An increasing number of businesses are now choosing to sell online. According to a recent report, global e-commerce sales will total US$6.3 trillion in 2024. As far as Italy is concerned, estimates show that the percentage of the population making online purchases will increase from 68.2% in 2023 to 72.4% in 2027. Being able to pay online is, without question, becoming more and more strategic. To stay abreast of the continuous growth of e-commerce, businesses need to develop a payment strategy that meets customers' needs and preferences.

If you want to start your own e-commerce business or grow an existing one, it can initially be challenging to navigate the complex world of online payments. In this article, find out how e-commerce payments work, what the different payment methods available on the market are, and how to secure online transactions.

What's in this article?

• The technology behind digital payments
  
• The main types of e-commerce payment methods in Italy
  
• PayPal: Is it safe for your business?
  
• Why accept Postepay as a payment method for your e-commerce business in Italy
  
• How to secure your transactions
  

The technology behind digital payments

To understand how digital payments – also known as electronic payments – work, let's first define them: they are financial transactions that take place using digital channels. They can include more traditional payment options – such as bank transfers and credit or debit card payments – as well as payments made using digital wallets, such as Google Pay and Apple Pay.

Globally, estimates show that digital payments will exceed US$11.5 trillion in 2024. There is also significant growth in this area in Italy, despite the country traditionally being very fond of using cash. Italy's digital transactions reached €206 billion in the first half of 2023, with growth of over 13% during the same period in 2022. The reasons are linked primarily to the pandemic period – when an unprecedented number of customers resorted to online purchases – but also to the speed and convenience of these payment methods, and to the new regulations that have recently come into force in the country. In Italy, legislative decree of 30 April 2022 no. 36 introduced the obligation for professionals and businesses to accept payments by credit or debit card (two digital payment methods). Those who do not accept a digital payment method risk having to pay a €30 administrative fine, in addition to 4% of the transaction's value – even for small amounts.

Let's now take a look at how digital payments work in practice.

The parties involved in digital payments

While digital payments happen almost instantly, several parties come into play behind the scenes, which – in those few seconds – implement a series of procedures to process a transaction successfully. These parties consist of:

• The customer or payer: The individual who initiates the process of purchasing goods or services from the business.
  
• The merchant or beneficiary: The business selling the goods or services.
  
• The payment gateway: The software application that acts as a bridge between the business's website and the payment processor.
  
• The payment processor: The business that has implemented the infrastructure and technology needed to validate payment information, authorise transactions and make the corresponding transfers from the issuing bank to the acquiring bank.
  
• The payment network: The organisation that facilitates the electronic transfer of funds between individuals, businesses and financial institutions. Payment networks (e.g. Visa, Mastercard, Discover, American Express) are interconnected ecosystems of financial entities (e.g. banks, credit card companies, credit unions) that work together to process cashless transactions as securely and as quickly as possible.
  

The e-commerce payment process

Let's see how payments work in e-commerce and how the various parties interact with each other to ensure a successful transaction:

• The customer enters the payment information in the payment form on the payment page of the business's website.
  
• The payment gateway receives this information and sends it securely to the payment processor.
  
• The payment processor, in turn, forwards it to the payment network (e.g. the credit card network, such as Visa or Mastercard). The payment network checks with the issuing bank that the necessary funds are available to make the purchase and that the card is not blocked.
  
• If the issuing bank accepts the payment, it transfers the money from the customer's account to the payment processor, which then sends it to the merchant account. The merchant account, in turn, transfers it to the business's main bank account.
  
• The payment gateway confirms the sale, both to the customer and to the business.
  

The main types of e-commerce payment methods in Italy

To maximise the conversion rate and expand into new markets, it is important to offer multiple payment methods, selecting those that are the right and relevant ones for your business. In recent years, new payment options have been added to the popular and widely used credit and debit cards. Here are the main payment methods available in Italy for e-commerce businesses in 2024:

• Credit and debit cards
  Credit cards and debit cards are the most commonly used e-commerce payment method in Italy. The main difference between credit and debit cards is that with the former, the account is typically debited at the end of the month, while with the latter, the money is withdrawn from the account immediately.

• Prepaid and top-up cards
  Italians consider prepaid cards to be a safe and reliable tool that enables them to control their expenses better, in addition to being accepted by the vast majority of e-commerce websites. In Italy, one of the most used prepaid cards – including for online purchases – is Postepay. Make sure you make it available as one of the payment methods for your online business.

• PayPal
  With PayPal, you can allow customers in over 200 markets to pay online. By connecting their PayPal account to a bank account or payment card, the customer does not need to communicate their financial data when making a purchase. For Italians, this makes PayPal one of the preferred e-commerce payment methods.

• Digital wallets
  Digital wallets (e.g. Apple Pay or Google Pay) are mobile applications that allow users to save their payment information so that they can pay directly from their smartphone or tablet instead of using physical payment cards. As there's no need to enter card details manually at the time of purchase, they are a quick and easy online payment option.

• Buy now, pay later options
  Deferred payments (also known as "buy now, pay later" or BNPL) involve the purchase price being divided into several instalments, the first of which is due at the time of purchase. While you, as the business, receive the full amount straight away, customers can pay in instalments over time – generally over the course of a few weeks or months. Some BNPL providers add interest to the service, but many offer interest-free repayment options.

