Payment Systems For eCommerce: Meaning, Different Types & Examples

This blog details payment systems in eCommerce, their features and how they help businesses accept and disburse payments.

The Indian eCommerce industry is flourishing, to say the least. In fact, eCommerce order volumes increased by 36% in the last quarter of 2020.

All this- despite the pandemic. Or maybe, because of it. 

Whatever the situation may be, this growing eCommerce industry requires well-equipped payment systems to function. And that is what this blog is all about.

We will be discussing payment systems in eCommerce, its features, and how it is changing every day.

payments systems for eCommerce: CTA

Buckle up, it is going to be a long and insightful read!

But before that… care to test your knowledge? 🙂

What is Payment Systems In eCommerce?

In simple terms, payment systems in eCommerce will help a merchant to accept and disburse payments. 

While some MNCs prefer to get ISO merchant accounts and tie-ups with independent banks, it is not feasible for most businesses. Not counting the compliance issues, the required resources and technical configurations are quite a task.

This is where international payment gateways come into play.

They help merchants seamlessly accept and disburse payments. Moreover, they are easy to integrate and handle the PCI compliance requirements. 

Of course, it does not end here. Let’s have a look at some of the features of payment systems in eCommerce.

P.S. From here on out, we will be using the terms ‘payment gateway’ and ‘payment systems’ interchangeably.

Related Read: Payment Gateway vs Merchant Account

Features You Need in Payment Systems in eCommerce

According to a Bain & Company report, Indian eCommerce is set to grow by ten times within a span of 5 years. Well, up to 20 billion USD by 2025, to be exact. 

Needless to say, our payment systems need to be just as well equipped and innovative to meet our future needs. Here are some of the features that must be present in payment systems in eCommerce. 

payments systems for eCommerce features

Type of Payment System

There are different types of payment systems in eCommerce. Ensure that your payment gateway offers them all.

Let us explain. 

Here are the types of payment systems you may require while accepting payments for your eCommerce business.

Related Read: Types of Payment Gateways

Payment Systems For eCommerce

Hosted Payment Page

A hosted payment page allows you to accept payments on a page provided by the payment service provider (PSP). Hosted payment pages are easy to set up. Most importantly, the payment gateway takes care of PCI compliance. 

Self Hosted Payment Page

In a self hosted payment page, the customer is directed to a payment page created by the merchant. Naturally, in this case, the merchant has more control over the user experience. Furthermore, the customer is not redirected to another domain and stays on the merchant’s site. 

However, self hosted payment pages may require higher technical expertise and resources. Not to mention, the merchant is in charge of the PCI-DSS compliance. 

QR Codes and Payment Links

The options above discuss payments through the website or app. However, payments may be made at the point of sale. In fact, people may want to pay through links on social media apps. This is where off-website payments come in. 

You can use payment links for customers with auto-filled details (payment price, purpose, etc) Thereafter, the customer can click the link and choose their preferred mode of payment. The best part is that payment links can be shared through messages, emails and even social apps like Whatsapp! 

Interestingly, these payment links can be used for payouts as well. (but more on that later)

QR codes can be used for accepting payments as well. This will help you convert Cash on Delivery orders into online payments. The QR code may be dynamic or static, according to your need. 

Popular Payment Methods

Payment systems in eCommerce must have diverse payment modes. This will allow you, the merchant, to accept payments in the customer’s preferred payment mode. After all, 7% of carts are abandoned due to a lack of preferred payment methods.

Here are some popular payment methods in India:

  • Credit and Debit Cards (Mastercard, Visa, RuPay, American Express)
  • UPI (United Payment Interface  for instant money transfer)
  • Wallets (Freecharge, PhonePe, Paytm, Paypal)
  • Net Banking (Directly login to bank accounts like ICICI, SBI, Axis)
  • Pay Later (LazyPay, OlaMoney Postpaid, ZestMoney)
  • EMI (Pay in instalments)

Transaction Flow For Payment Systems In eCommerce:

Payment Systems For eCommerce

1. The customer finalized the product and heads to checkout. The merchant may use a hosted payment gateway or non hosted payment gateway. They enter their personal financial details. These can be card details, VPA in UPI, net banking details, etc. 

