When you set up an online store, you have to be prepared to receive money from your customers via electronic means. After all, you don’t have a physical location where they can hand you money over the counter.
Therefore, this calls for a way to exchange money for goods even if the customer lives halfway around the globe.
Enter payment gateways.
These are third parties that connect your customer to your online shop when it comes to exchanging money. They handle the transaction, ensuring that both parties are satisfied.
Payment gateways are, arguably, the most challenging part of setting up your ecommerce store. This is because it requires trust amongst all three parties. Your customer needs to trust they aren’t being scammed and you need to trust the payment gateway to pass on the money to you.
Therefore, choosing the best from the numerous options out there can be an overwhelming task.
To that end, this article is a guide taking you through all you need to know when choosing a payment gateway for eCommerce stores.
To provide a smooth online shopping experience, you need to provide your customers with several online payment gateways to choose from. Debutify allows you to seamlessly plug different gateways into your online store. Download the top converting Debutify theme now for free!
What Is A Payment Gateway?
A payment gateway is a middleman between your online store and the payment processor that receives your customer's payment.
In other words, the customer inputs their personal financial details, and the gateway takes care of securely sending the data to the payment processor.
You can think of the payment gateway as a secure transport; the way money is moved from the bank, the same way money is transferred from your customer to the payment processor.
This means that the payment gateway is not only responsible for taking the relevant information, credit card information and passwords, but is also responsible for securely bringing this information.
The online payment gateway is responsible for encrypting your customer's credit card information and getting it safely to the payment processor.
However, that is not all. The payment gateway is also responsible for getting the information back to your customer.
This means the payment gateway relays back to the customer whether their payment has been processed or not.
If you have an eCommerce website, then you need to have a payment gateway to ensure that your sales bring actual money into your business account.
Now that you know what a payment gateway for eCommerce stores is, let’s show you how it functions.
How Do Payment Gateways Work?
The good news is that you don't need to be conversant with all the nitty-gritty of the financial world to understand eCommerce payment strategy.
However, to give you an idea, here's a breakdown of how it all works.
- Your customers add products to their cart and proceed to checkout. Here, they fill out their payment details.
- The third party takes the payment details, encrypts it, and then forwards it to the payment processor.
- The gateway hands the customer off to the payment processor.
- Here, the customer goes through the steps to finalize payment.
- The payment processor verifies the transaction, displaying the message to the customer.
- The customer can return to the online store.
With this in mind, you can now go ahead and pick what gateways to include in your eCommerce payment strategy.
What To Look For In An Online Payment Gateway
Now that we’ve gone through how the payment gateway works, it's high time we did some digging to find the right online payment gateway for your ecommerce store.
Choosing the wrong service can be one of the worst mistakes you can make as a budding online entrepreneur.
In other words, it's not enough to pick an online payment gateway; you need to find the one that will work best for your eCommerce store. Additionally, it should work for your customers as well. After all, it’s their money before it’s yours.
Here are a few things to look out for while you're looking for the right online payment gateway.
Compatibility With Your eCommerce Platform
It would help if you kept in mind that you might not have all the payment gateways available to you, depending on what eCommerce platform houses your online store.
However, most payment gateway systems plug into the popular large eCommerce platforms. So, if your store is on Shopify, Magento, Woo-commerce, and BigCommerce, you don't need to worry.
Check out all the payment options Shopify supports across the different countries here.
The Debutify platform takes advantage of this, enabling your store to plug into every major payment gateway for eCommerce stores.
Customer Payment Details Entry Format
The second question you should ask yourself is how you want to take your customer's payment details.
There are three primary ways of doing this.
- Direct entry on your site: This is the most hassle-free option for the customer. They enter their payment details into a standard form on your site, sending the data to your site’s server.
However, this poses a tremendous security risk because you’re handling all this on your own. You need deep pockets if you’re to enforce the severe security precautions needed to remain PCI (payment card industry) compliant.
- Redirect payments: This involves redirecting your customers to a payment page hosted outside your store. Alternatively, you can include a checkout form inside a secure iFrame, within a page on your site.
Although this is much safer, it inconveniences your customers. Consequently, you might have a high cart abandonment rate because customers don’t want to bounce around to other sites to pay for items.
- A marriage of the above: This involves installing a payment form on your site. However, the customers’ details are sent straight from the browser via a secure payment gateway to the gateway’s servers. With this method, your customer's details will never pass through your web server.
Based on the above, you should choose a payment gateway because it fits the bill in the last bullet point.
Combined Payment Gateway + Processor Or Separate Companies
As we earlier described, online payment gateways are the middlemen between your customer’s finances and your payment processor.
However, it's common for a payment gateway to double as a payment processor as well. Some examples of this would be Paypal and Stripe.
Nevertheless, some companies only offer payment gateway services. Take for instance Paypoint and Sage pay.
