Demystifying eCommerce Payment Systems

Posted by Modo on Jun 5, 2019 12:07:00 PM



eCommerce Payment Systems, Demystified

The world of eCommerce payment systems can seem a little arcane and strange to the uninitiated, and that’s something we’re here to change. We believe that every eCommerce business needs to understand how electronic payments work, so you can meet customer needs when it comes to paying for products or services. Get the right ePayment system in place and you’ll make things fast, easy, and convenient for your buyers—and that’s good for everyone.

With that in mind, let’s peer into the crystal ball of electronic payments and read the tea leaves on the different types and features of eCommerce payment systems. First up, we’ll explore what types of magic tricks ePayment systems perform behind-the-scenes.

How eCommerce Payment Systems Work

For an in-depth guide to how the eCommerce payment ecosystem works, take a look at our deep dive into how everything fits together. <link to blog post: “The Payments Ecosystem: Not Nearly as Boring as You Think!” once published.> In brief though:

  1. You install shopping cart and payment software on your eCommerce website.
  2. The customer chooses the products and services they want to purchase.
  3. They decide on how they want to make payment and enter their details.
  4. Your back office payment stack sends payment information to various processors, gateways, banks, and other third parties.
  5. The payment is validated, authorized, and approved, and the information is sent back to your payment software.
  6. The order is completed and you provide products or services.
  7. The payment clears and is credited to your merchant account.

Fair enough—but what does this actually mean in practice? How can the right eCommerce payment system lead your customers through the maze of paying for stuff?

Advantages and Benefits of eCommerce Payment Systems

Choosing the right type of ePayment system makes an enormous difference to your customers, and can drive a significant competitive advantage.

Customers Can Choose to Pay However They Want

Consumers are moving away from traditional credit and debit cards and towards other ePayment options. Mobile wallets are on the rise, supported by specialist providers and by tech giants, like Google Pay and Apple Pay. Customers in one country might want to pay in cryptocurrency, while consumers in another could prefer cash on delivery, bank drafts, or eChecks. They key word here is “convenience”—give your customers plenty of options, and they’re more likely to choose your online products and services.

Merchants Can Reduce Fraud and Chargebacks

Payment fraud is a big thorn in the side of eCommerce, with billions lost to criminals every year. The right payment stack will link your ePayment system with specialist fraud detection software that uses  machine learning and artificial intelligence to reduce the risk, impact, and likelihood of fraudulent transactions <link to blog post on fraud detection once published>. In the arms race of criminals and fraud prevention, it’s important to have the latest weapons in your arsenal and ready to go.

Customers and Merchants Experience Fast Payment Processing

The right payment stack can make payments really, really fast. No customer wants to waste time waiting for payment authorization, so ideally you’ll want an eCommerce payment system that authorizes payments in five seconds or fewer.

ePayment Systems Keep Things Simple and Convenient

Most modern eCommerce payment systems are designed with the customer experience front-and-center. This means an easy-to-use interface, enhanced security, saved details, and the ability to pay quickly and easily. Reduce friction in the payment process and you’re guaranteed to generate more revenue.

For more information, take a look at our guide: Advantages of eCommerce payment systems.

Important Features of an Electronic Payment System

Here’s what to look for when you’re deciding on the right ePayment system for your online business:

  • Wide range of integrations with all of your payment supplementary services like fraud detection, order management, inventory management, point of sale, and more.
  • Cross-border payments and interoperability, so customers can choose to pay in multiple currencies and from multiple countries.
  • Extremely robust payment security to protect transactions and payment information from hackers.
  • Multiple login options so customers can easily use their existing accounts to pay for goods and services.
  • Simple to implement on your eCommerce website so it’s a seamless payment experience for your customers.
  • Flawless experience across all devices and channels, whether people are using a smartphone or tablet, or completing payment through other channels like social media.
  • Recurring and subscription billing if you provide products and services on a regular basis.
  • Multiple ePayment options, which we’ll get into below.

For more information on the key features of eCommerce payment systems, take a look at our payment features blog post.

Electronic Payment Options for Consumers

Because the way we pay is changing so fast, it’s worth focusing on the various different payment options that your customers are looking for. You’ll want to consider the payment options that are most important for your prospective customers.

Credit and Debit Cards

Plastic is still the most popular payment option, with older consumers in particular still choosing to pay with a credit or debit card. They’re fast and easy to use, although consumers get charged interest on credit cards and are limited by available funds with debit cards.

Prepaid and Smart Cards

These cards are similar to debit cards, except that they need to be pre-funded. Customers can load amounts onto these prepaid cards, then use them exactly like a regular card to make online payments.

eWallets and Mobile Wallets

Mobile wallets and eWallets are a way for consumers to store multiple credit cards, debit cards, bank accounts, and other payment details in one secure place. They just need to sign in with their wallet details and choose a payment type. The ePayment system will then deduct the amount from the appropriate place.

Apple Pay, Samsung Pay, Amazon Pay, Google Pay, PayPal

There are dozens of easy payment services available to consumers, often linked with an eWallet or mobile wallet. Brand recognition reinforces security, making these popular options for fast, simple, and convenient payments.

Bank Accounts, Bank Drafts, eChecks

Some consumers will want to pay directly from their bank account, and numerous eCommerce payment providers will offer this service. This can be particularly useful for ongoing payments.


In some countries, cash on delivery is still a preferred method of payment. You might choose to defer paying for a product until the consumer actually receives it.


As cryptocurrencies become more widely accepted, being able to pay in Bitcoin, Ripple, Litecoin, or another cryptocurrency could be a competitive advantage.

Whatever solution you decide on for your eCommerce and ePayment system, make sure it has all the features you need. That way you can integrate it flawlessly into your payment stack where both you and your customers can enjoy significant advantages.

Topics: Features of electronic payment system, Ecommerce payment system, types of e payment system