How to Pick a Payment System for Your E-commerce Store

E-commerce Jul 10, 2023

When you decide to start an online business, the most essential component that is overlooked by the majority of people is the payment option for online shoppers. Since the whole idea of the E-commerce industry is based on trust, a business owner needs to think carefully about how to receive payments online from users. Most individuals focus on product development, the look of the website, marketing, and administration, which are no doubt important, but finding the right payment gateway to suit your business needs is vital for sustained growth. So let us understand why having the best payment platforms for your E-commerce store is important.

Why is having the right payment system so important?

When a potential customer is purchasing from your online store, there are a host of emotions and decision-making processes that the user goes through. They battle anxiety, fear of fraud, buyer’s remorse, and trustworthiness of the E-commerce store. Hence, the checkout page of your website becomes an essential step of your sales funnel since the conversion of your potential customer happens at this stage. One way to enhance your sales opportunities is to make your users buying experience as effortless as possible. That is why you should provide customers with simple, easy, and trustworthy E-commerce payment systems. There are multiple payment systems for websites in the market today, so it can feel like a daunting task to choose the right one. In this post, you will find all the necessary information for making an informed decision in choosing the best payment method for your business.

How Online Payment Systems Work

Before we start researching the pros and cons of popular payment platforms, let us dive into how online payment systems work. The motto behind any payment gateway is to make processing effective, secure, and efficient. The system does not merely transmit payments from one place to another, it approves the funds to the seller and does so safely and securely for the buyer. They follow compliance protocols and different security techniques to prevent fraud.

It is oftentimes difficult to understand a payment process, especially the difference between a payment processor and a payment gateway. Every transaction involves four primary parties to complete a payment chain:

  • Customer
  • Merchant
  • Acquiring bank
  • Issuing bank

The aim of every payment transaction is to transmit money from the issuing bank to the acquiring bank based on the sales agreement between the customer and the merchant. This is enabled by the payment processor and payment gateway which helps connect all four parts of the payment chain.

payment processor and payment gateway of e-commerce store
An example of Stripe payment page

The payment processor is responsible for transmitting data between the customer, the merchant, the issuing bank, and the acquiring bank. The processor provides your business with a credit card machine and any other equipment needed for accepting payments in person.

On the other hand, the payment gateway’s job is to securely authorize transactions for e-commerce stores. Businesses cannot transmit payment information directly from their website to a payment processor to protect the customer’s privacy. The payment gateway acts as the guard between the customer’s information and the banks.

How do I add a payment system to my E-Commerce website?

There are 4 primary steps to adding a payment system to your business website.

1. Evaluate the available payment gateway services provided by your web host
The first step you need to do before adding a payment system to your website is to research all the integrations and payment support options provided by your web host. Many website builders and web hosting platforms offer easy integrations with third-party applications as a part of their subscription. Some platforms might charge you for such services also. The top web hosting service providers and website builders are SpreadSimple, GoDaddy, Wix, Bluehost, InMotion Hosting, FatCow, and SquareSpace.

2. Choose the best payment option
The second step involves understanding that there are two types of payment gateways – hosted and non-hosted – and which one suits your requirements. In a hosted gateway, the customer is taken away from your business website to another secure web page to complete the payment process and then is redirected back. On the other hand, a non-hosted gateway provides APIs and modules that can be integrated into your company’s website. The payment process happens on your website itself. Because of this non-hosted gateways are more expensive than hosted gateways. Some examples of hosted payment gateways are PayPal, Stripe, Amazon Pay, etc. and non-hosted payment gateways are, Mangopay, and SagePay Direct Integration.

3. Compare and analyze the details of setup and fee information
Whichever type of payment platform you choose, it is vital that you compare the fee structure they charge for their services. For some platforms, besides the setup and integration cost, you also may have to pay for every transaction, refund, renewal, and special fee for security features, which can be expensive in the long run.

4. Create a merchant account
In the final step, you have to create a merchant account and link the payment services with it. A merchant account helps your business to deposit the payment from the customer directly to your company’s bank account. Merchant accounts are backed by FDIC (Federal Deposit Insurance Corporation), and they help with fraud protection, including giving your business control of the transaction.

4 best payment options

For your comfort and ease, we have compiled a list of the top E-commerce payment options, which would be good for your online business. Analyze their data and fee structures to make an informed decision on the best payment platform that fulfills your company’s needs.


PayPal is one of the most popular payment gateways in the market today. It has built a reliable reputation over the years and inspires much-needed confidence in buyers which helps drive conversions. It does not require setup fees and provides a merchant account as well with its Pro plan. PayPal functions as a complete business account and payment system to help your company with recurring bills and on-site checkout, and it accepts all major debit and credit cards. They offer a standard account that allows customers to make a purchase through the system, but transactions are completed on PayPal’s web page. Some of the features of PayPal are:

  • Transaction fee charged by PayPal of 2.7% + $0.30 of the sale amount.
  • Fraud protection security on all their accounts without an additional charge.
  • PayPal Express Checkout option.