• Bank transfer
  Bank transfers are a relatively little-used payment method in Italy and often not included among the options available on e-commerce websites. The timeframes for crediting the amounts are longer compared with using credit and debit cards, so they tend to be less attractive to businesses that generally prefer to collect the funds immediately. However, businesses that cater to more traditional customers – who may not yet be familiar with more modern e-commerce payment channels – may still choose to make this payment option available.

• Cash on delivery
  This is one of the first payment methods used at the dawn of e-commerce in Italy. It is considered a safe payment method, but it has disadvantages from a business point of view, as it is impractical and expensive. For example, if the customer is not present when the delivery is made, the business has to wait longer before receiving the payment.

PayPal: Is it safe for your business?

For Italians, PayPal is one of the preferred e-commerce payment methods. It is perceived as safe because it allows you to purchase online without disclosing your credit card details. But is it actually safe for your business? Let's take a look at the tools used by PayPal to protect sales:

• Seller protection
  PayPal's Seller Protection policy can come into play in two cases: if you receive an unauthorised payment, or if a customer claims that they did not receive the item through PayPal's Buyer Protection programme. In these cases, PayPal may cover the entire payment amount on eligible sales through the Seller Protection programme.

• Anti-fraud protection
  This is an integrated solution that uses machine learning and insights from the PayPal network to help you fight fraud. Using this tool, you are able to customise fraud filters according to your risk tolerance and specific business needs, thus helping to improve chargeback and refused transaction rates.

• Chargeback protection
  With its chargeback protection tool, PayPal monitors digital credit and debit card transactions, reviews fraud risks, and does not apply chargeback fees if a transaction ends up being "unauthorised" or for an "item not received".

• PSD2 and 3D Secure
  The PayPal platform complies with the two-factor authentication used by payment cards (3D Secure) and provides automatic updates so that users are always aware of changes to security protocols. The revised Payment Services Directive (PSD2) introduced strict security requirements for electronic payments in order to reduce cases of fraud. 3D Secure (Three-Domain Secure) established an additional level of protection for digital transactions made online using credit or debit cards. According to the new 3DS2 protocol, introduced by PSD2, a username and password are no longer sufficient from a security point of view. In fact, the user must authenticate using at least two of the following types of element:

  • Something the buyer knows (e.g. password, PIN)
    
  • Something the buyer has (e.g. a smartphone, OTC token, wearable device)
    
  • Something the buyer is (e.g. fingerprints, facial recognition)
    

3DS2 is the most commonly used method to ensure compliance with Strong Customer Authentication (SCA) – an authentication procedure that validates the identity of the user of a payment service or transaction.

Why accept Postepay as a payment method for your e-commerce business in Italy?

Postepay is the most commonly used prepaid card in Italy: 29 million cards have been issued and over two billion transactions were made in 2022. More than 1.5 million Italians chose Postepay cards to make their first e-commerce purchase. Launched by Poste Italiane in 2003 with the goal of stimulating alternative payments to cash, it has become the most popular top-up card in Italy – partly because the card is so easy to activate and use.

Available in different types for both customers and businesses, Postepay is a payment method that every e-commerce business operating in Italy should make available on its website.

How to secure your online transactions

One of the key concerns for anyone selling products or services online and accepting payments through their website or mobile applications is protecting financial transactions from unauthorised access, data breaches and fraud. But how can you actually protect your e-commerce payments?

Let's take a look at the main measures that can be taken:

• SSL encryption protocol
  A Secure Sockets Layer (SSL) certificate encrypts all information sent to your online store, making it more difficult for attackers to access your data. This helps protect both your website and your customers' data.

• Tokenisation
  Tokenisation replaces sensitive information – such as the card number or CVV – with a unique, random code, thus securing the actual card information.

• PCI DSS compliance
  The Payment Card Industry Data Security Standard (PCI DSS) consists of a set of security standards designed to ensure that all businesses processing, storing or transmitting credit card information maintain a secure environment. PCI DSS compliance helps businesses to minimise the risk of breaches, protect customer data and avoid potential fines or penalties.

• Two-step authentication
  Two-step authentication is a fundamental security measure for digital payments, as it verifies the identity of users attempting to access or complete a transaction. Two-step authentication adds an additional layer of security to e-commerce transactions. To make a payment, the user requires a second factor in addition to their password – for example, a one-time code sent via SMS or a fingerprint.

• Secure payment gateway
  Relying on a secure payment gateway that complies with PCI DSS and other relevant industry standards is key to the security of transactions on your e-commerce website, saving you the trouble of meeting these requirements yourself.

• Regular website updates
  It is important to schedule regular security updates to fix the latest vulnerabilities that your website is exposed to. It is therefore significant to update the core software running your e-commerce website – to protect your payment infrastructure and customer data from vulnerabilities, cyberattacks and unauthorised access.

Choosing the right payment provider is an important step in starting an online business and growing it – all while ensuring that you meet the latest compliance and security requirements needed to protect your payments, your data and that of your customers. Start now with Stripe to find out more about how we can help you achieve these goals.