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Online Payment Processing for Small Businesses: A Guide

Updated: Sep 3, 2021

Online payment processing for small businesses has never been easier. As the internet continues to evolve, so grows the need for quick and secure online payments. Now more than ever, it's an integral part of doing business in today's fast-paced digital world.


As a small business owner, you may not be aware of what’s actually going on when you accept payments through your website. It's important to understand payment processing to manage your online store and prepare yourself for potential issues.


In this blog post, our experts at Rigel Payments will discuss:

  • What online payment processing is

  • How online payments work

  • Benefits of accepting online payments

  • Online payment safety

Image of woman holding credit card ready to make a purchase on laptop.
Online Payment Processing

Table of Contents

  1. What Is Online Payment Processing?

  2. How Does Online Processing Work?

  3. Are Online Payments Safe?

  4. Benefits of Accepting Online Payments

  5. Conclusion

People Also Ask:


What does online payment processing mean?


Online payments are simply an exchange of funds online when buying goods or services. This includes processing information from a payment method chosen by the customer, usually a debit or credit card.


How does online transaction processing work?


Basically, when a customer buys something from a merchant’s online store, the payment gateway gathers the transaction information securely. This data is processed and sent to the bank and the credit card network for approval.


What Is Online Payment Processing?


Online payment processing is the transaction of buying goods or services online and exchanging personal and financial information to authenticate. It implies an exchange between a merchant selling (your small business) something and someone (your customers) who wants to buy it.


To accept online payments, you'll need to work with one or more middle partners, like a bank or merchant services provider. Next, you'll need three key components.


These include:

  1. Payment Processor: Think of the payment processor as the middleman between your customer's bank and you, the merchant. It handles the card transaction process by transferring information from customer credit and debit cards to your bank, and your customer's bank. Payment processors also deal with concerns like card limits, validity, and security.

  2. Payment Gateway: The payment gateway is basically an online version of a POS (point of sale) system. It helps connect the payment processor and your website. Payment gateways also connect your merchant account with credit and debit card issuers.

  3. Merchant Account: A merchant account is a bank account that allows your small business to accept payments online. Without one, there is nowhere for the funds from your customer's online payments to go to you. The money from these online payments is transferred to your business bank account automatically, usually with one or two business days.

These three key elements provide the technological side of the transaction and connect to their financial institution for clearing payment. This can often be handled by a trusted payment processor, such as the ones offered by Rigel Payments!


How Does Online Processing Work?


It's time to explore how payment processing online works. There are eight separate entities involved in the process.


All of which include:

  1. The Customer

  2. Your San Diego Small Business

  3. Credit Card Network

  4. Payment Processor

  5. Payment Gateway

  6. Merchant Account

  7. Your Customer's Bank

  8. Your Bank

Here’s a breakdown of how online payment processing works:

  • First, your customers choose an item(s) to buy, adding them into their online cart. They complete the checkout process once they pay via credit or debit card and enter their card information on your payment page.

  • Next, their card information is transmitted to the payment gateway. The payment gateway transfers the data to the payment processor.

  • The payment processor sends the transaction information to the credit card network, verifying your customer's credit card details.

  • Once verification is complete, the card network requests authorization to release the necessary funds with your customer's bank. When it's confirmed that there are enough funds, the bank submits a response to the credit card network for transaction approval.

  • This data is sent to the payment processor, which requests to transfer the funds from your customer's bank. The money is transferred to the merchant account, where it sits for a few days before making its way into your business's bank account.

Are Online Payments Safe?


When you have the right payment processing provider on your side, you can expect safer transactions for all involved parties. Online payment processing can bring a lot of benefits, but some challenges may arise.


You can outsource some of these to your merchant services provider if they have the capabilities available.


Common concerns with accepting online payments include:

  • Risk of fraud

  • Technical issues

  • Chargebacks and other fees

The purpose of having an online payment process is to provide your small business with the tools to handle credit card transactions securely.


Trusted and experienced payment providers can provide you with fraud prevention tools like address verification systems (AVS).


When working with a professional provider, you have access to many customizable options. In addition, they can help manage chargebacks that may arise from disputed transactions.


Benefits of Accepting Online Payments


Many small businesses are increasingly accepting online payments thanks to the instant, long-term overall advantages. Regardless of your company's industry or market, increasing and maintaining your cash flow is a top priority.


Having an online payment processing option available for your customers allows them to purchase items from you with ease.


7 common benefits of accepting online payments include:

  1. Easy and quick setup process

  2. Reliable means of payment

  3. Increased trust with customers

  4. Convenience to recurring payments

  5. Credit cards to allow low budget purchases

  6. Boosts sales on last-minute deals

  7. Gives you a competitive edge

Another significant benefit is that the right payment processing provider can oversee the complexities of compliance and security.


At Rigel Payments, we can help you stay compliant, maintain airtight security for your shoppers, clear transactions fast, and much more.


Conclusion


Now that you understand online payment processing, you have the knowledge to take your small business to new heights. Succeeding in today's highly competitive online marketplace includes staying up to date on your options.


Are you ready to discover what online payment processing can do for your small business?

Contact Rigel Payments to get started!

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