Global e-commerce sales brought in $3.914 trillion worldwide in 2020. With massive companies like Amazon and Alibaba in the space, competition is tough and margins are thin. Amazon owns 39% of all U.S. e-commerce sales, while Alibaba owns 58.2% of e-commerce sales in China.This is exactly why e-commerce credit card processing is so important for online business owners. As experts note, turning a profit in e-commerce is hard. Small business retailers must execute properly in the online marketplace to compete with the "bigger fish" like Amazon. That begins with taking care of your customers and making the shopping experience seamless. You can start by making sure the checkout experience is straightforward. You'll need to integrate an e-commerce platform to do so. You can’t just choose any merchant service provider (MSP) and integrate the solution with your platform. You have to partner with an e-commerce credit card processing company that works to ensure your bottom line. In this article, you'll find a complete guide to e-commerce credit card processors that you can integrate into your online store. We'll walk you through how to process e-commerce payments, the different payment methods you can offer customers, and the fees associated with doing so. We also provide you with the best credit card payment processing service for online transactions.
How Does E-Commerce Credit Card Processing Work?
For e-commerce credit card processing, many companies get a merchant account — a type of bank account that enables you to accept online payments. You have to apply for a merchant account with a bank or processing company. Most merchant account providers allow you to accept credit and debit cards. They also support most card networks, such as Visa, Mastercard, Discover, and American Express. Fees usually include:
Termination fees, should you cancel
Long story short, it can get expensive. Additionally, a merchant account uses a payment gateway — a service that connects your e-commerce store with your payment processor. It ensures a secure financial network for the customer. A payment gateway checks the validity of cards, determines the customer’s issuing bank, encrypts numbers, and authorizes (or declines) transactions.E-commerce credit card processing can get complex. Third-party payment processors, such as Nadapayments, have become more popular because they aggregate the whole process into one platform. It makes life easier for you and your clients. Third-party MSPs streamline e-commerce credit card processing by:
Removing the need for an individual merchant account: Third-party e-commerce credit card processing providers use one merchant account to represent different merchants.
Removing the need to set up a payment gateway: Their service includes this.
Only paying as you use the processor: Note you still have to pay e-commerce credit card processing fees, which can eat into your profits.
Provide you with a virtual terminal and point-of-sale system: This allows you to do things like track inventory and print financial records for tax purposes.
How Are E-Commerce Credit Card Processing Fees Calculated?
Since third-party payment processors have become increasingly popular, it's important to understand how their fees work. While these solutions simplify the task of accepting payments, a lot still goes on to make sure funds transfer securely and efficiently. The first thing you need to know is your effective rate, otherwise known as your total fee. This rate takes into account everything and includes all fees plus the markup you pay your payment processor. Contained within your effective rates are individual e-commerce credit card processing fees:
You pay an interchange fee to the card-issuing bank.
You pay an assessment fee to the card brand. Note: You could simply pay a pass-through rate, a pricing model that combines interchange and assessment fees. If your MSP charges a pass-through rate, make sure they don’t mark up the price unnecessarily.
You may also pay cancellation fees when a transaction is voided. You could still pay fees even if the customer returns the item and/or asks for a refund.
You could even face rate increases, which you shouldn’t allow since fees are a percentage of each transaction and naturally rise with your prices.
You may pay monthly fees, hidden surcharges, and other fees if you have a complex multi-tiered plan.
As the merchant, you may have some wiggle room when it comes to negotiating fees. While interchange and assessment fees aren’t that negotiable, ask about voided transaction fees and about reducing fees when you have to refund a customer. Payment processing companies typically don’t need to charge fees in such instances.
How Much Are E-Commerce Credit Card Processing Fees?
Pricing structures can vary between processing providers. But e-commerce credit card processing fees usually exceed in-person card processing fees. MSPs charge more because of the higher risk of fraud with online payment. Below is the pricing structure that major payment processors use for their processing fees:
Third-party e-commerce credit card processing services often apply an additional monthly subscription cost. These can add up to an extra $300-$600 per year. While these transaction fees may not seem like much, they can cut into your profits and your bottom line.
Why Are Processing Fees Important?
According to a TSYS consumer study, nearly half of online shoppers prefer making purchases with a credit card.
Credit cards are the most popular payment option, beating out debit cards and PayPal. Furthermore, customers who do use a credit card tend to spend more. As an online merchant, lowering your e-commerce credit card processing fees is crucial to greater success. Consider this example:
Your e-commerce store achieves $1 million in revenue, with 75% ($750,000) coming from credit card purchases.
On that $1 million in revenue, your net margin is 10%. You have $100,000 in profits.
However, you pay an average of 3.3% per card transaction in processing fees. On $750,000 in purchases, that equates to $24,750 per year.
The $24,750 comes off your bottom line. However, the best e-commerce credit card processors allow you to waive processing fees entirely, instead passing them onto the consumer.
Nadapayments — The Best E-Commerce Credit Card Processor Available
Nadapayments is a service that saves you 100% in processing fees, meaning the service can quickly pay for itself. The company's surcharge program passes processing fees on to consumers, allowing you to keep 100% of your revenue every time a customer pays with a credit card. Customers can avoid the extra fee by choosing to pay with a debit card instead. These fees are made clear to customers when they are checking out online.Nadapayments will provide you with a virtual terminal and a mobile payment app. Plus, for in-store transactions, they offer Wi-Fi-enabled EMV Quick Chip card readers.You’ll also receive a hosted payment link, which can be used to add a “Pay Now” button on your website. When customers click on the link, they are directed to a secure payment form where they can enter their payment amount and card number. Nadapayments also allows you to send emailed invoices and accept payments over the phone. Due to its unified payment experience, you can easily track all of your transactions from either your in-person credit card machine or your virtual terminal — no matter how you've accepted the payment. The two systems link with one another and work seamlessly. A terminal only costs $35 per month. This is a flat fee, making it attractive for anyone, including low-volume merchants. There are no hidden costs, monthly minimums, or setup fees.Nadapayments accepts multiple payment methods, including:
Nadapayments is entirely secure and PCI-compliant. PCI compliance is required for all merchants, who must follow the Payment Card Industry Data Security Standards. Nadapayments meets all standards, which helps protect both you and your customers' sensitive information. Lastly, you’ll receive exceptional customer support, available 24/7/365.
Propel Your E-Commerce Business with Smarter Credit Card Processing
Whether you're an established online merchant or a startup looking to break into a new industry, you should be paying attention to your e-commerce credit card processor. Not all processors are created the same. The pricing model offered by your processing company can have a significant impact on your bottom line in the long run. If you're looking for the best way to improve your bottom line, be sure to choose Nadapayments. Nadapayments is an e-commerce credit card processor that provides you with everything you need to start processing online transactions.It also is affordable, costing a mere $35 per month. You pass processing fees onto the customer whenever they pay with a credit card, impacting your bottom line by as much as 3.5%. Reach out to us to learn more and get started today.