2. It is important to note that the payment may have been done through QR codes, payment links, UPI or any other mode. The transaction flows remains the same. The payment gateway safely captures this information and forwards it to the acquiring bank.

3. Next, the Acquiring bank runs a fraud check and sends the information to the card company. (Mastercard/Visa/ American Express) The card company authorizes or denies the transaction on the basis of these parameters:

Knowledge Parameters: Information like customer PIN, passwords, CVV etc

Inherence Parameters: Two-factor authentication codes, OTPs or biometrics

Possession Parameters: Cheques, account numbers, physical cards, etc.

4. Once the card company gives the go-ahead, the information is transferred to the Issuer (customer’s bank). The Issuer runs an authentication process and checks if the account has enough funds.

5. After this, the approval or denial of the transaction is forwarded through the same route. Issuer>Card companies>Acquirer>Payment Gateway>Merchant>Customer.

6. After the payment status is accepted, the acquirer requests funds from Issuer. Thereafter, the funds are settled under this time frame. 

Recurring Bill

By 2022, 53% of all software revenue will be generated through the recurring bill model? Moreover, 70% of business leaders believe that the subscription business model is the future of eCommerce. 

Payment Systems For eCommerce

These stats are enough to prove that the recurring bill model is important to eCommerce businesses. They can increase customer satisfaction and retention with a better customer experience. Moreover, they can aid in accurate business forecasting. Businesses are extending Fixed Charge or Pay-Per-Consumption models for their customers. For example, Adobe changed their one-time 200 USD fee to a monthly subscription of 10 USD. This helped them grow their revenue and boost sales. 

Choose a payment system that allows you to offer recurring payments. Moreover, ensure that it is developer-friendly and allows you to offer free trials and has multi-user support. A payment system with advanced analytics will help you evaluate your past transactions and help optimize for better success rates. 

Sub Merchant Account 

A merchant account is necessary to accept and collect payments as a business. An eCommerce payment system can help you with a sub-merchant account after onboarding. 

Basically, the payment gateway owns the master merchant account. Thereafter, all of its clients are accorded a sub-merchant account. As a result, the payment gateway accepts and disburses payments on behalf of the merchant. Finally, it settles the respective amount with each merchant. 

payments systems for eCommerce: types of merchant account

It is beneficial for businesses to get a sub-merchant account as it is cost-effective. Moreover, the payment gateway handles PCI compliance, ensuring safe transactions. In fact, Cashfree employs a robust Risk Management System with the help of Paypal. 

Moreover, a sub-merchant account eliminates the infrastructure and compliance cost that comes with an ISO merchant account. In a payment gateway merchant account, you only have to pay the merchant discount rate per transaction. 

Related Read: Payment Aggregator: Updated Guide

Easy Onboarding and Integration

Accepting payments through payment systems in eCommerce may be easy, However, integrating it is not a piece of cake. 

Ensure that your payment system is easy to integrate. Look for payment gateways with ready-to-use plugins for major eCommerce platforms like Shopify, Magento, Woocommerce. Moreover, ensure that it has detailed guides for integration in every popular computer language.

Mobile Payments makes up for 53.9% of global e-commerce sales. So, ensure that your payment gateway is easily integrated with websites and apps alike. Ensure that it offers SDKs for platforms like Android, iOS, React Native and more. 

Furthermore, ensure that your payment gateway offers a seamless onboarding experience. Having a dedicated account manager and stellar support team always comes in handy!

Payment Analytics

Another important feature of payment systems for eCommerce is payment analytics. As a business, your scalability will depend on your current cash flow. Payment systems have dashboards that can help you with payment reports. You can get insights into your payment volumes, popular payment modes, timelines and platforms. 

payments systems for eCommerce: payment reconciliation example

With the help of these insights, you can optimize your payment flow and increase your transaction success rates. Furthermore, you can make marketing campaigns around the most popular modes of payment with the help of discounts and vouchers.

