In this article by Bret Williams, author of the book Learning Magento 2 Administration, we will see how to manage payment gateways, shipping methods and orders with Magneto 2. E-commerce doesn’t work unless customers actually purchase a product or service. In order to make that happen on your Magento store, you need to take payments, provide shipping solutions, collect any required taxes, and, of course, process orders.

In this article , we’re going to:

• Understand the checkout and payment process
• Discuss various payment methods you can offer your customers
• Configure table rate shipping and review other shipping options
• Manage the order process

(For more resources related to this topic, see here.)

It’s extremely important that you take care to understand and manage these aspects of your online business, as this involves money — the customer’s and yours. No matter how great your products or your pricing, if customers cannot purchase easily, understand your shipping and delivery, or feel in the least hesitant about completing their transaction, your customer leaves and neither they nor you achieve satisfactory results. Once an order is placed, you also have steps to take to process the purchase and make good on your obligation to fulfill your customer’s request.

Fortunately — as with many other aspects of online commerce — Magento has the features and tools in place to create a solid, efficient checkout experience.

Understanding the checkout and payment process

Since most people shopping online today have made at least one e-commerce purchase on a website, the general process of completing an order is fairly well established, although the exact steps will vary somewhat:

1. Customer reviews their shopping cart, confirming the items they have decided to purchase.
2. Customer enters their shipping destination information.
3. Customer chooses a shipping method based on cost, method and time of delivery.
4. Customer enters their payment information.
5. Customer reviews their order and confirms their intent to purchase.
6. The system (Magento, in our case) queries a payment processor for approval.
7. The order is completed and ready for processing.

Of course, as we’ll explore in this article, there is much more detail related to this process. As online merchants, you want your customers to have a thorough, yet easy, purchasing experience and you want a valid order that can be fulfilled without complications.

To achieve both ends, you have to prepare your Magento store to accurately process orders. So, let’s jump in.

Payment methods

When a customer places an order on your Magento store, you’ll naturally want to provide a means of capturing payment, whether it’s immediate (credit card, PayPal, etc.) or delayed (COD, check, money order, credit). The payment methods you choose to provide, of course, are up to you, but you’ll want to provide methods that:

1. Reduce your risk of not getting paid.
2. Provide convenience to your customers while fulfilling their payment expectations.

Consumers expect to pay by credit card or through a third-party service such as PayPal. Wholesale buyers may expect to purchase using a Purchase Order or sending you a check before shipment. As with any business, you have to decide what will best benefit both you and your buyers.

How Payment gateways work

If you’re new to online payments as a merchant, it’s helpful to have an understanding of how payments are approved and captured in e-commerce. For this explanation, we’re focusing on those payment gateways that allow you to accept credit and debit cards in your store. While PayPal Express and Standard works in a similar fashion, the three gateways that are included in the default Magento installation – PayPal Payments, Braintree and Authorize.net — process credit and debit cards similarly:

1. Your customer enters their card information in your website during checkout.
2. When the order is submitted, Magento sends a request to the gateway (PayPal Payments, Braintree or Authorize.net) for authorization of the card.
3. The gateway submits the card information and order amount to a clearinghouse service that determines if the card is valid and the order amount does not exceed the credit limit of the cardholder.
4. A success or failure code is returned to the gateway and on to the Magento store. If the intent is to capture the funds at time of purchase, the gateway will queue the capture into a batch for processing later in the day and notify Magento that the funds are “captured”.
5. A successful transaction will commit the order in Magento and a failure will result in a message to the purchaser.

Other payment methods, such as PayPal Standard and PayPal Express, take the customer to the payment provider’s website to complete the payment portion of the transaction. Once the payment is completed, the customer is returned to your Magento store front.

When properly configured, integrated payment gateways will update Magento orders as they are authorized and/or captured. This automation means you spend less time managing orders and more time fulfilling shipments and satisfying your customers!

PCI Compliance

The protection of your customer’s payment information is extremely important. Not only would a breach of security cause damage to your customer’s credit and financial accounts, but the publicity of such a breach could be devastating to your business.

Merchant account providers will require that your store meet stringent guidelines for PCI Compliance, a set of security requirements called Payment Card Industry Data Security Standard (PCI DSS). Your ability to be PCI compliant is based on the integrity of your hosting environment and by why methods you allow customers to enter credit card information on your site.

Magento 2 no longer offers a Stored Credit Card payment method. It is highly unlikely that you could — or would want to — provide a server configuration secure enough to meet PCI DSS requirements for storing credit card information. You probably don’t want the liability exposure, as well.

