Similar to the number of eCommerce websites in the market, there was a scarcity in the number of online payment gateway providers anyone could opt for earlier. Thankfully, that isn’t the case anymore.
Setting up online payment methods for products and services is no longer a challenge for eCommerce businesses.
According to research, 86 percent of customers make online purchases via credit or debit cards, and more than 60 percent consider it to be their favored payment method when making a purchase.
A payment gateway refers to a software that securely interfaces between an eCommerce website and a customer’s preferred mode of payment, which can be their bank account, credit card, debit card, gift card or any online wallets.
Some of the examples of recognized payment gateways are BrainTree, PayU, Amazon Payments, Stripe, PayPal, Skrill, to name a few.
Watch out for payment gateway providers list at the end of the article.
With the help of online payment gateways, it becomes easy to accept several types of electronic payments. Instead of you having to set up and run all the software, hardware, connections, and security, online payment gateway services offer a complete all-in-one solution. For many small businesses, the ease of a payment gateway is an excellent way to run eCommerce Solutions.
Here are some of the questions you should ask yourself before choosing a payment gateway:
- What will be the service cost?
- What features do they provide, for example, fraud security, virtual terminals?
- Is it compulsory to have a merchant account for your chosen gateway?
- Does the payment gateway support your online store’s country?
To better understand the importance of these questions, let’s get into further details about how payment gateways work.
List of Payment Gateways
Like every market, you’ll find a number of national and international companies competing to provide the best services with some useful payment gateway features. Identify which service suits your business best.
Here’s a quick payment gateway providers list to get you started:
- WooCommerce Payments
- Shopify Payments
A Step-by-Step Overview of how a Payment Gateway Works
Users are required to pay for subscriptions, advanced functionality, and any SaaS.
- eCommerce websites require users to fill a registration form during the checkout process, and select a preferred payment method.
- Payment information collected by this form is processed by a payment gateway, and securely transferred to the processing bank for approval via SSL.
- The processing bank sends the request via MasterCard or Visa’s payment network to the card issuer. Other cards like Discover and American Express, act as both card issuers and processors – making the authorization process easy.
- The card issuer approves or declines the transaction, and sends its response through Visa or MasterCard, to the processing bank. Then, the processing bank forwards the response to the merchant through the gateway, who finishes the transaction accordingly.
- If the transaction is successful, the merchant deposits the receipt with the processing bank.
- The payment processor adds the funds to the merchant’s account and adds the transaction to Visa/MasterCard for a settlement.
- The company issuing the card then pays the processing bank, while simultaneously taking out the funds from the card issuer’s account.
- The issuing bank adds the transaction to the cardholder’s account and demands the payment in a monthly statement or debits the amount immediately.
Finding the right payment gateway to suit your business is a time-consuming process, given the extensive list of providers. Online payment gateway providers must adhere to all payment processing best practices (mentioned above) for easy and secure payments.
12 Important Factors to Consider when Choosing a Payment Gateway
1. Choose an Appropriate Payment Flow
As your business grows, your eCommerce payment gateway should be able to scale along effortlessly. You need to select the most appropriate payment flow for your business to add a payment gateway to a website.
- A site with an integrated payment form used to send information to a secure payment gateway: With this option, payment details are sent through a secure form. The form contains all the required information and passes it to the gateway provider through API calls. This may require additional programming, and therefore, boosts the overall cost of payment gateway integration process.
- iFrame or redirect for payments: Either customers are redirected to a secure, hosted payment page, or they are required to enter their information in an embedded iFrame on the website. Developers can leverage this option as it takes less time to integrate.
- Having an Escrow system: This payment gateway option suits certain types of businesses. A secure escrow system, built within your eCommerce platform, can withhold funds before the admin grants the right authority. For example, if your platform works as an intermediary in trading operations, or serves as another type of online marketplace (like a bidding portal), you might need to create a dedicated on-platform store, where the traded funds of the two parties will be stored safely, and arbitraged while the deal is in process.
2. Choosing the Correct Product
When it comes to selling products and services online, a payment gateway is required on every website. It allows customers to buy a product or service, while business owners receive these payments hassle-free. To choose the right product, you should consider how adaptable your payment solution is, while keeping its security in mind.
It’s also very important to figure out how to add a payment gateway to your website – this doesn’t mean you have to do it yourself, you should hire an expert to take care of this. Select the best online payment method for your business and for your customers.
3. Make your Customers Feel Safe and Secure
Big companies have taken the online shopping experience above and beyond – raising customer expectations from all eCommerce websites. Even if you are running a small business, your customers will expect a high quality website that runs on the most secure payment options.
If you’re selling online, you are directly or indirectly competing with the likes of Amazon, Walmart, etc.
For instance, some payment gateways allow you to customize the whole payment experience to reflect your brand’s typeface, logo, and color palette. Some customers don’t even realize that they might be redirected to a third-party website temporarily to process their transactions safely.
Make sure your payment gateway is certified for following information security standards like PCI-DSS. PCI Standard is mandated by the card brands but administered by the Payment Card Industry Security Standards Council.
4. Consider Fees and Service Agreement Requirements
Pricing’s for payment gateways are commonly based on the type of transactions a business conducts (online or in-person), and even business sales, revenue consistency, transaction frequency, and the markets served.
It’s crucial to compare how the business model coincides with the payment provider, or a gateway’s fee structure. A few services may require setup fees and contracts, or they may charge transaction fees if a certain order and transaction volume isn’t met.
