Payment processing is what happens from the moment a consumer makes an online purchase to the moment the money arrives in the seller’s account. Various stakeholders and components play a part.
Here are some of the most common questions regarding online payments.
1. What is a payment processor and how does it work?
A payment processor is a company selected by a merchant to process online transactions. This includes credit and debit card payments (e.g. Visa, Mastercard, etc.) and alternative payment methods (e.g. Alipay, WeChat Pay, etc.).
Payment processors offer a range of services for businesses to process online payments.
Some processors, like ECOMMPAY, are Visa/Mastercard Principal Members. This enables them to process online payments via credit and debit cards on behalf of the issuing bank. Direct acquiring means online transfers are more secure and convenient. Companies can accept payments through cards issued by different banks around the world with ease.
There are also payment processors like PayPal, who combine multiple capabilities into one platform. PayPal is PCI DSS compliant, enabling it to work with online businesses, but also offers consumers an online account linked to a digital wallet or bank card. It is not only a payment processor, but also a payment method.
2. What is a payment method?
A payment method is how consumers pay for goods or services online. Payment methods can be very diverse: bank cards, digital wallets, mobile payments, instant transfers, and dozens of other global and regional options. Because consumers can choose to pay in different ways, eCommerce merchants must offer a suite of tools enabling them to receive funds from the buyer.
There are several credit card processing companies in the market that process payments using the methods listed above. Usually, these companies offer a proprietary payment gateway and other customisable fintech solutions for secure, convenient online payments.
3. Which payment processor is better?
There is no easy answer to which payment processor is best. Each industry and each business working within that industry is different. Parameters, like target audience, geography, annual turnover, operational risks, etc., will vary.
Online payment processing requires a customised approach and flexible payment solutions.
Each online business will have its own payment processing requirements. It’s up to them to find the most suitable payment processor. Quite often, they choose to diversify risks by working with more than one processor. For example, a company operating in a local market with low turnover can process payments on its website using a standard payment gateway offered by a local bank. For a growing company looking to enter new markets and regions, this approach won’t work.
Online payment processing is like a river. It flows in different ways depending on the situation. Different payment landscapes result in different flows. Every juncture the river crosses requires a payment gateway. Merchants must familiarise themselves with payment processing terms and conditions in order to choose the most suitable payment processors for their operations across the globe.
4. Are Mastercard and Visa payment processors or payment systems?
The concept of a payment system is often confused with a payment processor. The two terms may seem similar, but in reality, they’re both part of the online payment processing chain linking the buyer and the seller. Card schemes, like Visa, Mastercard, and American Express, are payment systems. Alternative payment methods offer consumers a different way to pay. This includes mobile applications WeChat Pay and Apple Pay, for instance.
Payment processors, meanwhile, provide their clients with a payment gateway. The payment gateway makes accepting payments online fast, convenient, and secure. Payment processors create payment solutions incorporating all the various components of the payment ecosystem to address specific client needs.
5. Is PayPal a payment processor or a payment gateway?
PayPal is a global payment service provider. It has been on the market since 1998. 267 million people worldwide use PayPal digital wallets. Simultaneously, PayPal is the largest payment processor in the global eCommerce market. It is on par with giants like Google Pay, Apple Pay, and Amazon Pay. Like any other global company, PayPal has created its own ecosystem for both customers and sellers.
The company has its own payment gateway. This payment gateway is used for processing payments on behalf of large trading platforms, including eBay.