You can, however, provide SSL Encryption that could satisfy PCI compliance as long as the credit card information is encrypted before being sent to your server, and then from your server to the credit card processor. As long as you’re not storing the customer’s credit card information on your server, you can meet PCI compliance as long as your hosting provider can assure compliance for server and database security.

Even with SSL encryption, not all hosting environments will pass PCI DSS standards. It’s vital that you work with a hosting company that has real Magento experience and can document proof of PCI compliance.

Therefore, you should decide whether to provide onsite or offsite credit card payments. In other words, do you want to take payment information within your Magento checkout page or redirect the user to a payment service, such as PayPal, to complete their transaction?

There are pros and cons of each method. Onsite transactions may be perceived as less secure and you do have to prove PCI compliance to your merchant account provider on an ongoing basis. However, onsite transactions mean that the customer can complete their transaction without leaving your website. This helps to preserve your brand experience for your customers.

Fortunately, Magento is versatile enough to allow you to provide both options to your customers. Personally, we feel that offering multiple payment methods means you’re more likely to complete a sale, while also showing your customers that you want to provide the most convenience in purchasing.

Let’s now review the various payment methods offered by default in Magento 2.

Magento 2 comes with a host of the most popular and common payment methods. However, you should review other possibilities, such as Amazon Payments, Stripe and Moneybookers, depending on your target market. We anticipate that developers will be offering add-ons for these and other payment methods.

Note that as you change the Merchant Location at the top of the Payment Methods panel, the payment methods available to you may change.

PayPal all-in-one payment solutions

While PayPal is commonly known for their quick and easy PayPal Express buttons — the ubiquitous yellow buttons you see throughout the web — PayPal can provide you with credit/debit card solutions that allow customers to use their cards without needing a PayPal account. To your customer, the checkout appears no different than if they were using a normal credit card checkout process.

The big difference is that you have to set up a business account with PayPal before you can begin accepting non-PayPal account payments. Proceeds will go almost immediately into your PayPal account (you have to have a PayPal account), but your customers can pay by using a credit/debit card or their own PayPal account.

With all-in-one solution, PayPal approves your application for a merchant account and allows you to accept all popular cards, including American Express, as a flat 2.9% rate, plus $0.30 per transaction. PayPal payments incur normal per transaction PayPal charges.

We like this solution as it keeps all your online receipts in one account, while also giving you fast access to your sales income. PayPal also provides a debit card for its merchants that can earn back 1% on purchases. We use our PayPal debit card for all kinds of business purchases and receive a nice little cash back dividend each month.

PayPal provide two ways to incorporate credit card payment capture on your website:

• PayPal Payments Advanced inserts a form on your site that is actually hosted from PayPal’s highly secure servers. The form appears as part of your store, but you don’t have any PCI compliance concerns.
• PayPal Payments Pro allows you to obtain payment information using the normal Magento form, then submit it to PayPal for approval.

The difference to your customer is that for Advanced, there is a slight delay while the credit card form is inserted into the checkout page. You may also have some limitations in terms of styling.

PayPal Standard, also a part of the all-in-one solution, takes your customer to a PayPal site for payment. Unlike PayPal Express, however, you can style this page to better reflect your brand image. Plus, customers do not have to have a PayPal account in order to use this checkout method.

PayPal payment gateways

If you already have a merchant account for collecting online payments, you can still utilize the integration of PayPal and Magento by setting up a PayPal business account that is linked to your merchant account. Instead of paying PayPal a percentage of each transaction — you would pay this to your merchant account provider — you simply pay a small per transaction fee.

PayPal Express

Offering PayPal Express is as easy as having a PayPal account. It does require some configurations of API credentials, but it does provide the simplest means of offering payment services without setting up a merchant account.

PayPal Express will add “Buy Now” buttons to your product pages and the cart page of your store, giving shoppers quick and immediate ability to checkout using their PayPal account.

Braintree

PayPal recently acquired Braintree, a payment services company that adds additional services to merchants. While many of their offerings appear to overlap PayPal’s, Braintree brings additional features to the marketplace such as Bitcoin, Venmo, Android Pay and Apple Pay payment methods, recurring billing and fraud protection. Like PayPal Payments, Braintree charges 2.9% + $0.30 per transaction.

