Covid19 dictates new rules for doing business. The pandemic has changed the mode of buying. Today, the already high number of online shoppers is growing exponentially. According to the survey, over 50% of the consumers now shop online more frequently. eCommerce store managers process tons of orders daily. In such a time, setting up online payment is a must-have.
To do this, you need to integrate a payment gateway into your website. But which one to choose? This post will consider different payment gateways and advise on the specific things to pay attention to.
Table of contents
What is a payment gateway, and how does it work?
As explained in the previous Softensy post, a payment gateway allows merchants to accept money from debit and credit cards in the online store. The payment gateway accompanies the transaction from start to finish – from the moment when the buyer clicks “pay” until the time the seller receives money. The gateway takes care of protecting cardholder’s data by encrypting sensitive information. Also, it makes sure the transaction details are safely returned to the site frontend once the payment processor approves or denies the operation.
The whole process takes not more than a few seconds. During this time, the payment gateway, the issuing bank, the acquiring bank, and the payment system join forces for fast and secure money transfer. Each of them is responsible for a particular area of work. As a result, the required amount goes from the buyer to the seller in a few clicks.
Payment gateway vs. merchant account
When you start researching payment gateways, you will come across the notion of a merchant account. Many think these are mutually exclusive concepts, but it is not so. A merchant account serves to accumulate funds from a buyer before they proceed to your bank account. Until recently, all payment gateways obliged merchants to open such an account. Without it, they could not transfer money to your bank.
The situation has changed now and a merchant account is no longer a necessity. Multiple gateways don’t require to open it. They take money from a customer’s card account and, after processing, place it directly to the merchant’s bank account. Further, we’ll dig deeper into each option. So, let’s clarify the chief distinction between payment gateways with a merchant account and without it and see who benefits from each option.
Payment gateways that require a merchant account
To integrate it, you need to contact the bank and put in a request for opening the merchant account. There are not so many banks that provide services to maintain merchant accounts. Besides, the procedure is not fast. Depending on the selected organization, it may take up to a month and a half.
Another headache is that a portion of technical expertise is required. You will need to study documentation and spend some time on implementation.
Here comes the question: “Why bother with such a gateway at all?” Well, it may be a part of the long-term strategy for big companies because old-school gateways often have lower transaction fees. So, if you are ready to face some hassle at the set-up period, you may gain in after days.
Authorize.Net and WorldPay are examples of the gateways with a merchant account. These are experienced players in the financial market. Both founded in the late 90-s, they successfully operate till now and have many clients worldwide.
Payment gateways that do not require a merchant account
Their strongest plus is quick and trouble-free integration. No extra moves like changing banks or applying for an account are required. After contacting the payment provider, they send you instructions to add the gateway to the eCommerce site. In some cases, you won’t need developer skills and will be able to integrate the gateway without exterior help.
The pitfall lies in the relatively high transaction fees. It may be ok for small and medium businesses as a slight increase in price is not a big deal on a small number of transactions. However, if you own a large company, it makes sense to calculate both options and see what’s more profitable: pay a set-up fee or overpay a bit on each operation.
Another downside is that some payment gateways make the user leave the store page and complete checkout at the third-party site. Of course, this is less convenient than doing everything in one place so the UX suffers.
Hosted vs. non-hosted payment gateways
A payment gateway can be integrated into your site or hosted elsewhere. Either option has pros and cons and works for different situations. Let’s take a closer look.
Hosted payment gateways
Hosted gateways redirect the buyer to the provider’s page to finish the transaction. Since payment actually takes place on the provider’s side, the merchant doesn’t have to obtain a PCI-DSS certificate and take care of data security. It is a payment provider who is fully responsible for it.
However, the bad news is that you may lose clients. People tend not to trust unfamiliar providers, so they may refuse to complete checkout at their page. Anyhow, if you opt for a hosted gateway, make sure to study users’ preferences in the target region and choose the most trusted company.
Hosted gateways are perfect for start-ups and mid-sized stores since it doesn’t take many wits to implement them. In fact, you just need to add the pay button to your site and start receiving payments in a matter of hours. Yet, such gateways may frighten away your customers as some of them would not want to go back and forth during checkout.
Non-hosted payment gateways
Non-hosted gateways are linked to your store through a special gateway API. They provide a seamless user experience by enabling shoppers to complete a purchase on the merchant’s side. The users stay on the same page from the moment they add goods to the shopping cart until seeing the transaction’s successful status. Such an approach grows brand confidence and increases customer loyalty.
The main cons include the integration itself and security matters. You will most likely need the developer’s help to add a payment gateway into an eCommerce site. Besides, you will have to study your country’s security standards and comply with PCI requirements. Note, the PCI compliance procedure may take up to two weeks, and the certificate should be renewed once a year.
If your product’s specific nature involves a subscription or membership, you need to check whether the payment gateway supports this feature. Many providers don’t work with recurring payments. If you make the wrong choice, your customers will have to renew their subscription at the beginning of each subsequent period, which is a big headache.
Another critical point is the ability to modify the payment date and the product price on the go. Thus, your clients don’t have to stop the subscription and start it again if they need to make the changes to the subscription plan.
PayPal, Stripe, Authorize.net, FirstData, Amazon Pay, and WorldPay are the providers we mentioned earlier. All of them support repeated payments. However, WorldPay doesn’t work with subscription suspension and reactivation.
Tips to choose a payment gateway
I hope the information above has helped you understand how payment gateways differ. Most probably, you already have some thoughts about the best option for your business. What’s next? Keep researching and analyzing different providers. Here’s what we recommend to do to narrow down your search:
It is a decisive factor that will help you choose in favor of a particular provider. Pay attention to set-up fees, transaction fees, and monthly payments. If you need extra features like recurring charges, check their pricing too. Carefully read the documentation and ask questions to the company representatives so as not to face hidden fees later. See the price comparison table of top payment gateway providers in our previous post.
Accepting online payments is an essential function of all payment gateways. Still, you may be interested in many extra features. So, where to dig? First of all, pay attention to transaction processing speed, supported payment methods, and geographic coverage. Note, some providers process payments for up to two days and work in specific regions only. That is why it is necessary to learn all the pitfalls before adding a payment gateway into an eCommerce site or mobile app.
Request for demo
Online payment is an integral part of the shopping experience. Depending on the provider, the procedure may vary. Before entering into a partnership with a company, make sure you are happy with what they offer. For that:
- Apply for demo or training and see how the system works.
- Do not hesitate to ask questions.
- If you like everything, proceed to the integration stage.
Try support service
Accepting online payments is a critical step. If something goes wrong, you should be able to contact a payment gateway provider and get competent help shortly. Find out which support channels your potential partner utilizes and how long their average response time is. Some companies have a very progressive community and provide 24/7 support by phone, chat, email. Yet, some firms use only telephone and email. Learn more about top providers’ support in our earlier post.
No partnership lasts forever. Before signing an agreement, check if the provider supports the data mobility. This feature will help you keep the customer base in case you decide to switch to another gateway. It is especially important for merchants who charge recurring payments. If you lose clients’ records, the current period will remain unpaid.
Need help to integrate payment gateway?
A win-win partnership with a payment gateway provider depends on many factors: how big your business is, what you sell, in which region you work, which clients you target. Whether you choose a hosted or non-hosted gateway, the one with or without a merchant account, you have to take some steps to set it up. And, in most cases, coding skills are required.
At Softensy, we work closely with fintech firms and eCommerce stores. We often deal with payment gateway integration and know what is best for a specific enterprise. So, if you need competent advice, get in touch. We consult for free.