5. Ensure Effective Transactions
According to a survey conducted, more than 25 percent of customers will abandon a buy if they are compelled to register for an account to complete it. If your checkout procedure uses a third-party shopping cart with an enrollment procedure built into the cart, ensure that you can make it an optional factor that allows for a “guest” checkout. Likewise, your payment gateway should enable you to remove unwanted form fields for a simpler checkout process. Big eCommerce businesses expect online retailers to boost conversions by up to 50%, by eliminating redundancies, such as wanting the customer to enter both billing and shipping information, even if the postal addresses are the same.
6. Make Checkout Easy on All Devices
Marketers believe that approximately 15 percent of e-commerce sales have happened on a mobile device in the past 2-3 years, and that figure is increasing steadily. As you evaluate your payment gateway options, make sure that you can provide a working checkout experience that is receptive to different mobile devices, and network types.
7. Multiple Features to Choose From
Online payment gateway service providers offer several features, depending on your business needs. For example, if you need to provide your products and services around the world, your payment gateway should provide a global solution, and accept several credit cards, debit cards, and currencies, based on different countries.
Payment gateways also impact your efficiency. Be sure to find out if your chosen payment gateway supports electronic invoicing, all payments types, text/email reminders for customers, smart charge back management, etc.
8. Easy Integration Process
Online payment gateway integration definitely isn’t a DIY process. Most payment gateways provide detailed instructions on integrating to popular eCommerce platforms like Shopify, Magento, WooCommerce, etc.
The ideal solution is to select a payment gateway system that doesn’t botch up your website’s UX with a slow payment process. Select a payment gateway that makes it easy and beneficial for your customers to make payments on your website where they can select a payment method of their choice.
9. Merchant Account
It is crucial to have a merchant account to receive funds through an online payment gateway.
What is a merchant account? It’s used when customers make an online payment through a payment gateway; the money is temporarily transferred to a separate retailer account. This is different from your actual bank account. The cash stored in a merchant account has to wait until it gets approved by the customer’s processing bank. After approval, the money is transferred to your bank account.
Even though it seems to be an extra task, merchant accounts provide an extra layer of security and funds management for both sellers and buyers. As an alternative, some payment gateways do not require a merchant account, and transfer money directly to the seller’s account. In such cases, payment gateways can charge a higher processing fee.
10. Recurring Billing
Recurring billing allows you to set up an automatic billing cycle for your customers, making it an absolute necessity for companies with monthly payment plans. Subscription-based services like Netflix run on a recurring payment model.
Moreover, non-profits have found utility in recurring billing, as this functionality enables organizations to collect funds from regular contributors consistently.
11. Mobile Payments
In the coming years, mobile payments will replace credit card buying, even in point-of-sale environments. Payment gateway providers, with the help of mobile payments, enable buyers to transfer money using their mobile phones, either with top branded apps or with a mobile-optimized site.
Mobile payments are powered by payment gateways, but are optimized for mobile devices like phone and tablets. The rise of digital wallets like Apple Pay, Google Pay, Samsung Pay, etc. has changed how customers pay through mobile, and payment gateways are adding support for all major digital wallets.
12. 24×7 Customer Support
Several payment gateway services limit their support to tickets, or emails. In this situation, users need to follow manual instructions to fix a problem. If you feel more comfortable talking to a person instead of sending emails, check whether the provider offers live technical support, at least within standard working hours, so that you can quickly resolve any technical problems.
Best Payment Gateway for Small Businesses and Startups
Small businesses or startups that rely on CMS’ like WordPress/Shopify, and don’t want to invest in larger e-payment gateways – can choose simpler, more CMS-integrated payment solutions for their business.
1. WooCommerce Payments
WooCommerce is a plugin that turns WordPress into an eCommerce platform. With $0 billed annually and no monthly fees, WooCommerce Payments is a convenient way to manage your transactions.
Due to the CMS-wide integration with WordPress you can use all the features, which were previously available on third party websites, straight from your WordPress dashboard.
2. Shopify Payments
Shopify is perhaps the most widely used eCommerce platform in the world right now, so it makes sense for Shopify to provide their own payment gateway for its customer.
Along with all the basic payment gateway features, Shopify Payments supports stores in most of the countries that run Shopify. Similar to how WooCommerce integrates with WordPress, Shopify Payments is a native feature that can be accessed straight from your Shopify dashboard.
However, Shopify Payments doesn’t provide free service, and comes with a starting plan of $29/month.
Dig a Little Deeper
Questions that cross almost everybody’s mind: What is the cheapest payment gateway? Are there any hidden costs? How long does it take to process the money? How much will Chargebacks cost? Dig a little deeper to find the answers and ask vendors about:
- Rates for rewards, business, and international cards: These rates are not the same as standard transaction fees. Find out if they’re higher than your budget allows.
- Minimum limit and annual fees: A minimum limit means your eCommerce website has to make a sale of that set minimum amount, otherwise you can be charged extra. Some payment gateway providers also charge annually, instead of charging on minimums.
- Chargebacks: Chargebacks are transactions with dispute. Customers can raise a dispute and have their money returned to them. A merchant receives this request and reverses the transaction. Chargebacks are a safety measure that curbs unauthorized or fishy transactions. Payment gateways may charge you per dispute, so be sure to look into this as well.
- PCI compliance: PCI compliance is an information security standard for secure card payments. All businesses may not be in a position to undertake this compliance due to heavy costs, in that case you can go with a payment gateway vendor that offers affordable rates. Make sure you ask your payment gateway provider about PCI compliance before finalizing anything.
Selecting and integrating the right payment gateway isn’t that tough or cost-restrictive if you understand your business needs. By doing it right, you can have an immediate and positive impact on your brand’s customer experience and profitability. All you need is consider the above-discussed factors before choosing and implementing the right payment gateway.
Another good case practice is to hire an expert and let them deal with all the technical aspects of integrating a payment gateway.
If you want more clarity on how payment gateways work for small and large eCommerce businesses feel free to contact us.