E-commerce payment systems explained from A to Z

Setting up a payment system for an e-commerce site is a must, but it can also be very intimidating for someone whose job is not. The good news is that in the space of 10 years, online payment solutions have become incredibly simplified and diversified. It is now possible to set up an online payment without advanced technical knowledge and in just a few minutes. This article aims to offer you a complete but simplified guide to understanding online payment to an e-merchant.

Contents

  • Understand the overall functioning of the online payment process
  • The risk of credit card fraud
  • The different online payment solutions
  • Payment module installation process
  • Payment ergonomics
  • What alternatives to online payment?
  • Best practices for paying for an e-commerce site
  • In conclusion

Understand the overall functioning of the online payment process

Online payment means a transfer of electronic money on the order of a customer using a form accessible on a website or mobile application. As a rule, it is carried out by means of a bank card.

The simplified payment process is structured according to the following steps:

1- The user wishes to make an online purchase from their basket. He clicks on a button which will redirect him to the server of the payment service provider (PSP).

2- At the same time as the internet user is redirected to the payment page containing the form, information is also transmitted from the e-commerce site to the PSP. this information is encrypted by means of the SSL protocol, that is to say, that this information – for those who do not have the encryption key – resembles a series of letters and numbers without meaning.

3- The PSP, therefore, deciphers this information which is the basic data necessary for recording the transaction: the amount of the transaction, possibly details of the purchase, name and address of the buyer and of course identification of the seller.

4- Once the payment has been recorded (and possibly analyzed by means of algorithms for detecting fraud attempts), the customer is redirected to the e-commerce site. The PSP signals to the site that the transaction has been carried out by calling a specific address so that the system – e-commerce platform and statistical monitoring system – of the e-merchant records the sale.

More and more often, an intermediate stage which is now well known is involved: 3-D Secure verification. 3-D Secure is a secure Internet payment protocol developed by Visa and MasterCard to reduce the risk of Internet fraud. Its purpose is to ensure, during each online payment, that the card is used by its real holder thanks – for example – to the sending of a code by SMS or the verification of a random code – called token – displayed on the customer’s card for the most secure solutions.

The risk of credit card fraud

Nowadays, fraud detection systems use machine learning algorithms. The fraud rate is around one fraudulent transaction per thousand. The most widely used mathematical method for classifying large amounts of data is a supervised binary classification. Detection models exploit complex correlations between a large number of variables. Several classes of algorithms are used which are then associated with the detection of statistical anomalies with respect to a standard.

The different online payment solutions

When the time comes to add a payment system to its website, several solutions are available to e-merchants.

He can turn to a banking establishment which will offer him to sign a VAD (Distance Selling) contract then which will give him a payment solution either in the form of payment modules for the most common platforms, in general, Woocommerce, Prestashop, Magento, either in the form of documentation with web services (API), i-e a set of codifications to be integrated into the site code by hand by a PHP developer.

The advantage of the banking solution and its PSP is generally the moderate amount of transaction commissions, of the order of a few cents often declined between a fixed part and a variable part of 0.3% for example.

The disadvantage of going through a PSP of a large bank is the relative slowness of the process: you must make an appointment with an advisor, explain your project, provide supporting documents, wait for limitation periods, wait for obtaining access to the payment system and then set up the module.

The other solution, which I always favour when launching an e-commerce store on a human scale, is to go through an independent provider. the best known is Paypal but the amount of commissions charged is in my opinion prohibitive to make it your main system.

Stripe is a great alternative. The system is accessible in a few minutes and your site will be able to receive the first payments within 15 minutes. You will then have to provide supporting documents to be able to collect payments and prove your identity, of course. the amount of commissions is a little higher than at a traditional bank but quite moderate. The technical implementation is simplified as much as possible thanks to turnkey and free Woocommerce or Prestashop modules.

Payment module installation process

On WordPress, you must go to the “Extensions” tab and then search for the extension you wish to add. Install the plugin and activate it. It must then be configured with basic information. You will first have to create an account with your PSP which will give you unique keys, usually a product key and a test key. You will need to enter these keys in your WordPress plugin.

The classic settings are of different types:

– the appearance of buttons and payment forms;

– currency, the country accepted…

– tax rates and classes (generally VAT)

– actual transactions during the purchase or during the shipment of the package

– thank you page once the transaction is completed …

You can then make fictitious payments using a test card whose number will be given to you by the PSP. Once everything is in place, you can then move on to the final production environment.

Payment ergonomics

In a perfect world, and giants like Amazon have understood this, the best payment system is one that allows payment in one click. This technology is however accessible to e-merchants to a certain extent.

Most e-commerce sites will ask you to create a customer account and to indicate your postal address, telephone, name, first name. The bare minimum for the delivery of purchased goods. These steps are not always mandatory.

If you market virtual products (ebook, videos, coaching etc…) or the hotel industry for example you can completely offer a form reduced to its strictest minimum: card number, date, CVC code and an email. Stripe offers the option to activate the recording of payment information for a future purchase which can be made with one click.

To activate this payment form reduced to its strictest minimum you must use a specific WP Stripe module developed by an independent provider but which works very well.

What alternatives to online payment?

Online payment is dominant for practical reasons but there are alternatives. The good old payment by check is still valid. At Prestashop or Woocommerce, you can activate it using an add-on. It is preferable to offer this option because around 5% of Internet users still prefer to use this method of payment which is safer for them.

Best practices for paying for an e-commerce site

It is advisable to offer several payment solutions to satisfy users. Some customers only order with Paypal that they consider safer. It can also happen that the payment gateway is temporarily broken (rare all the same today) and in this case offering an alternative is saving.

The lack of means of payment is the 3rd cause of abandonment of a basket on an e-commerce site behind the excessive delivery costs and the search for a last-minute promo code.

In conclusion

Online payment has become safer and easier to set up. The configuration is now relatively simple if you use a reputable e-commerce platform. However, you will have to test your purchasing process carefully in order to simplify it as much as possible and to be sure to follow an exact statistical follow-up of the steps to identify the one that causes a dropout rate that is too high.

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