[Infographic] What You Need to Know about Online Payment Processing

Robirt Kong

Estimated read time: 2 minutes, 58 seconds

It doesn’t matter if you’re an established digital business or an up-and-coming online store looking to sell software, digital downloads, or digital content, a key part of selling online is making sure you’re familiar with how online payment processing works.

However, many businesses quickly realize that is easier said than done. Especially since there is a lot of technical jargon and terminology within the payment ecosystem. So much so that even just trying to figure out what to pay attention to can be overwhelming.

So, what is a payment gateway anyway? How are card payments validated? I’ve never even heard of a card association before!

The Key Players in Online Payment Processing

The sale of your software really involves four key components—a merchant, a buyer, the payment gateway, and the payment processor. The technology connects the merchant and buyer in the process.

  1. Your customer, the buyer.

    She’s super excited to get her hands on your product and can’t wait to see how the new digital good, software, or content will help her in her life. Her issuing bank is responsible for approving the credit or debit card used in the transaction.

  2. Your business, the digital goods provider.

    For your businesses to start accepting credit and debit card purchases you’ll probably need to partner with a merchant bank who’ll start accepting payments on your behalf. Your merchant bank (the acquirer) will also need to set up a merchant account for your business. You can think of this merchant account as the holding tank where all the funds from the sale of your products are held before being distributed into your company’s actual bank account.

    It’s important to understand that merchant accounts can accept alternative payments, but we’re focusing on just card payments to keep things simple.

  3. The Payment Gateway

    Similar to the physical point of sale terminals found in brick and mortar stores, payment gateways allow businesses to take card payments directly from their site. There are regulations in place to protect the transmission of sensitive transaction data so payment gateways need to serve as the information highways for delivering encrypted payment information from an ecommerce site to the payment processor.

  4. The Payment Processor

    The payment processor is mainly responsible for connecting merchant accounts and payment gateways. After receiving the encrypted data from the payment gateway, the payment processor runs the payment information through a card association—a network of issuing and acquiring banks that process payment cards—which will then authorize or deny the request. This approval or rejection process will determine if the vendor is allowed to begin fulfilling the order.

The payment process may seem a little daunting at first. So we’re sharing a helpful infographic on navigating online payments for digital businesses.

fastspring online payment processing infographic

FastSpring Infographic: Online Payment Processing 101

FastSpring as your Merchant of Record

FastSpring’s end-to-end ecommerce solution takes the hassle out of online payment processing so you can focus on the rest of your business.

FastSpring’s does more than just ensuring payments securely hit your bank. As your Merchant of Record, FastSpring assumes all financial liability for your business. This includes chargebacks initiated by your customers, declines, and other back-office operations for your ecommerce business. Merchants of Records, like FastSpring, even help you stay compliant with local and international laws by handling VAT and taxes on your behalf.

Is your business ready to start growing sales volume? Click here to download our guide: What You Need to Know About Selling Online.


Robirt Kong

Robirt is a recent graduate from U.C. Santa Barbara with a B.A. in Communication and Econ. After spending six months at FastSpring as an intern, Robirt joined the team full-time as a Digital Marketing Specialist. Robirt combines his interest in digital marketing strategy and analytics to assist the team in a variety of projects including Content, SEO, and Paid Media. Outside of work, you can find him spending time with friends, enjoying Downtown Santa Barbara, and learning how to program.
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