As lucrative as the eCommerce industry is, it is the most hack-prone business niche. Many logins on eCommerce websites are scam attempts. Sellers are continually on the lookout for simple and secure ways to process transactions.
What Is A Payment Gateway?
A payment gateway is the broker that processes credit card payments for ecommerce stores and traditional brick and mortar stores. Over the years, online payment gateways have enhanced their services. New entries offer innovative solutions, and the older ones offer better upgrades. All these improvements are to make transactions and transaction processes secure and smooth.
How Does Payment Gateway Work?
The entire process is automated and happens within seconds. Payment gateways complete the task of processing credit cards in the following steps:
- Collate payment details, customers fill in their payment information in a form. This is provided when they proceed to checkout. This stage of the payment gateway interface is not limited to the collation of payment details. It includes a proper screening of the order, calculation of tax. It may include a “geolocation” if the retailers specify.
- Encrypt payment, the payment form that the customer fills out at the checkout is private and encrypted. A payment gateway encodes customer’s information for exclusive use by the payment processor.
- Authorization request, the payment processor cannot complete a transaction without approval. Approval is required from the credit card issuer to finish all transaction processes.
- Completed transaction, as soon as the payment is successful, the payment gateway sends a message to the customer. This will show the success of the transaction. This dialogue box triggers the website to return you back to its home page.
Payment Gateway Vs. Payment Processor: What Is The Difference?
A payment gateway deals with all credit card payment processes. It is the authorizing platform. Payment processors encrypt the credit card. It then transmits relevant information needed for the transaction to the credit card issuer (bank). What this means is that a payment processor needs a payment gateway to function.
In reality, payment gateways interact with payment processor. When you use a platform that offers both, you are more secure and have less threats to deal with.
Factors To Consider When Choosing A Payment Gateway
Are you launching a new store or already operate one? It is important to choose the right payment gateway for easy and smooth payment processing. The question is, how do you know if a payment gateway is right for your eCommerce store?
Here are some key markers to pay attention to:
- Support: You should prioritize the platform your eCommerce store operates. There are certain payment gateways that deal with specific eCommerce platforms. There are others that don’t. How do you verify if a payment gateway supports your kind of store? Most payment gateways have an extension catalogue or documentation on their website. Check it and confirm if they offer services for the kind of store you run.
- Mode of operation: How do you prefer to take customer’s details for payment? From a technical stance, you can achieve this in three ways:
- Have a payment form integrated on your website.This is a less secure way. But it is user-friendly. But, if you are not making millions on your site per year, you should probably consider other alternatives. The PCI compliant regulations that allows the implementation of this feature is quite expensive.
- iFrame. This is also referred to as redirect. As opposed to taking customer’s information directly on your site. You can redirect them to a secure page hosted outside your site’s payment page. This “iFrame” makes it difficult to match payment forms with the website. It is a complex approach but it is the most secure.
- Middle-Ground Alternative. Payment gateways like PayPal use this method. In fact, this is the most common mode of operation for modern gateways. Customers fill in their payment details on your site and this detail is sent encrypted to the payment gateway’s server.
- Single or double: This article focuses on platforms that offer the combined service of payment gateway and processing. But, the final decision is yours to make. Can you afford operating a merchant account where you can process credit card payments directly? If not, you should note that this is not a smart move for a small scale store. Not even for a mid-sized. Such premium service does not come cheap. If you own a large store, you can always leverage the cost-effective benefit of owning a merchant account. PayPal and Stripe are proven payment providers. They offer a combined service of gateway and payment processing. You only need to adopt the one that best suits your business.
- Single or combined: Yes, you can combine two payment gateways. Customer’s preference is what defines and necessitates this point. Payment providers are not to suit the retailer alone, customers must be considered. Credit card usage is solely based on trust. Customers seldom use unfamiliar payment portals when making payments. It will interest you to know that over 15% of online shoppers abandon their carts due to limited payment options. 6% abandons cart for another store with a better experience. This is a combined total of 21% sales decline due to the payment gateway option of a store.
PayPal is a popular payment provider with wider access to different countries across the globe. You may not like to deal with PayPal for personal reasons. You can use it as a supplementary payment platform on your site.
- Cost of service: There are no fixed fees that payment gateways are mandated to charge their customers. The competition determines the fee. You need to carefully examine these gateways and compare them. Payment charges range from monthly fees, variable fees, chargebacks, international card usage, and even fees per transaction.
The important things to note here are: is the value offered worth the price tag? What does the competition offer? Carefully analyze these questions before committing yourself to a gateway fulltime. You should expect to pay between 2.9% and 3%. Less is great.
- Time frame: It is possible that some payment gateways will want to keep you longer against your wish. They do this by making you sign extensive contracts of over two years. If you are not happy with their service after a few months of signing up, you are stuck. There are some payment gateways that offer their services on a monthly basis. Some will happily allow you access without any form of contract at all. It is important you carefully research and consider the terms of service of each payment gateway before making a final decision.
- Reputation: This is one of the biggest factors every store owner should pay attention to. Please note that online reviews may not paint the credibility of a payment platform. This is because:
- People are not excited to comment about a good service
- People tend to overreact when they have a bad experience.
- Payment services deal with millions of payments every year. There will always be negatives.