Suppose you opt for a company that doesn't offer the combined service. In that case, you need to have a merchant account, allowing you to process credit card payments directly. This can be quite expensive, so this option is usually left to established eCommerce brands.
For your smaller operation, a more sensible option would be partnering with a company that offers a combined payment gateway and processor service. For example, you can use an integrated service, like PayPal, where you're using their merchant account.
Number Of Payment Gateways
Your customers may have a specific payment gateway that they trust and use exclusively. If you do not have their preferred payment gateway, they might not buy from you.
One popular alternative is PayPal, as customers do not have to enter their credit card details on the website when they use it. Paypal is also available worldwide.
This makes Paypal a good alternative. It is also good to think of a back up if you have problems with your primary payment gateway.
The Debutify theme for Shopify allows you to add several payment gateway add-ons to your online store.
Cost Of The Service
Another major factor in your decision is how much the service is going to cost you.
Payment gateways have different fees that you need to understand fully before committing to their service.
These include monthly fees, fixed fees per transaction, variable fees based on a percentage of the account, plus extra fees.
Lock-In Period With The Given Payment Gateway
Before putting pen to paper, you need to understand how long you have to commit.
Some companies lock ecommerce store owners into lengthy contracts. If you stumble across any problems with the service, you might find it hard to break the contract.
Therefore, you should look for a service that ties you in for a short time. Use this time to assess their service before renewing or terminating.
In other words, you need to test the waters before diving in.
Look At The Features You Need For Your Ecommerce Store
Different payment gateways offer various features, and not all of them have what your store needs.
In some instances, you might need to handle recurring payments. Payment gateway services handle various transaction types differently.
Therefore, you should opt for gateways that fit in well with your eCommerce payment strategy.
Compatibility With Your Customers’ Preferred Payment Methods
Buyers use various modes of payment when they’re clearing out their carts. Some of the most common include credit cards like Visa and Mastercard.
However, your customers for other parts of the world use very niche systems. Not all your customers use Visa and Mastercard, so you need to look into their preferred payment gateways and see how you can incorporate them into your eCommerce store.
You need to have this in mind while searching for the service to install into your site.
Payment Gateway Brand Reputation
It’s prudent to read reviews for any provider you're thinking of using.
Keep in mind that a lot of these companies are processing millions of payments in a single moment. Some of these payments might not go through or might have issues.
However, if a provider has predominantly bad reviews, then chances are that they are not the right service provider.
The same is valid if they have overwhelmingly good reviews. This is particularly seen in newer brands that are trying to make a name for themselves.
Check If You're Considered "High Risk"
Some sectors are considered "high risk" by payment providers. For example, if your store deals in e-cigarettes or adult content, you might be red-flagged by certain payment gateways.
Therefore, you need to research and check to see if the industry you're in falls into this category. Your preferred provider might refuse to work with you based on this.
What Are The Most Popular Online Payment Gateways?
This is one of the most recognized payment platforms in the world. Most users have a PayPal account of their own, so it is the go-to choice for most customers.
This means that with PayPal, you can virtually sell to anyone.
You don't need a merchant account to use Paypal. You also get advanced fraud protection.
Additionally, you can issue invoices and can withdraw money quickly to your bank account in your local currency.
2checkout is another popular one; it has been around since 2006 and is available in 180 countries.
It works in 29 languages and 100 currencies. Additionally, there's a localized checkout for supported countries.
2checkout also integrates with more than 120 e-commerce tools and allows you to accept all major credit cards and Paypal payments.
Payline is more of a hands-on payment system. This means that it's up to you to set up non-standard features like recurring payments or other payment schemes that aren’t part of the service’s default offerings.
Furthermore, you need a merchant account for your online business. This makes the setup more complex. Such a situation is likely to put off entrepreneurs who are just starting out their eCommerce store.
In other words, this particular option lends itself well to more established eCommerce stores that have particular needs.
Stripe has a clear fee structure, good integration with all major eCommerce systems, and an easy to use interface. This has made Stripe very popular.
Stripe is a bit more technical and developer-friendly, making it intimidating for some. However, this means that you can fine-tune it to meet your needs.
Authorize.Net is one of the oldest payment gateways on the internet, as they have been around since 1996.
They allow you to accept contactless payments, credit cards, and e-checks. Additionally, they have advanced fraud detection.
Transferwise can be a great compliment for your business as it is an innovative financial service. It provides you with local bank details for the UK, the Eurozone, Australia, and the US without needing a local address.
In other words, you can request payments like a local of that area, no matter where you are. This enables you to withdraw with low fees, thus minimizing the cost of converting currencies.
Online payment gateways are ideal if you want to install an effective eCommerce payment strategy. However, you might find it challenging when it comes to choosing the right gateway to work with.
Above, we’ve gone through the various ways you can assess potential payment gateways to add to your online store. Additionally, we’ve listed some popular options that several online businesses use in their stores. Debutify allows you to integrate all the popular online payment gateways to your Shopify store. Download the top converting Shopify theme Debutify for free now.