An online payment gateway is a software service or platform that helps you receive payments from customers on your website.
To stay competitive in today's digital age, your business needs to have an online presence.
But did you know that over 50% of shoppers will abandon a cart if they have to wait for more than 3 seconds to check out? To avoid this situation, you need to use a payment gateway to make it easier for your customers to pay you.
What is a payment gateway?
An online payment gateway is a software service or platform that helps you receive payments from customers on your website.
Payment gateways allow customers to pay you quickly and easily. These payments are seen immediately in your system. This can help you manage your finances better and improve your cash flow. A good payment gateway is crucial for any successful online business.
How does a payment gateway work?
A payment gateway connects with the customer's bank (issuing bank) to check if the transaction can be processed (depending on the card or account balance, etc). After receiving the confirmation, the payment gateway authorises the payment by communicating the approval to the acquiring bank.
A payment gateway is like a messenger that sends payment information from the customer's bank to your bank. It then tells you whether the payment was approved or declined.
When a customer wants to pay, they enter their payment details into the gateway. The gateway sends the details to the bank to verify the payment. If the payment is approved, the gateway sends a message back to complete the transaction.
Importance of payment gateways
If you run an online business, you must choose the right payment gateway. This choice affects how your customers feel about the business, how safe your transactions are, and how much money the business makes.
Spend some time studying and comparing different payment gateway options. This will help you choose the right kind of payment gateway. It will also ensure that your payments are done smoothly and securely.
Different needs of different companies
Every business is unique. Your payment needs are different from other companies. Your payment needs are based on factors like size, industry, and the products or services you offer.
Therefore, it is important to ensure that the chosen payment gateway matches the different payment types used in your business. These are the kinds of payments that usually arise:
1. Small businesses
- Small businesses have limited resources to invest in payment processing.
- Examples of small businesses include boutique stores, freelancers, and local service providers.
2. Mid-sized businesses
- Mid-sized businesses may have more complex payment gateway needs.
- They need to handle larger transaction volumes.
- Examples include e-commerce retailers, subscription-based businesses, and online marketplaces.
3. Large businesses
- Large businesses may require special payment processing solutions.
- Examples of large businesses include large companies, financial institutions, and online travel agencies.
4. Non-profit organisations
- Non-profit organisations have unique payment gateway needs.
- Examples of non-profit organisations include charities, religious organisations, and social advocacy groups.
Main types of payment gateways
There are two main types of payment gateways used by almost all online businesses and e-commerce sites.
1. Hosted payment gateways
- This option is better for small and mid-sized businesses.
- The processing company is responsible for all security and compliance requirements.
- A hosted payment gateway doesn't integrate into your site.
- This means that you cannot control the customer's experience.
2. Integrated payment gateways
- These payment gateways do not require your customer to leave your site to complete the payment.
- You have to use an API to connect the payment gateway directly to your e-commerce website.
- You must ensure that your e-commerce platform supports this option.
So how should you go about choosing and installing the right payment gateway for your business? The following steps will be a useful guide to this important business requirement.
Important features of a payment gateway
The right payment gateway selection for your business is a critical decision. You could risk losing money and customers if your choice of payment gateway is wrong.
Here are the most important payment gateway features to help you choose the right one:
Cost
- The total cost of the gateway is the most important factor.
- There are typically three types of costs for setting up a payment gateway
- Set-up fee
- Monthly fee
- Transaction fee
- Consider both the volume and the value of your transactions to find out the total cost.
- The best option is a payment gateway with a fixed monthly fee and a reasonable transaction fee.
1. Ability to use different modes of payment
- Your payment gateway should accept different modes of payment.
- These modes of payment can include e-wallets, debit cards, or credit cards.
2. Holding time
- Online payments are approved immediately.
- But the money is credited to your company account after a few days.
- This gap is called a "holding period."
- The holding period allows the banks to handle any refunds or payment issues.
- Holding periods can range from 1-7 days.
3. Multiple currency support
- Your payment gateways should be able to process transactions in various currencies.
- This will help your business to expand and for international customers to make purchases.
4. Recurring billing
- If you run a subscription-based business, you need to pick a payment gateway that allows repeat billing at fixed intervals.
- Your provider must be able to save and store customer details for future transactions.
- Your gateway must be set up to automatically charge the payment method.
- It must offer retry options for failed transactions.
5. Hosted vs. non-hosted
- A payment gateway can be hosted off-site
- Here the customer is taken to the payment processor's website for them to enter their details.
- It can also be non-hosted.
- Here the customer will be able to enter the details without leaving your website.
- Each of these different modes of hosting payment gateways has its pros and cons.
- Choose your option keeping in mind the size of your company, the budget that you have available, and the nature and volume of your transactions.
6. Payment gateway security
- Payment gateways offer various security features such as SSL encryption, tokenisation, and two-factor authentication.
- This builds trust and credibility with customers.
- It also offers strong fraud protection.
- This also leads to better sales and customer loyalty.
7. Mobile paymentsupport
- Many customers shop with their mobile phones or tablets
- It is therefore important to select a payment gateway that allows mobile payments.
- This provides your customers with the flexibility to pay regardless of the device they use.
8. Limits
- Some payment gateways set an upper limit on the monthly transaction amounts that you can process.
