you to pay a certain percentage more when you pay with a card.
electronic checks
Although credit cards are more convenient to pay online, they charge large transaction fees. To prevent this, electronic checks were introduced. Electronic check payments are similar to cash payments. After the buyer’s approval, the money is sent to the merchant’s server. There are no exchange fees, and even if there are, they are usually very low.
online wallets
Mobile wallets are electronic wallets that store user credentials and help them pay in a fraction of a second. Every time they have to pay, they don’t have to ask for their bank details or card number. They can simply use their mobile wallet to pay for the transaction. Mobile wallets are widely preferred and loved due to the convenience they bring with them.
email invoices
Once you have made your purchase, you will receive an email with a link. You can make the payment with just a few clicks. It’s just as convenient as mobile wallets and saves time.
Disadvantages of accepting payments online
- When a merchant accepts payments online, the cost of fraud increases. There are many apps on the market that show a successful transaction message, but the transaction has not started yet. Due to this, the trader sometimes faces heavy losses.
- Technical problems are the most common problems when it comes to online payments. This can lead to cart abandonment or lost sales. The customer may get frustrated and not return.
- There are huge service fees that apply to online payments for merchants. This reduces the profit margins of the traders, leaving them with lower profits than they actually are.
Advantages of accepting payments online
- Accepting payments online allows you to reach a broader, global audience than is possible with checks or offline payments. This increases the profit and reach of your online business.
- When you accept payment online, you improve the customer experience because online payments are seamless. Especially after the pandemic, people have completely switched to online payment methods, preferring to pay online instead of cash.
Conclusion
After the pandemic, digitization has become one of the most important things. People now prefer to pay online rather than offline or in cash. Today, a merchant that accepts online payments is generally preferred. So it is better to start accepting online payments to avoid cart abandonment.
Also Read: Employee Payment Management
Categories: How to
Source: HIS Education