Related Read: Payment Page Design Examples

Instant Settlements

After payment processing, the customer funds reach the payment gateway. After that, the payment gateway forwards the net amount to each individual merchant. It takes the refunds, cancelled orders, and payouts into account. This process is known as payment gateway settlement.

payments systems for eCommerce: CTA

However, the settlement may be standard or Instant. The standard settlement may take 3 to 4 days. However, instant settlements may take as little as 15 minutes after fund capture. In fact, it may allow settlements during bank holidays as well.

Instant settlements are beneficial for your eCommerce business in numerous ways. They eliminate settlement uncertainties and offer improved cash flow. As a result, you can address your urgent payment dues. 

PS. You can activate Instant Settlement on specific transactions you select as well!

Refunds for Ecommerce

40% of customers buy products online with the intention of return some of them. Needless to say, online refunds are an integral part of eCommerce shops. However, with settlement and reconciliation issues, refunds can quite often be a hassle. On top of that, late or incorrect refunds can lead to poor customer service.

However, there are three main solutions for solving these issues:

payments systems for eCommerce: instant refunds

1. Instant Refunds: Your payment system can help you offer instant refunds to the original payment source. 

2. Payout Links: Remember those payment links we discussed? Well, your payment system can use that for refunds as well. You can create a payout link and notify the customer with email, message or social apps. After that, the customer can select the preferred account where they want to receive the refund.

3. Card Pre-authorization: You can temporarily block funds on your customer card when they place an order. In case, they cancel the order with 7-9 days, the transaction will be marked void. This way, you will not need to refund at all. 

Swift Reconciliation

Reconciling your payment can be a breeze with the right payment system. A payment gateway can equip you with a dashboard that spells out the details of each transaction. Moreover, you can access customized reports of transactions with specific filters.

For instance, the dashboard can help you filter out transactions of a certain time period. You can also check transaction amount, unique order ID, MDR on each transaction and net settlement amount 

However, there is a way to automate your reconciliation process as well! With Autocollect, you can create virtual IDs for each of your customers. A virtual account is basically a pass-through account connected to your real merchant account. Once the customer pays, you are instantly notified about the transaction and payment details via webhook. 

payments systems for eCommerce: autocollect

Bank Account Verification

Bank transfer failures are one of the biggest issues in payment transfer. Ensure that your eCommerce payment system equips you with a solution: Bank Account Verification.

This feature can help you verify the existence of your beneficiary’s bank account. Moreover, it will help you match your beneficiary’s name to the one listed in their bank account. In fact, you can verify UPI IDs as well. 

Bank account verification can be extremely useful for refunds and vendor commissions. It will minimise failed transfers or reversals. 

Vendor Commissions 

When we discuss payment systems in eCommerce, it is important to include marketplaces. And a marketplace would need to split vendor commissions in an efficient manner. 

Money transfer API can be used to send funds directly from your bank account. Ensure that your payment system can help collect customer payments, deduct commissions, and schedule payments to vendors. These vendors may be delivery partners or service providers as well. 

payments systems for eCommerce: CTA

Sell Globally

Like we mentioned before, international payments are a necessity for businesses today. After all, the global eCommerce market is expected to rise to 6388 billion dollars by 2024.

A robust payment system is important to keep up with this shift. Offering international payments will help you attract overseas customers and reduce cart abandonment issues.

Ensure that your payment system offers popular international payment modes like Paypal. You can add your Paypal account to your payment gateway account to receive payments. Moreover, ensure that your payment gateway supports international cards.

integrated payment systems: cta

Furthermore, you can also show the product prices in the customer’s preferred currency. This will help you provide a better customer experience. Moreover, ensure that the payment gateway settles the funds in your own currency.



That has been a long read. 

We hope that it has been equally insightful as well. Choosing a payment system for eCommerce may be tricky. However, once you have your needs figured out, it can be a piece of cake.

We hope that reading this blog was a step in that direction.