The Complete E-Commerce Payment Stack: From Checkout to Reconciliation

India's e-commerce market is projected to reach $200 billion by 2027, driven by rising internet penetration, UPI ubiquity, and a growing middle class comfortable with online shopping. Behind every successful e-commerce business is a payment stack that handles the full lifecycle — from collecting customer payments to settling with sellers, managing refunds, handling chargebacks, and reconciling everything in between.

In this comprehensive guide, we dissect the modern e-commerce payment stack for Indian businesses, drawing on real-world patterns from Paywize's marketplace and D2C customers. Whether you are building a new platform or optimising an existing one, this guide covers the architecture, technology choices, and operational practices that separate high-performing payment stacks from fragile ones.

Anatomy of an E-Commerce Payment Stack

A complete e-commerce payment stack consists of five layers: payment acceptance (collecting money from buyers), payment routing (choosing the optimal processing path), settlement and disbursement (paying sellers and vendors), refund and dispute management (handling returns and chargebacks), and reconciliation and reporting (tying everything together financially). Each layer has distinct requirements, and weaknesses in any layer cascade through the entire system.

Layer 1: Payment Acceptance

Supporting Every Payment Method

Indian e-commerce customers expect to pay using their preferred method. Your checkout must support UPI (Intent, QR, and collect), credit and debit cards (Visa, Mastercard, RuPay), net banking across all major banks, wallets (Paytm, PhonePe, Amazon Pay), Buy Now Pay Later (Simpl, LazyPay, ZestMoney), EMI options on cards and BNPL, and Cash on Delivery with partial prepayment options.

Paywize's checkout SDK renders an optimised payment page that dynamically orders payment methods based on conversion data for your specific customer demographics. If 70% of your customers pay via UPI, UPI appears first. This simple optimisation improves checkout conversion by 5-8%.

Checkout Conversion Optimisation

Cart abandonment at checkout is the single biggest revenue leak in e-commerce. Common causes include too many steps in the payment flow, slow page loads, unfamiliar or untrusted payment interfaces, lack of preferred payment method, and transaction failures without clear retry options.

Paywize addresses each of these through a streamlined checkout flow that completes in 2 clicks for returning customers, sub-second page loads with lazy-loaded payment method modules, a customisable branded checkout that matches your site's look and feel, smart payment method ordering based on historical conversion, and automatic retry on alternate rails when a transaction fails.

Layer 2: Intelligent Payment Routing

Once a customer initiates payment, the routing layer determines the optimal processing path. For card payments, this means selecting the best acquiring bank. For UPI, it means choosing the PSP handle and settlement path. For net banking, it means routing through the most reliable gateway for that specific bank.

Paywize's Smart Routing engine evaluates real-time success rates across all available processing paths and selects the one with the highest probability of success for each transaction's specific characteristics (card BIN, issuing bank, amount, time of day). When the primary path fails, automatic failover retries on an alternate path within milliseconds — invisible to the customer. This routing intelligence is the primary reason our e-commerce partners see 35-45% fewer payment failures.

Layer 3: Settlement and Seller Payouts

Marketplace Settlement Logic

For marketplaces, settlement is complex. Each order may involve multiple sellers, platform commission, GST components, TDS deductions (Section 194O), and logistics adjustments. The settlement engine must split the collected payment into the correct amounts for each party and disburse on the agreed schedule.

Paywize's split settlement API handles this automatically. When a payment is collected, you specify the split rules — platform fee percentage, fixed commission, GST treatment, and TDS deduction. The system calculates each party's share and queues seller payouts for the configured settlement cycle (instant, T+1, T+3, or weekly). Seller payouts are processed via IMPS or NEFT through our bulk payout infrastructure, with full reconciliation tying each disbursement back to the original customer payment.

D2C Settlement

For direct-to-consumer brands, settlement is simpler but speed matters. Paywize offers T+0 (same day) settlement for eligible merchants, meaning funds from today's sales are in your bank account by evening. This is a significant cash flow advantage over the T+2 to T+7 settlement cycles offered by most payment gateways.

Layer 4: Refunds and Disputes

E-commerce return rates in India range from 15-30% depending on the category (apparel sees the highest rates). Your payment stack must handle refunds quickly and accurately to maintain customer trust and comply with consumer protection regulations.

Instant Refunds

Traditional refund cycles take 5-7 business days for cards and 2-3 days for UPI. Paywize's instant refund capability credits the customer's account within minutes by issuing a fresh payout to their bank account or UPI ID, rather than waiting for the original payment to reverse through banking channels. This dramatically improves customer satisfaction and reduces support tickets.

Chargeback Management

Chargebacks are an unavoidable reality of e-commerce payments. Paywize's chargeback management system provides real-time alerts when a chargeback is filed, auto-populates response templates with transaction evidence (delivery confirmation, customer communication), tracks response deadlines, and analyses chargeback patterns to identify fraud vectors. Our e-commerce partners maintain chargeback rates well below the 1% threshold that triggers card network penalties.

Layer 5: Reconciliation and Reporting

For e-commerce businesses, reconciliation is multidimensional. You need to reconcile customer payments against orders, settlements against collected amounts (accounting for fees and taxes), refunds against returned orders, seller payouts against settlement calculations, and bank credits against gateway settlements.

Paywize's auto-reconciliation engine handles all five dimensions. Every transaction — payment, settlement, refund, payout — carries linked references that connect the entire chain. The reconciliation dashboard shows real-time status across all dimensions, and exceptions are flagged automatically. Financial reports are available via API for integration with your BI and accounting systems.

Case Study: A Leading Fashion Marketplace

A prominent Indian fashion marketplace processing ₹150 crore monthly switched to Paywize's full-stack payment infrastructure. Results after six months: payment success rate improved from 88% to 96.5% (Smart Routing and failover), refund processing time dropped from 5 days to under 30 minutes (instant refunds), seller settlement cycle reduced from T+7 to T+1, monthly reconciliation effort decreased from 3 full-time employees to 4 hours per week (auto-reconciliation), and chargeback rate dropped from 1.2% to 0.3% (fraud detection and evidence automation).

Paywize replaced three separate vendors — payment gateway, payout provider, and reconciliation tool — with a single integrated platform. The improvement in success rates alone recovered more than the entire cost of the switch. — VP of Finance, Leading Fashion Marketplace

Building Your E-Commerce Payment Stack

Whether you are launching a new e-commerce business or upgrading your existing payment infrastructure, Paywize provides every layer of the stack. Start with payment acceptance using our checkout SDK, add seller settlements with the split payout API, enable instant refunds, and turn on auto-reconciliation. Each layer can be adopted independently, so you can migrate incrementally without disrupting operations.

Get started at dashboard.paywize.in or schedule a consultation with our e-commerce solutions team to design the optimal payment stack for your platform's specific needs and scale.