A Word about Merchant Fees

After operating our own e-commerce businesses for many years, we have used many different merchant accounts and gateways. At first glance, 2.9% — offered by PayPal, Braintree and Stripe — appear to be expensive percentages. If you’ve been solicited by merchant account providers, you no doubt have been quoted rates as low as 1.7%. What is not often disclosed is that this rate only applies to basic cards that do not contain miles or other premiums. Rates for most cards you accept can be quite a bit higher. American Express usually charges more than 3% on transactions. Once you factor in gateway costs, reporting, monthly account costs, etc. you may find, as we did, that our total merchant costs using a traditional merchant account averaged over 3.3%! One cost you may not think to factor is the expense of set-up and integration. PayPal and Braintree have worked hard to create easy integrations to Magento (Stripe is not yet available for Magento 2 as of this writing).

Check / Money Order

If you have customers for whom you will accept payment by check and/or money order, you can enable this payment method. Be sure to enter all the information fields, especially Make Check Payable to and Send Check to. You will most likely want to keep the New Order Status as Pending, which means the order is not ready for fulfillment until you receive payment and update the order as Paid.

As with any payment method, be sure to edit the Title of the method to reflect how you wish to communicate it to your customers. If you only wish to accept Money Orders, for instance, you might change Title to Money Orders (sorry, no checks).

Bank transfer payment

As with Check / Money order, you can allow customers to wire money to your account by providing information to your customers who choose this method.

Cash on Delivery payment

Likewise, you can offer COD payments. We still see this method being made available on wholesale shipments, but very rarely on B2C (Business-to-Consumer) sales. COD shipments usually cost more, so you will need to accommodate this added fee in your pricing or shipping methods. At present, there is no ability to add a COD fee using this payment method panel.

Zero Subtotal Checkout

If your customer, by use of discounts or credits, or selecting free items, owes nothing at checkout, enabling this method will cause Magento to hide payment methods during checkout. The content in the Title field will be displayed in these cases.

Purchase order

In B2B (Business-to-Business) sales, it’s quite common to accept purchase order (PO) for customers with approved credit. If you enable this payment method, an additional field is presented to customers for entering their PO number when ordering.

Authorize.net direct post

Authorize.net — perhaps the largest payment gateway provider in the USA — provides an integrated payment capture mechanism that gives your customers the convenience of entering credit/debit card information on your site, but the actual form submission bypasses your server and goes directly to Authorize.net. This mechanism, as with PayPal Payments Advanced, lessens your responsibility for PCI compliance as the data is communicated directly between your customer and Authorize.net instead of passing through the Magento programming.

In Magento 1.x, the regular Authorize.net gateway (AIM) was one of several default payment methods. We’re not certain it will be added as a default in Magento 2, although we would imagine someone will build an extension. Regardless, we think Direct Post is a wonderful way to use Authorize.net and meet your PCI compliance obligations.

Shipping methods

Once you get paid for a sale, you need to fulfill the order and that means you have to ship the items purchased. How you ship products is largely a function of what shipping methods you make available to your customers.

Shipping is one of the most complex aspects of e-commerce, and one where you can lose money if you’re not careful. As you work through your shipping configurations, it’s important to keep in mind:

• What you charge your customers for shipping does not have to be exactly what you’re charged by your carriers. Just as you can offer free shipping, you can also charge flat rates based on weight or quantity, or add a surcharge to live rates.
• By default, Magento does not provide you with highly sophisticated shipping rate calculations, especially when it comes to dimensional shipping. Consider shipping rate calculations as estimates only. Consult with whomever is actually doing your shipping to determine if any rate adjustments should be made to accommodate dimensional shipping.

Dimensional shipping refers to a recent change by UPS, FedEx and others to charge you the greater of two rates: the cost based on weight or the cost based on a formula to determine the equivalent weight of a package based on its size: (Length x Width x Height) ÷ 166 (for US domestic shipments; other factors apply for other countries and exports). Therefore, if you have a large package that doesn’t weigh much, the live rate quoted in Magento might not be reflective of your actual cost once the dimensional weight is calculated. If your packages may be large and lightweight, consult your carrier representative or shipping fulfillment partner for guidance.

• If your shipping calculations need more sophistication than provided natively in Magento 2, consider an add-on. However, remember that what you charge to your customers does not have to be what you pay. For that reason — and to keep it simple for your customers — consider offering Table rates (as described later).
• Each method you choose will be displayed to your customers if their cart and shipping destination matches the conditions of the method. Take care not to confuse your customers with too many choices: simpler is better.

Keeping these insights in mind, let’s explore the various shipping methods available by default in Magento 2.

