One of the biggest decisions you’ll make when starting an online store is how to accept payments. Processing fees, security requirements, and payment options all play a role in creating a checkout experience that keeps customers coming back.
Non-cash transactions are expected to exceed 2.5 trillion globally by 2028, so the ecommerce payment processing system you choose is more important than ever.
This complete 2026 guide to ecommerce payment processing breaks down how online payments work, what fees to expect, and how to choose the right provider for your business. It will also explore how GoDaddy Payments makes it simple to accept payments online, in person, and on the go while keeping transactions secure and easy to manage.
What is ecommerce payment processing?
Ecommerce payment processing is the system that moves money from a customer’s account to a business’s account when a purchase is made online. It securely verifies the transaction, transfers the payment, and confirms that the funds are approved.
There are multiple entities involved in this process, including the customer, the merchant, the customer’s bank, the merchant’s bank, the payment processor, and the payment gateway.
The evolution of online payments
Online payments have changed significantly since the early days of ecommerce. Early online stores relied primarily on basic credit card forms and manual verification, which often led to delays and security concerns.
Modern ecommerce payment systems support credit cards, debit cards, digital wallets, and alternative payment methods. They also use advanced security protocols, such as encryption, tokenization, and fraud monitoring.
Ecommerce vs. in-store payment processing: Key differences
Ecommerce and in-store payment processing follow similar paths for moving funds, but the technology involved is different. In-store payments typically rely on physical card readers, chip technology, or tap-to-pay systems. Ecommerce payments occur entirely online and rely on payment gateways, secure checkout pages, and digital verification tools to process transactions securely.
Understanding the ecommerce payment ecosystem
Ecommerce payment processing works through a network of interconnected systems and financial institutions. Each online transaction involves several parties working together, including the customer, the merchant, the payment processor, the payment gateway, and the banks responsible for approving and transferring funds.
A payment gateway is the secure bridge between a business’s website and the payment processor. It collects the customer’s payment details at checkout, encrypts them, and sends them to the processor for authorization. Once the customer’s bank approves the transaction, the gateway returns the confirmation so the purchase can be completed.
Complete breakdown: How ecommerce payment processing works
Ecommerce payment processing may feel instant to shoppers, but a complex process begins behind the scenes as soon as they click “Pay Now” or “Complete Purchase.”
If you haven’t created your ecommerce website yet, try out GoDaddy’s online store builder! It’s a hassle-free way to get your business up and running.
Let’s take a closer look at how accepting payments online works.
Step 1: Customer initiates checkout
The process begins when a customer completes checkout on your website and submits their payment information. This usually happens through a secure checkout page built into your ecommerce platform or online store. These pages use HTTPS to protect sensitive data while it travels across the internet.
Step 2: Payment data encryption and transmission
Once the payment information is submitted, it is immediately encrypted using SSL/TLS protocols. This encryption prevents payment details, such as card numbers, from being intercepted and occurs automatically.
Step 3: Payment gateway routes the request
After the data is encrypted, the payment gateway securely sends the transaction request to the payment processor. The gateway ensures payment data is transmitted safely between your ecommerce website and the payment processor.
Step 4: Processor validates transaction details
The payment processor then reviews the transaction and performs verification checks. These can include confirming the card number format, matching the CVV code, running address verification (AVS), and screening the transaction for potential fraud.
Step 5: Issuing bank approves or declines
The transaction is then sent through the card network to the customer’s issuing bank. The bank checks the account status, verifies that enough funds or credit are available, and evaluates potential fraud signals before approving or declining the payment.
Step 6: Authorization response returns
The bank’s decision travels back through the card network to the processor, then to the payment gateway, and finally to the merchant’s website. If approved, the purchase is confirmed, and the order can proceed.
Step 7: Funds settlement to merchant account
Authorization confirms that the payment is valid, but the actual transfer of funds occurs during settlement. Approved transactions are typically grouped into batches and processed later. Funds move from the issuing bank through the card network to the merchant’s acquiring bank.
Average processing times by payment method
Most credit and debit card transactions are authorized within seconds and settle within one to three business days. Bank transfers, such as ACH payments, can take up to 3 days because they move through traditional banking networks that process transactions in batches.
Ecommerce payment methods explained
Although credit and debit card payments are still the most common, 57% of consumers expect flexible payment options at checkout. In fact, about 10% of shoppers abandon their carts due to insufficient payment method options.
Luckily, you can easily offer multiple payment methods using tools like GoDaddy Payments and Online Store. Below are some of the most common payment methods that ecommerce stores can implement.
Credit and debit cards
Credit card usage increased by 91% from 2016 to 2024, and debit cards were used for 100.7 billion payments in 2023 alone. Major card networks such as Visa, Mastercard, American Express, and Discover are widely accepted across online stores, making them familiar and convenient for customers.
Card payments typically authorize instantly, allowing businesses to confirm orders quickly. However, merchants should expect processing fees ranging from 2% to 3% per transaction, depending on the provider and card type. Cards also carry a higher risk of chargebacks and fraud than some other payment methods, which is why payment processors use fraud-detection tools to help reduce risk.
