How Does Online Payment Processing Work In 2021


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Online payment processing has been around for many years, but how it works in 2021 is drastically different. When you think about how often your company accepts payments online and what types of payment options you offer to your customers, then the chances are that there’s a whole lot more than just credit card processing happening on the backend. This blog post will discuss how online payment processing has changed over time and where it’s headed towards in 2021 and beyond!

What Is Online Payment Processing?

In this digital era, more and more people are opting for online payment processing to get their products delivered right to the doorstep.

Online payment processing, also called electronic payments or e-commerce transactions, refers to any business that offers customers a way of completing financial transactions through an online connection rather than in person.

Elements Of Ecommerce Payment Processing

There are different options that you can choose for your online store’s payment processing. You can choose a mixture of different options, or you can stick with one option.

Having A Merchant Account

Merchant account providers are companies that work with banks to process payments for you.

These provide a more seamless experience because it’s their job, and they’re used to doing this all day, every day. As explained by Danny Randell in an article posted on Helcim, there are many questions you should ask when choosing a merchant service provider. Such questions include:

  • What are the monthly fee, setup fee, and any other fees?
  • Can one pay by credit card or bank transfer?

By getting answers to your questions, you can make a more informed decision when choosing your merchant service provider.

Merchant accounts can be costly for smaller e-commerce stores that don’t do enough transactions per month to make up the cost to justify having one. This is in comparison to something like PayPal, which offers similar features without all the overhead costs associated with running an established company processing credit card transactions on behalf of other organizations. This makes sense if your store doesn’t need complex recurring billing features and is primarily for one-time purchases.

Payment Gateways

Payment gateways are companies that will process payments for you online.

They charge a fee to do so, which is usually around %0.30 of the amount processed plus other fees and rates, but this varies depending on the company in question.

The best part about payment gateways is that they can be used with any e-commerce platform or software solution – for example, PayPal, Braintree by Shopify, Stripe, First Data (the list goes on). The downside to payment gateways is that not all have expanded their reach internationally yet.

It’s crucial when choosing what your target market looks like geographically because some only offer services domestically while others are international players who provide a regional coverage.

Payment Processors

Some e-commerce platforms like BigCommerce have their in-house payment processor, so they don’t need an external one. This will be the best option if you’re looking to save money while still maintaining control of how payments work within your store. It’s essential, though, with any software solution that it allows you enough flexibility.

It’s crucial to weigh the pros and cons of each option before choosing which payment processing solution will work best with your store in 2021.

How Does Online Payment Processing Work Today?

Before we dive into how payment processing works, let’s talk about the different methods customers consider for online purchases in this era of dwindling wallets. The most common include;

Credit Cards

Credit cards are on the rise as a preferred method for online transactions, accounting for 63% of all purchases by 2021.

The number one reason people use credit cards is convenience. Credit card users don’t need to worry about carrying cash or dealing with checks to complete their purchase without leaving home.

Debit Cards

The other popular method of payment is debit card usage.

It’s estimated that 28% of people use this tool to pay for their online purchases, and they are projected to grow in popularity by 11% between now and 2021.

The downside is that debit cards are linked to checking accounts, and users need funds in their accounts for the payment to be processed.

Digital Currency

Digital currencies like Bitcoin and Ethereum are often accepted for online purchases, with 15% of consumers using these methods by 2021.

There is a downside to paying through a digital e-Commerce currency that transaction fees can be high. The typical credit card fee ranges from 0-30%. That’s nothing compared to the average transaction fee on some cryptocurrency exchanges: $150 or more!


The last payment method people consider in this day and age includes wallets like PayPal, Amazon Pay, and Apple Pay.

These methods’ popularity varies according to the individual, but wallet usage is projected to grow by 14% in 2021.

There are so many ways that people can pay for their online purchases today!

How Do eCommerce Payment Processors, Gateways, And Merchant Accounts Work Together?

It’s essential to understand how the three payment options work once the customer has added items to their shopping cart.

  • The customer’s credit card information is transmitted to the merchant through an SSL encrypted connection which ensures secure transmission of sensitive data, a necessary element for any e-commerce site operator.
  • After authorization processing by the gateway or processor, funds are transferred from the bank account held with your payment facilitator (PayPal) to that associated with your merchant account at their acquiring bank using Automated Clearing House (ACH).
  • This process takes just minutes if inputted correctly, and after sending you notification of successful payment transaction completion via email, they will either redirect customers back to your website to complete checkout or provide them with a link so they can access it directly on PayPal as well as other sites such as Facebook Messenger, WeChat Pay, and Apple Pay.
  • The customer’s card information is never stored on your site, but instead, it remains with the merchant account holder until settlement.

Important Things To Consider When Choosing Your Payment Processor

Now that you know about the different payment processors, you need to consider which one will work best for your business.

First, you should consider making a list of the different needs that each payment processor has:

  • Does it have any limitations on how much merchandise can be sold?
  • Is there an annual fee or monthly fee associated with using this service? If so, what is it?
  • How do they process payments? Will my customers send me money and hope that their credit card doesn’t decline because of fraud prevention checks. Or, does the payment processor handle all those steps between the customer and merchant account exchange data and prevent fraud from happening in the first place (because we know nothing’s perfect)?

Most importantly, though, how do they process refunds?

Does the company offer any special features that might benefit my business, like e-commerce integration with websites or a customizable checkout page for customers to use on your website?

Once you’ve made this list of considerations and weighed them all against one another, it’s recommended that you pick three payment processors from what we just talked about to make your final decision. This will give you options when it comes time to choose which service is right for your business.

The next thing you need to figure out before choosing a provider is how much they are charging per transaction fee (or “rate,” as some companies call it). The first step is figuring out how many transactions each month there will be – then subtract those by the number of transactions per month that you plan on having.

So, if there are 500 monthly transactions and 250 are new customers (which is what we recommend to keep your business growing). The rate would be calculated as $0.35 * 750 = $250 – at this point, it’s a good idea to also think about how much those transaction fees will cost over time – not just for one year but more like five years from now when you’re trying to grow your sales volume because each increase in sale means multiplying the amount by two or three!

Lastly, PCI compliance needs to be considered because this is a crucial step in your credit card processing. PCI compliance protects you and your customers from any data breach or hacking that could take place on either side: customer-side where hackers steal their information like bank account numbers or social security numbers, merchant-side where they’re concerned about how secure your systems are when it comes to storing transactions.

You need at least two levels of protection to comply with PCI standards:

Level one has three requirements; encrypting transmission protocols used between point-of-sale equipment and online connections, protecting stored data, and using a firewall to prevent unauthorized access.

Level two has 12 requirements, including everything from limiting physical and electronic-only storage media on your premises and performing periodic vulnerability assessments of systems.

Online payment processing has been around for many years, but how it works in 2021 is drastically different. This blog post discusses how online payment processing has changed over time and where it’s headed in 2021 and beyond!

Rashmi is the Editor of PhonesWiki. She launched PhonesWiki back in 2018, turning it into a top spot for phone news and updates by 2019. Now, it's your go-to for leaks and solutions to phone problems. Her first phone was a Nokia 6610, but now she relies on an iPhone 14 Pro as daily driver. Rashmi's a tech enthusiast through and through, always tinkering with gadgets and gizmos. When she's not writing, you'll find Rashmi hanging out with her beloved pet, enjoying some quality playtime. Have a tip or just want to say hello? Contact her at


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