Before we go over the shipping methods, let’s go over some basic concepts that will apply to most, if not all, shipping methods.

Origin

From where you ship your products will determine shipping rates, especially for carrier rates (e.g. UPS, FedEx). To set your origin, go to Stores | Configuration | Sales | Shipping Settings and expand the Origin panel. At the very least, enter the Country, Region/State and ZIP/Postal Code field. The others are optional for rate calculation purposes.

At the bottom of this panel is the choice to Apply custom Shipping Policy. If enabled, a field will appear where you can enter text about your overall shipping policy. For instance, you may want to enter Orders placed by 12:00p CT will be processed for shipping on the same day. Applies only to orders placed Monday-Friday, excluding shipping holidays.

Handling fee

You can add an invisible handling fee to all shipping rate calculations. Invisible in that it does not appear as a separate line item charge to your customers. To add a handling fee to a shipping method:

• Choose whether you wish to add a fixed amount or a percentage of the shipping cost
• If you choose to add a percentage, enter the amount as a decimal number instead of a percentage (example: 0.06 instead of 6%)

Allowed countries

As you configure your shipping methods, don’t forget to designate to which countries you will ship. If you only ship to the US and Canada, for instance, be sure to have only those countries selected. Otherwise, you’ll have customers from other countries placing orders you will have to cancel and refund.

Method not available

In some cases, the method you configured may not be applicable to a customer based on destination, type of product, weight or any number of factors. For these instances, you can choose to:

• Show the method (e.g. UPS, USPS, DHL, etc.), but with an error message that the method is not applicable
• Don’t show the method at all

Depending on your shipping destinations and target customers, you may want to show an error message just so the customer knows why no shipping solution is being displayed. If you don’t show any error message and the customer disqualifies for any shipping method, the customer will be confused.

Free shipping

There are several ways to offer free shipping to your customers. If you want to display a Free Shipping option to all customers whose carts meet a minimum order amount (not including taxes or shipping), enable this panel.

However, you may want to be more judicious in how and when you offer free shipping. Other alternatives include:

• Creating Shopping Cart Promotions
• Include a free shipping method in your Table Rates (see later in this section)
• Designate a specific free shipping method and minimum qualifying amount within a carrier configuration (such as UPS and FedEx)

If you choose to use this panel, note that it will apply to all orders. Therefore, if you want to be more selective, consider one of the above methods.

Flat Rate

As with Free Shipping, above, the Flat Rate panel allows you to charge one, singular flat rate for all orders regardless of weight or destination. You can apply the rate on a per item or per order basis, as well.

Table Rates

While using live carrier rates can provide more accurate shipping quotes for your customers, you may find it more convenient to offer a series of rates for your customers at certain break points.

For example, you might only need something as simple as for any domestic destination:

• 0-5 lbs, $5.99
• 6-10 lbs, $8.99
• 11+ lbs, $10.99

Let’s assume you’re a US-based shipper. While these rates will work for you when shipping to any of the contiguous 48 states, you need to charge more for shipments to Alaska and Hawaii. For our example, let’s assume tiered pricing of $7.99, $11.99 and $14.99 at the same weight breaks.

All of these conditions can be handled using the Table Rates shipping method. Based on our example, we would first start by creating a spreadsheet (in Excel or Numbers) similar to the following:

Country	Region/State	Zip/Postal Code	Weight (and above)	Shipping Price
USA	*	*	0	5.99
USA	*	*	6	8.99
USA	*	*	11	10.99
USA	AK	*	0	7.99
USA	AK	*	6	11.99
USA	AK	*	11	14.99
USA	HI	*	0	7.99
USA	HI	*	6	11.99
USA	HI	*	11	14.99

Let’s review the columns in this chart:

• Country. Here, you would enter the 3-character country code (for a list of valid codes, see http://goo.gl/6A1woj).
• Region/State. Enter the 2-character code for any state or province.
• Zip/Postal Code. Enter any specific postal codes for which you wish the rate to apply.
• Weight (and above). Enter the minimum applicable weight for the range. The assigned rate will apply until the weight of the cart products combined equals a higher weight tier.
• Shipping Price. Enter the shipping charge you wish to provide to the customer. Do not include the currency prefix (example: “$” or “€”).

Now, let’s discuss the asterisk (*) and how to limit the scope of your rates. As you can see in the chart, we have only indicated rates for US destinations. That’s because there are no rows for any other countries. We could easily add rates for all other countries, simply by adding rows with an asterisk in the first column. By adding those rows, we’re telling Magento to use the US rates if the customer’s ship-to address is in the US, and to use other rates for all other country destinations.

