How to Choose an Online Payment Processor

Opening your online store is exciting! Not so exciting: figuring out the nuances of how to get paid over the internet. A critical part of opening an online business (and staying open!) requires understanding how payment processing works and deciding which software or third-party processor best suits your needs. After all, what’s the point of owning and operating a business if the critical part of the transaction – being paid – isn’t functioning?

A payment processing company (or payment processor) is a business that allows you to accept payments and processes those payments for you. Sometimes, a payment processor will bundle this service with a point of sale system – but not always.

How to Differentiate Payment Processors

There are several features that will help you weigh the pro’s and con’s of each online payment processor.

  • Pricing: Which transactions incur a fee? For example, manually entered vs credit card swipe. Are there chargeback costs? Are there minimum limits?
  • Flexibility: Do customers have choices when they go to pay for your product? What are the Terms of Service – and could they potentially interrupt my business? Does this payment processor make it easy to complete a transaction on all platforms (whether Windows or iOS, desktop computer or mobile phone)?
  • Functionality: Does this payment processing software (or platform) integrate well with your business and website? Is it something that you can use with minimal issues? How long does it take to process a transaction? When is your money deposited?
  • Security: Does this business offer fraud protection? Are payments secure? Is customer information secure? Does this business make my customers feel safe and secure?
  • Features: What else does this payment processor offer that sets them apart from the rest of the competitors? What does this business’s customer service look like?

Merchant Accounts

One term you need to know before we discuss online payments: merchant accounts. What is a merchant account? It’s a type of bank account for businesses that allow them to accept and process electronic transactions. A merchant account is crucial for an online business, and although it often comes with added fees, it also includes numerous services that make doing business online easier and safer. Additionally, a merchant account offers an extra layer of security for both the buyer and the seller. You can usually talk to your bank and see if they offer this. A lot of times they are setup to easily integrate with your website.

Third Party E-Commerce Platforms

One of the appeals of listing your product or engaging in sales on an e-commerce platform is that the third-party platform is responsible for everything associated with the payment aspect of the transaction. For example, when you list a product on Etsy, you don’t get to decide if you want to be paid via Paypal or Stripe or with a credit card. Instead, Etsy acts as an intermediary and (partially) makes that decision for you: they offer a limited number of ways for customers to pay for their purchase, and in turn, Etsy ensures that you receive your money. Fees are set by your bank institution.


Stripe is unique in that this payment processor accepts transactions from around the world, in addition to Google Pay, Apple Pay, and Masterpass. Stripe is particularly well-known for guaranteeing secure payment options and safely storing data. Stripe also offers in store point of sale devices that allows you to sell in person as well as online and seamlessly integrates.

Stripe charges 2.9% of the online transaction amount plus a $0.30 fixed fee.


Square offers ways to sell both online and in-person, which makes it ideal for businesses who have both a physical and online presence. Through Square’s POS software, business owners can also perform business-related functions (like managing inventory), making it an excellent option for those who are trying to consolidate all their business-related actions into one software or platform. Additionally, Square offers several tools to help you grow your business, which may be appealing to entrepreneurs who are seeking to consolidate tasks and responsibilities into as few software programs as possible.

Square charges 2.9% of the online transaction amount plus a $0.10 fixed fee.


Although in my opinion PayPal has fallen down the charts as a option for online payments it is one of the oldest tried-and-true e-commerce payment solution and offers a myriad of ways for customers to purchase a product. Incorporating paypal into your online payment structure allows you to accept credit or debit cards, pay-later options (like pay-in-4 and Paypal Credit), or to purchase through social media platforms like Facebook, Instagram, and Pinterest.

Paypal is fast, simple, and familiar to most customers. However, Paypal does require a fee of 2.9%-5% of the transaction amount, plus a $0.30 fixed fee. Additionally, Paypal has an inconsistent track record when it comes to customer support: although their buyer protection is excellent, their seller protections leave something to be desired, particularly when it comes to issuing refunds.

Which Payment Option is Right for Me?

At the end of the day, the “right” payment processing plan is the one that ensures a smooth transaction for both you and your customer. I only talked about three payment processors in this post, but there are so many others, each with their own benefits and drawbacks! While the list of options for how to accept online payments continues to grow and evolve, you can narrow down the choices by exploring the most popular options and determining which of the payment processors makes it easiest for your customers to pay you, and in turn, for you to pay for your bills. Ultimately, it pays (pun intended) to do your research and determine which payment processor is going to be the best match for how – and to whom – you envision selling your product.

If you still are not sure which is right for you, or you are having trouble integrating a payment processing software on to your website or still have questions, feel free to contact me at 832-253-2102.

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