- You need to manage this limit, especially if your business is in high-value goods or has a big transaction volume.
9. Payment gateway integration
- Your payment gateways should integrate easily with your e-commerce platforms, shopping carts, or websites.
- This provides a more convenient experience for customers.
- It will also save you time and effort because you do not have to track and update payments manually.
10. Reporting and analytics
- Your payment gateways must give strong reporting and analytics features.
- These give valuable insights into transaction data, sales trends, and customer behaviour.
11. Customer support options
- Customer support is an important element of your payment gateway.
- Issues or problems with a payment gateway user experience can affect your business revenue and reputation.
- The key factors to be considered in customer support include:
- Quick resolution of payment issues.
- Help with compliance requirements.
- Technical support for installing and managing the gateway.
- Full fraud prevention support.
Security and compliance features
Payment gateway security is such an important point that it needs a separate section.
Payment processingrequires handling sensitive financial information. It is thus important to have strong security and payment gateway compliance features.
You must make sure that your payment gateway has the following security features:
1. Encryption
- Payment gateways use encryption to hide data.
- This helps to prevent illegal access to information such as credit card numbers.
2. Tokenisation:
- This is a process of replacing information with a unique token.
- Payment gateways use this to store customer payment information safely.
- It also reduces the risk of data leaks.
3. Fraud detection and prevention
Payment gateways must have fraud protection tools to check suspicious payments.
The tools can block these suspicious payments before they are processed.
4. PCI compliance
- All payment gateways have to comply with the Payment Card Industry Data Security Standard (PCI DSS).
- This is a security requirement to protect the personal data of cardholders.
- It creates an extra layer of protection for the customers.
5. Two-factor verification
- Your chosen payment gateway must have a two-factor verification feature.
- This means that your customers have to give an additional verification, such as a one-time password sent to their mobile device, to complete the transaction.
- This prevents unauthorised access to customer accounts.
6. Fraud prevention
- Payment gateways use various fraud prevention measures, such as address verification, CVV verification, and transaction monitoring.
- Check and confirm your payment gateway provider's fraud protection and detection tools and processes.
7. Compliance with local regulations
- Depending on the location of your business and your customers, you may be required to comply with local regulations related to data privacy and security.
- Your provider must comply with regulations such as GDPR (EU) or the CCPA (California, USA).
8. Regular audits and assessments
- Regular security audits and assessments can help identify weaknesses in your systems.
- It will also ensure full and continued compliance with security standards and regulations.
9. Staff training
- The payment gateway is, after all, software.
- It requires humans to set it up and operate it effectively.
- You must make sure that your team is trained on the latest features of your payment gateway.
- Your team must also be educated on the latest rules and regulations of the online payment industry.
Mistakes to avoid when selecting a payment gateway
1. Have very low budgets
- Low-priced or "cheap" payment gateways may not provide all the features that you need.
- There could also be hidden costs which could come up later.
- This could add to your total cost.
2. Limited payment options
- If your payment gateway is not able to handle all possible payment options, you could lose customers.
- Some customers may have other payment restrictions, which prevent them from using your business.
3. Use a fixed plan
- Do not sign up for a fixed payment gateway plan.
- A fixed plan cannot be modified or scaled up.
- Your payment gateway must keep in step, with the growth of your business.
4. Do everything yourself
- You might think it is cheaper to manage the entire payment gateway process yourself.
- However, a payment gateway is software.
- You may not have the skills or experience to use it efficiently.
- You could make mistakes that spoil the customer experience.
- You could also lose valuable business.
How to make the final decision
Choosing the right payment gateway for your business is a critical decision. It can have a great impact on your revenue, reputation, growth, and customer experience. The following tips will help you choose the right payment gateway provider for your business:
1. Evaluate your business needs
- Check your business's specific requirements.
- Choose a payment gateway that can meet your business needs effectively.
2. Compare fees and pricing
- Compare payment gateway fees and pricing structures.
- Make sure they match your budget.
- Check the payment gateway's transaction fees, monthly fees, and any other additional costs.
3. Check security and compliance features
- Ensure that the payment gateway is fully compliant.
- It should match all compulsory security and compliance requirements.
- It should also offer robust security features.
4. Check all the customer support options
- Choose a payment gateway provider that offers excellent customer support options.
- Customer support must cover all important points including availability, channels, response time, technical expertise, and training and onboarding.
5. Analyse integration options
- Check the payment gateway's integration options.
- Make sure they match your business's website or e-commerce platform.
6. Read reviews and ratings
- Check customer reviews and ratings of the payment gateway.
- Understand their reputation, reliability, and customer satisfaction.
7. Test the payment gateway options
- Always test the payment gateway before making a final decision.
- This way you can make sure it meets your requirements.
- You can also identify and solve any bugs or other software issues.
Conclusion
Choosing the right payment gateway is crucial for your online business. Payment gateways offer your business many benefits. But is not always easy to choose the right one.
The choice of your payment gateway can directly impact your bottom line. Consider the following points carefully before selecting your payment gateway:
- Your business needs
- Fees and pricing
- Security and compliance performance
- Customer support options
- Integration options
- Customer reviews and ratings
- Rigorous testing
These tips will help you make a decision that will improve your payment processing experience, revenue, and customer satisfaction.