Digital wallets
Digital wallets are very popular for mobile commerce — as of 2025, 61% of Americans use them to shop online. These wallets, like Apple Pay, Google Pay, and PayPal, allow customers to store card details and complete purchases quickly using their phone or browser. They streamline checkout by eliminating the need to manually enter payment information.
Businesses benefit from faster checkout, enhanced security through tokenization and biometric authentication, and reduced cart abandonment. Many wallets also support one-click or express checkout, which can significantly improve conversion rates on mobile devices.
Payment links and invoicing solutions
Payment links (or pay links) are a simple way to accept payments without a traditional checkout page. They are unique URLs that direct customers to a secure payment page to complete their purchase.
Tools like GoDaddy Pay Links allow businesses to create and send payment links through email, text messages, social media, or messaging apps. Customers simply click the link, enter their payment details, and complete the transaction. Some of these tools also offer invoicing. This allows businesses to send a bill and collect payment in one step.
Learn how to create a professional invoice in this guide.
Mobile payments and in-app transactions
Mobile payments allow customers to complete purchases directly from smartphones or within mobile apps. This includes purchases made through mobile browsers as well as in-app transactions. While not as prominent as credit or debit card transactions, American shoppers made payments via mobile devices an average of 11 times per month in 2024.
For ecommerce businesses with mobile apps, in-app payments can provide a seamless user experience. Customers can store payment methods, complete purchases quickly, and avoid reentering their details. However, businesses should also consider app store transaction fees and platform rules when selling through mobile apps.
Buy now, pay later (BNPL)
Buy now, pay later (BNPL) services, such as Affirm, Klarna, and Afterpay, enable customers to split purchases into smaller payments over time. These options can make higher-priced products more accessible and may increase average order value. An estimated 365 million people worldwide used BNPL in 2025, so this payment option can be worthwhile for merchants.
Bank transfers and direct debits
Bank transfers and direct debit payments allow customers to pay directly from their bank accounts. These methods are often used for subscriptions, recurring billing, or larger transactions where card payments may not be ideal.
While bank transfers can take longer to process than card payments, they often come with lower transaction fees and reduced chargeback risk. For businesses selling internationally or handling recurring payments, they can be a useful addition to a broader payment strategy.
Ecommerce payment security: Protecting your business and customers
Security is non-negotiable in ecommerce. Every online transaction involves sensitive financial information, and businesses must protect that data to maintain customer trust. Strong payment security safeguards both merchants and customers from fraud, financial loss, and unauthorized access. Because of this, most ecommerce businesses follow the best practices for website privacy outlined below.
PCI DSS compliance requirements
PCI DSS (Payment Card Industry Data Security Standard) is a global security standard designed to protect cardholder data during payment processing. Any business that accepts credit or debit cards online must follow PCI compliance requirements.
These standards include guidelines for securely storing, processing, and transmitting payment data. Businesses often rely on payment processors and gateways that help manage many of these requirements, but merchants are still responsible for maintaining compliance on their websites.
Encryption and tokenization
Encryption protects payment information while it travels across the internet. Secure websites use HTTPS and SSL/TLS protocols to encrypt data between the customer’s browser and the server. This prevents sensitive details such as card numbers from being intercepted during transmission. Ecommerce businesses can strengthen this protection by learning how to choose the best SSL certificate.
Tokenization adds another layer of protection. Instead of storing the actual card number, the system replaces it with a unique token that represents the payment information. Even if a system were compromised, the token would be useless without the secure system that generated it.
3D Secure and two-factor authentication
3D Secure is an authentication protocol that verifies a cardholder’s identity before completing an online payment. Programs such as Visa Secure and Mastercard ID Check use this technology to add an extra verification step during checkout.
Customers may be asked to confirm their identity using a one-time passcode, biometric verification, or another form of two-factor authentication. This helps reduce fraud and unauthorized transactions while providing stronger protection for both businesses and customers.
Chargeback management strategies
A chargeback occurs when a customer disputes a transaction with their bank and requests that the payment be reversed. This differs from a refund, which happens when a business voluntarily returns money to a customer after a purchase.
Chargebacks can lead to additional fees and may negatively affect a merchant’s standing with payment processors if they occur frequently. Ecommerce stores can reduce chargebacks by maintaining clear product descriptions, providing transparent return policies, using fraud detection tools, and offering responsive customer support. To learn more, read this guide on what is a chargeback.
How to choose the right ecommerce payment processor
Your ecommerce payment processor can directly impact your revenue, costs, customer experience, and daily operations. There is no one-size-fits-all solution; the best processor depends on your business model, size, location, and customer preferences.
Assessment checklist for your business needs
Before choosing a payment processor, it helps to evaluate how your business operates. Ask yourself:
- What is your expected monthly or annual transaction volume?
- What is your average transaction value?
- What types of products or services do you sell?
- Is your business considered standard-risk or high-risk?