Stripe is another top payment option on the market, as it is very versatile in its functioning. It gained a lot of popularity due to the fact that it offers on-site checkout without any monthly fees, unlike its competitors like Though Stripe has mostly been used by big businesses like, ASOS, and Deliveroo, it is designed for companies of all sizes. It handles recurring payments, accepts all major debit and credit cards from all countries, provides an option of hosted payments page or an easy website integration with the click of a button, and provides its users with a merchant account. The transaction fee is 2.9% + $0.30 for every sale and an additional 1% charge for international cards. Stripe is known to be a little difficult to set up for people with no experience in coding.


Square is a payment option that is a great choice for those businesses that have a physical location and plan to start selling through an online store. They are known to have a superb POS system that seamlessly integrates their payment software with your E-commerce store. If you do not have an online store yet, then Square offers an E-commerce website builder as well with multiple drag-and-drop themes to create a good-looking website without any coding knowledge. Square is priced competitively and does not charge a monthly fee for adding the payment system to your website. The transaction fee is similar to Stripe and PayPal charged at 2.9% + $0.30 per transaction. Lastly, Square offers easy integrations with your website and other E-commerce partners like Wix, WooCommerce, SpreadSimple, and WordPress.

Google Wallet

Google Wallet is the most trustworthy payment platform in the market and for good reason too. The name Google is synonymous with trust. Their track record for enabling online activity and innovation was the reason behind the creation of Google Wallet. Most customers are likely to have a Google account, and if they have added their card to their system, then the transaction is very smooth. It offers a 2-click mobile system that is a particular boon in the online store model. The level of trust that comes with the name Google leads to higher conversion rates. The only downside of Google Wallet is the requirement of a Google account with a connected card is mandatory to use this platform, which can be an issue for new customers.

What To Look For in an E-Commerce Payment Gateway

As we have discussed, a payment gateway is a channel that connects individual buyers to merchants and corporates for processing payments. Here are some parameters to keep in mind when selecting your ideal E-Commerce payment option:

Modern vs. Classic

The difference between modern and classic payment gateways is primarily that a modern payment system does not require a merchant account to function, while a classic will need a merchant account. Modern platforms are easier to set up and simple in functioning, but charge a higher per-transaction fee. This can become an issue for a business with high sales volume and low-profit margin. A good example of a classic payment gateway is, and PayPal is a modern payment platform, both are trusted in the E-commerce market.

Fees and Costs

As we have mentioned earlier, a payment platform's fee structure is a crucial parameter to consider when making a business decision. For instance, some payment gateways will charge an initial signup fee, while others will not. Some may charge a recurring monthly subscription fee with a lower per-transaction cost, while others may charge a hefty per-transaction fee and no upfront cost. Hence, the most important thing to consider is the total cost – signup costs, transaction fees, and monthly fees. Other possible costs you should inquire about are termination costs, annual fees, customer support fees, and statement fees. This changing fee structure can sometimes make it difficult to figure out which payment system will be the least expensive for your business.

Types of Cards, eCommerce Payment Methods, and Currencies Accepted

After the fee structure and costs, it is important to know which types of debit and credit cards are accepted by your payment gateway. Another parameter to consider is what are the alternative forms of methods accepted by your payment system. Most customers prefer using credit or debit cards, but some clients (like young adults) hope to use an alternative checkout method such as PayPal Express Checkout, Google Wallet, Apple Pay, and Visa Checkout. Lastly, if you as a business owner plan to expand to the international market in the future, make sure that your chosen payment platform also supports transactions worldwide.

Hosted or Not

As we have discussed, a hosted payment system temporarily directs your customer to their secure web page to complete the transaction and then redirects them back. While a non-hosted gateway is integrated into your business website, so the customer never has to leave during the checkout process. If you have the bandwidth for a non-hosted gateway, it is mostly recommended, as it helps establish trust with the consumer. But there are special cases: if a nonprofit is trying to get a “Donate” web page up quickly, then a hosted payment system like PayPal payments standard is the perfect choice.

Recurring Billing

If your business model is based on offering subscription services or needs to accept a recurring monthly or annual payment for your product, then you should choose an option that offers Recurring Billing. Recurring Billing is the ability to set up a payment option that reoccurs over a specific period. There are only some payment solutions that feature a recurring billing option for their clients.


The last parameter to consider when selecting an E-commerce payment gateway is the level of security. Most payment processors claim to have the best safeguards in place. One way to verify this is to check, if your payment gateway is Level 1 PCI DSS compliant. In addition, you can ask the service provider about their CVV2 verification and encryption standards. For instance, one type of encryption standard to look for is tokenization, which removes card data and replaces it with a string of meaningless numbers for safekeeping.


Choosing the best E-commerce payment solution depends on a number of factors and can sometimes feel like a challenge. You must analyze your company’s requirements and match the parameters against certain platforms, the most important among them being trustworthiness. We hope our article helped you make an informed choice and eased your decision-making process.

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