How then do you determine the reputation of a payment gateway? How long has a payment gateway been operating? What is their scorecard? What is the general feedback about them within the industry? There, you have your answer!
- Specific needs: Depending on your product and/or service, there is a gateway that can handle your transactions better. Payment platforms differ in functionality. But, if you offer a one-time payment structure, any payment platform will work. Do your services require recurring payments? Are subscription-based? If you answered yes to either of these questions, you will need to carefully weigh your options. Not all payment gateways are capable of performing all payment related issues. For instance, Paypoint and Sagepay are payment gateways that only carry out single functions. While PayPal and Stripe are capable of multi-payment functions.
- Market support: This becomes important when you have a large percentage of international shoppers. Payment methods are quite different from payment gateways. Payment methods such as Visa and MasterCard are well known in some countries. Ensure that your desired payment gateway supports well-established payment methods. Your choice of payment gateway should be influenced by your customers. One important reason why shoppers pick a store over another is ease of payment and a user-friendly interface. To avoid losing potential sales to your competitors, implement a gateway that your customers are familiar with. You can also check your competitor’s website for insight on what payment options to integrate.
- Business support: This is specific to business niches that payment gateways consider risky. This is connected to the nature of the product and service. If you operate a gambling business, deal in adult content, offer debt collector services, or tobacco sales, your niche is considered high-risk. You have a smaller circle to choose from. You are limited to payment gateways that operate within your business niche.
Top 5 Payment Gateways You Can Trust
Finding a legit and efficient payment gateway can be a bit challenging. This is because there are a lot of garbage platforms out there. The good thing is, that doesn’t have to happen to you. There are a few trusted platforms you can choose from for your store. They offer some of the best services in the industry.
Paypal is one of the most widely-used payment gateways across the globe. It is the largest and most popular of all the payment gateways. It goes beyond a payment gateway. It doubles as a personal account for some people. PayPal is on an entirely different level from other payment gateways. It is a must-have. Its reach means you can sell your products and services to almost everyone.
There are several options PayPal offers business owners. These offers are based on your business niche. They include:
- PayPal Payment Standard: Customers set up the order on your site, then redirects to PayPal to make payment.
- PayPal Express checkout: This makes the transaction flexible for your customer. They are first directed to PayPal to authorize the transaction. PayPal redirects them to your site to then complete the order.
- PayPal Payment Pro: This is an exclusive service. In fact, this service is only operational in a few countries. Here, the customer carries out the entire transaction on your website.
PayPal does not require a merchant account. You are well protected, can issue an invoice and withdraw money seamlessly.
You should expect to pay 2.9% + 30¢ per transaction. You can get a discount if you process a lot of transactions. It is important to note that PayPal payment Pro attracts an additional $30 monthly fee.
Payline has stayed consistent over the last couple of years. In a market dominated by PayPal and Stripe, Payline is a viable alternative gateway. It is most suitable for retailers who accept credit cards alone. But you will need a business account to operate Payline. Payline is physical and less automated. You need to configure everything to your specification. It is easy to get started. As a fresh user, you may find the process a bit complicated though.
The physical nature of Payline makes it suitable for an existing store owner. Retailers who are familiar with payment gateways will easily want to try Payline.
You should expect to pay 0.3% per transaction. It excludes the cost specific credit card processed. You get a discount if you process a lot of transactions. Payline attracts an additional $10 monthly fee to keep you activated.
The oldest and arguably the most recognized payment gateway. It dates back to 1996. The platform allows you to make contactless payments, accept e-checks, and credit cards. It has integrated into its system an advanced fraud detector. It encrypts the customer’s data. Tokens serve as a disguise for sensitive information which ensures better security.
Authorize.Net is flexible. You can configure it to fit into your business structure.
You should expect to pay 2.9% + 30¢ per transaction. This excludes a monthly fee of $25 if you do not have a business account. A business account will reduce your fees to 2.9% + 10¢ per transaction. Enterprise solutions are adopted for businesses that process over 500k per year.
Stripe is one of the most popular payment platforms available. Stripe is designed to offer a flexible, easy, and user responsive interface. On a scale of 10, Stripe is 9 when you compare how customizable the user experience is. This is why Stripe has a growing customer base. Stripe focuses on modern solutions to payment problems.
Their customer service is second to none, offering a 24/7 support system via mail, chat or phone. Stripe has a level 1 PCI DSS certification. It issues type 1 and type 2 SSAE18/SOC reports. It complies with PSD2 and Strong Customer Authentication in the EU. It is available in over 30 countries and can process 135 currencies.
You should expect to pay 2.9% + 30¢ per credit card transaction within the US. There is a 1% charge for international cards.
If you are familiar with Square, it should be no surprise to see it mentioned here. In the fourth quarter of 2018, Square uploaded $23 billion in gross payment volume. This is a resounding statement for a company that specializes in physical credit card swipe payment. It requires phone support to make transactions successful.
Square is suitable for small scale retailers. You may need a platform that supports in-person transactions. You should expect to pay 2.75% for swiped transactions. There is a 3.5% charge for in-person transactions. This excludes an additional fee of $0.15.
If you are serious about running a successful and profitable eCommerce store, a payment gateway is one important thing you need to get right. You need to work with trusted and credible platforms that guarantee secure and convenient payment processing. It is best to always integrate payment gateways your customers already use and are comfortable with.