- Where are your customers located: domestic, international, or both?
- What sales channels do you use, such as your website, marketplaces, social platforms, or in-person sales?
- Do you need recurring billing or subscription payments?
- What technical resources do you have for setup and maintenance?
- What is your budget as a startup or established business?
Answering these questions helps clarify the features and capabilities your payment processor should support.
Understand costs and fees (markups, hidden fees)
Ecommerce payment processing fees can vary widely depending on the provider, transaction type, and payment method. Typical costs include:
- Interchange fees from card networks
- Processor markups
- Monthly service fees
- Chargeback and refund fees
- International card payment fees
- Payment method-specific fees
Always review a payment processor’s full pricing structure before committing to avoid unexpected costs.a
International payment capabilities
Ecommerce businesses selling to customers in multiple countries should consider whether their processor supports international cards. Accepting cards issued by banks around the world helps remove geographic barriers, allowing more customers to complete purchases without friction.
Supporting international cards can also improve conversion rates by offering a familiar, trusted, and secure way to pay. When customers can use their preferred card at checkout, they are less likely to abandon their cart, which can lead to increased sales and a broader customer base.
Integration options and technical requirements
Payment processors should integrate smoothly with your ecommerce platform, website builder, and other business tools. This keeps payment data, sales reports, and order information up to date across systems.
GoDaddy Payments and POS integrate with GoDaddy ecommerce tools to offer a seamless payment experience both online and in-person.
If your business operates online and in-person, you need a payment system that supports both ecommerce and point-of-sale transactions. Tools like GoDaddy Smart Terminal POS systems or retail POS systems allow merchants to accept in-person payments while syncing sales data with their online store.
Scalability and transaction volume handling
As your business grows, your payment processor should be able to handle increasing transaction volumes without slowing down checkout or adding operational complexity. Scalable payment systems support higher transaction counts, additional payment methods, and new sales channels without requiring major changes to your infrastructure. Choosing a processor that can grow alongside your business helps prevent disruptions as your ecommerce operations expand.
Future of ecommerce payments
Ecommerce payments continue to evolve as new technologies and customer expectations shape how people shop online. Some innovations are still emerging, while others are quickly becoming part of everyday checkout experiences. Businesses that stay informed about these trends can remain competitive and better prepare for changes in customer payment preferences.
As payment technology advances, it’s important to choose processors that innovate and adopt new capabilities. Modern payment platforms are expanding support for new payment methods, stronger fraud protection, and faster transaction experiences.
AI and machine learning in fraud prevention
As of 2025, 47% of businesses use some form of AI tool to help prevent fraud. These technologies can detect unusual behavior, flag suspicious transactions, and continuously adapt as fraud tactics evolve. This allows payment processors to stop fraudulent activity more quickly while reducing false declines that could block legitimate purchases.
Rise of alternative and local payment methods
While credit cards remain widely used, alternative payment methods are gaining traction across many regions. Digital wallets, local bank transfer systems, and region-specific payment solutions are becoming more common in global ecommerce. Offering these options can improve conversion rates, especially when selling internationally.
Cryptocurrency payments
Cryptocurrency payments are another area of ongoing development in ecommerce. Some businesses now accept digital currencies such as Bitcoin or Ethereum as an alternative form of payment. Cryptocurrency transactions can offer advantages such as lower processing fees in certain cases and faster cross-border transfers. As payment technology continues to advance, more processors may explore ways to support digital currencies alongside traditional payment methods.
Future-proofing your ecommerce payments
Ecommerce payments continue to evolve as technology, security standards, and customer expectations change. Businesses that stay informed and choose flexible payment tools can adapt more easily as new payment methods and checkout experiences emerge.
Using a reliable payment platform helps simplify operations while giving customers the payment options they expect. GoDaddy Payments integration with Online Store and Smart Terminals helps businesses accept payments online, in person, and through payment links, making it easier to manage transactions as your ecommerce business grows.
FAQs about ecommerce payment processing
What's the difference between a payment gateway and processor?
Payment gateways securely capture and encrypt a customer’s payment information at checkout, then send it to the processor. Payment processors communicate with card networks and banks to verify the transaction and move the funds from the customer’s account to the merchant’s account. Learn more about what is a payment gateway in this article.
Can I switch payment processors later?
Yes, businesses can switch payment processors if their needs change. Many companies change providers to reduce fees, support new payment methods, or integrate better with their ecommerce platform. Before switching, review contract terms, migration requirements, and how the new processor will integrate with your existing systems.
What is API payment processing?
API payment processing allows developers to connect a payment system directly to a website, app, or software platform using an application programming interface (API). This approach gives businesses more control over the checkout experience and allows payment features to be customized on their websites or in their applications.
What are payment processing networks?
Payment processing networks are the systems that connect merchants, banks, and payment processors to complete transactions. Card networks such as Visa, Mastercard, American Express, and Discover route payment requests from the merchant’s processor to the customer’s issuing bank and return the approval or decline response.