Likewise for the states column: Magento will first look for matches for any state codes listed. If it can’t find any, then it will look for any rates with an asterisk. If no asterisk is present for a qualifying weight, then no applicable rate will be provided to the customer.

The asterisk in the Zip/Postal Code column means that the rates apply to all postal codes for all states.

To get a sample file with which to configure your rates, you can set your configuration scope to one of your Websites (Furniture or Sportswear in our examples) and click Export CSV in the Table Rates panel.

Quantity and price based rates

In the preceding example, we used the weight of the items in the cart to determine shipping rates. You can also configure table rates to use calculations based on the number of items in the cart or the total price of all items (less taxes and shipping).

To set up your chart, simply rename the fourth column “Quantity (and above)” or “Subtotal (and above).”

Save your rate table

To upload your table rates, you’ll need to save/export your spreadsheet as a CSV file. You can name it whatever you like. Save it to your computer where you can find it for the next steps.

Table rate settings

Before you upload your new rates, you should first set your Table Rates configurations. To do so, you can set your default settings at the Default configuration scope. However, to upload your CSV file, you will need to switch your Store View to the appropriate Website scope.

When changing to a Website scope, you will see the Export CSV button and the ability to upload your rate table file. You’ll note that all other settings may have Use Default checked. You can, of course, uncheck this box beside any field and adjust the settings according to your preferences.

Let’s review the unique fields in this panel:

• Enabled. Set to “Yes” to enable table rates.
• Title. Enter the name you wish displayed to customers when they’re presented with a table rate-based shipping charge in the checkout process.
• Method Name. This name is presented to the customer in the shopping cart.
  

  You should probably change the default “Table Rate” to something more descriptive, as this term is likely irrelevant to customers. We have used terms “Standard Ground,” “Economy,” or “Saver” as names. The Title should probably be the same, as well, so that the customer, during checkout, has a visual confirmation of their shipping choice.

• Condition. This allows you to choose the calculation method you want to use. Your choices, as we described earlier, are “Weight vs. Destination,” “Price vs. Destination,” and “# of items vs. Destination.”
• Include Virtual Products in Price Calculation. Since virtual products have no weight, this will have no effect on rate calculations for weight-based rates. However, it will affect rate calculations for price or quantity-based rates.

Once you have your settings, click Save Config.

Upload Rate Table

Once you have saved your settings, you can now click the button next to Import and upload your rate table. Be sure to test your rates to see that you have properly constructed your rate table.

Carrier Methods

The remaining shipping methods involve configuring UPS, USPS, FedEx and/or DHL to provide “live” rate calculations. UPS is the only one that is set to query for live rates without the need for you to have an account with the carrier. This is both good and bad. It’s good, as you only have to enable the shipping method to have it begin querying rates for your customers. On the flip side, the rates that are returned are not negotiated rates. Negotiated rates are those you may have been offered as discounted rates based on your shipping volume.

FedEx, USPS and DHL require account-specific information in order to activate. This connection with your account should provide rates based on any discounts you have established with your carrier. If you wish to use negotiated rates for UPS, you may have to find a Magento add-on that will accommodate or have your developer extend your Magento installation to make a modified rate query.

If you have some history with shipping, you should negotiate rates with the carriers. We have found most are willing to offer some discount from “published rates.”

Shipping integrations

Unless you have your own sophisticated warehouse operation, it may be wise to partner with a fulfillment provider that can not only store, pick, pack and ship your orders, but also offers deep discounts on shipping rates due to their large volumes.

• Amazon FBA (Fulfillment By Amazon) is a very popular solution. Shipping is a low flat rate based on weight (http://goo.gl/UKjg7).
• ShipWire is another fulfillment provider that is well integrated with Magento. In fact, their integration can provide real-time rate quotes for your customers based on the products selected, warehouse availability and destination (http://www.ShipWire.com). We have not heard if they have updated their integration for Magento 2, yet, but we suspect they will.

Summary

Selling is the primary purpose of building an online store. As you’ve seen in this article, Magento 2 arms you with a very rich array of features to help you give your customers the ability to purchase using a variety of payment methods. You’re able to customize your shipping options and manage complex tax rules. All of this combines to make it easy for your customers to complete their online purchases.

Resources for Article:

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Further resources on this subject:

• Social Media and Magento [article]
• Creating a Responsive Magento Theme with Bootstrap 3 [article]
• Magento 2 – the New E-commerce Era [article]

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