Ecommerce Payments Explained

Online shopping has changed the way we buy. Behind the scenes, ecommerce payments keep everything moving. They’re what turn a click into a sale.

But what exactly are ecommerce payments? How do they work? And what should businesses know to make the most of them? Let’s break it down.

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What Are Ecommerce Payments?

Ecommerce payments are digital transactions that happen when someone buys something online. Instead of handing over cash or swiping a card in a store, the customer pays through a website or app.

The money moves electronically—from the buyer’s account to the seller’s. This can happen in seconds, but it involves a lot of moving parts.

How Ecommerce Payments Work

Here’s a simple overview:

1. A customer adds items to their cart and goes to checkout.
   
   
2. They choose a payment method—card, open banking (pay-by-bank), digital wallet, etc.
   
   
3. The payment processor handles the transaction behind the scenes.
   
   
4. The money is authorised, settled, and transferred to the business’s account

It all happens fast. But there are layers involved—payment gateways, processors, banks, and sometimes fraud protection services.

Payment Methods in Ecommerce

There’s no one-size-fits-all. The right payment methods depend on your customers, their age, and where they live. Here are the most common types:

1. Credit and Debit Cards

Still the most widely used– making up 27% of global e-commerce transactions in 2024. Easy, familiar, and accepted almost everywhere. 

But they come with higher fees (such as interchange and scheme fees), chargeback and higher fraud risks. Over 70% of all fraud comes from online card transactions. 

2. Digital Wallets

The most popular payment method–by 2025 will account for over 52% of global e-commerce transactions. They are the likes of PayPal, Apple Pay, Google Pay, and the others. 

Customers store their card or bank details in a secure app and pay with a tap or face scan. Great for mobile users and quick checkouts. 

Security is a key advantage, especially compared to cards. Digital wallets use multi-factor authentication, biometric recognition, and encryption to keep transactions safe. 

3. Pay-by-Bank

Money moves directly from the customer’s bank to yours via the ecosystem known as open banking. Banks share data with licensed open banking providers via secure APIs, making this payment method possible. It’s all secure and regulated by PSD2.

In fact, pay-by-bank is one of the safest payment methods online. Its other benefits include: lower fees, as no card networks are involved, so no interchange/scheme fees, no chargebacks; better user experience, and stronger biometrics security. 

Why Ecommerce Payments Matter

Payments in e-commerce are more than a technical step. They affect your business in real ways:

• Conversion rates: A slow or clunky checkout will lose sales. Customers will not go through with the payment because of friction and will go to the rival.
  
  
• Customer trust: Secure and smooth payments make people feel safe. Bad UX means that customers may never come back.
  
  
• Cash flow: How fast you get paid can impact your operations. Slow payments will create difficulties with cash flow.
  
  
• Fees: Payment processing costs add up quickly, especially from the card networks, eating into your revenues.
  
  
• Global reach: Offering local methods and multi-currency  helps reach more markets and more interested customers. 

Getting payments right helps your business grow—and keeps your customers happy.

Choosing the Right Payment Options

Here are a few things to consider:

1. ‍Know Your Customers

This is absolutely crucial. Where are they located? What methods do they trust? For example, cards are big in the US, but many European shoppers prefer bank-based options. Some countries skip cards entirely.

2. Think Mobile-First

A lot of shopping happens on phones. Mobile-friendly payment flows reduce friction and boost conversions. In fact, digital natives, Millennials and GenZs, now shop mostly on their phones. This means they pay there too! Make sure your checkout is optimised for mobile. 

3. Offer Multiple Options

One payment method isn’t enough, especially if you’re serving a wide clientele of multiple demographics.  Give customers choice—but not too much. Keep it simple, clear, and tailored to your market.

4. Watch the Fees

Every provider takes a cut, and if you’re using card payment–card networks take a cut too! Understand what you’re paying, and see if alternatives can lower your costs. You can also negotiate with your provider (but you cannot negotiate with card networks).

Role of Payment Gateways

A payment gateway is the tech that connects your website to the payment system. It encrypts payment data, collecting it from the merchant’s website or app, and securely routes this data to the payment processors and appropriate parties. 

Without an online gateway, you can’t accept payments online. Some gateways also handle fraud checks, currency conversion, and integrations with your ecommerce platform.

Fraud and Security

Online payments come with risks. You’re not checking IDs or seeing the card in person. That makes ecommerce a target for fraud. Security builds trust—and protects your bottom line.

This is especially the case with card payments. 70% of all payment fraud comes from online card transactions (especially triangulation and social engineering fraud). To stay safe:

• Use strong authentication, like 3D Secure, multi-factor verification
• Choose providers with built-in fraud tools.
• Avoid storing sensitive card details.
• Monitor for chargebacks and disputes.
• Choose payment methods that are inherently safer: open banking, digital wallets. 

Payment Processing Fees

Fees can eat into your margins. Here’s what to look out for:

• Transaction fees: Charged per payment, usually a percentage + flat fee.
• Card network fees: These are interchange and scheme fees – and they cannot be negotiated as card networks set them. 
• Monthly fees: Some providers charge for access or maintenance.
• Cross-border fees: Added when customers pay in a different currency.
  Refund and chargeback fees: You may still pay even if the sale falls through.

Compare providers and look for transparent pricing. Small savings per transaction can add up fast.

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Cart Abandonment and Payments

A big chunk of online shoppers abandon their cart at checkout. In fact, as much as 70% of all carts are abandoned according to the latest Baymard Institute study. 

One of the top reasons? Payment issues  Common blockers include limited payment options, complicated checkout processes, security concerns, lack of mobile optimisation, or surprise fees at the last step. 

But all these problems can be fixed with a good provider. Fixing your ecommerce payment flow can reduce abandonment and drive more sales.

Ecommerce Payments Across Borders

Selling internationally? Great—but payments can get tricky. Different countries have different norms, regulations, and preferred methods. And different languages – also something to consider for creating a checkout. What works in one market might flop in another.

To go global with ease:

• Offer local payment methods
• Display prices in local currencies
• Create checkout pages in local languages
• Use providers that support cross-border transactions
• Be clear about fees, taxes, and shipping costs

The smoother the experience, the more likely customers are to trust you and complete the sale.

What to Look for in a Payment Provider for E-Commerce Payments 

Choosing the right provider is a big deal. Here’s what to consider:

• Ease of integration: Will it work with your ecommerce platform, or website? Do they offer APIs, plugins, any other types of integration?
• Speed: Are payments processed and settled quickly? Especially in your regions and countries.
• Cost: Are the fees competitive and transparent? Do they offer cost-efficient payment methods like open banking (pay-by-bank)?
• Coverage: Can you serve customers in the regions you target? In their local currencies, payment methods and languages!
• Support: Is help available when something goes wrong? You can check TrustPilot reviews to access the quality of support the provider is offering. 
• Security: Are fraud tools and compliance built in? Fraud monitoring, encryption, multi-factor authentication…

Take the time to compare. The right setup can boost sales and reduce headaches.

Final Thoughts

Ecommerce payments might happen in the background, but they have a huge impact on your business. They shape the checkout experience, affect your costs, and determine how fast you get paid.As online shopping continues to grow, so does the importance of getting payments right.

Understand your options. Optimise your checkout. Offer methods your customers trust. And choose partners who help you stay secure, competitive, and ready to scale. Because when ecommerce payments work smoothly, everyone wins.