Payment Gateways: Factors to Consider When Choosing Your Payments Provider
One of the basic functions for any consumer-facing business is accepting payments. You need to take in money, or increasingly these days, accept electronic payments, whether through credit card, debit card, online or mobile processes. Choosing the right payment gateway is an important business decision to swiftly and seamlessly facilitate information transfer between your bank (acquiring bank) and the customer’s payment method (issuing bank or front end processor).
The most vital information transfer of a payment gateway is whether to accept or decline the payment.
A payment gateway makes it significantly easier to accept the various types of electronic payments. As opposed to setting up and running all the hardware, software, connections and security, they offer a turn-key payment solution. For millions of small and micro merchants, the simplicity of a payment gateway is the only practical way to enable eCommerce payments.
There are numerous payment gateways available, with different capabilities, options, and pricing and so there is no one ‘best’ solution; it depends on your business needs, what trade-offs you’re willing to make and your growth strategy. Here are some factors to consider:
One of the benefits of using a payment gateway is to streamline connections between you and your financial providers. Accordingly, you need simple integration with your merchant bank and the forms of payment that you want to accept. Are those integrations available out-of-the-box?
How about integration with third-party services? You might have a variety of other services that you want information to flow to and these integrations make your processes and workflows smoother.
No one likes to fill in lengthy arduous forms. So much so, that cart abandonment occurs almost 70% of the time. Thus, payment forms that are secure, easy to use, quick to fill and provide effective messaging are crucial.
How will the form appear on your site? Is it simple and transparent or does it raise doubts? Does it occur on your site itself, or does it transfer to a trusted third-party site? Are there appropriate prompts and messaging that can be customized?
What countries do you want to sell in? Establish that your payment gateway provides coverage in those markets and include considerations for future expansion. You’ll want to understand the different markets and their preferred payment methods; it’s not just about entering a market, it’s about successfully meeting the needs of those customers.
What are your future plans? What technologies, systems or processes do you want to eventually integrate?
Financial technology is changing fast, so doing research now will help you future-proof your business. Sure, you can change providers, but that is extra work and extra time. It’s better to anticipate your needs, so that you can adapt fast when you are ready for that next step.
Costs and Fees
How much transaction volume do you anticipate? How steady will it be? What is the average transaction amount? Do you value simplicity of integration/operation or lower costs? What extra services are you looking for?
You might opt for a higher fixed monthly fee, but with lower transaction costs, or vice-versa. You might opt for a variety of advanced services, or choose a bare-bones lowest-cost option. By thinking through these questions, you’ll have a strategy for getting the pricing model that is best for your needs.
Payment gateways use different technology stacks, networks and partnerships, so there are significant variations in speed. Transaction speed is important for your clients; some gateways don’t have the necessary capacity to complete the transaction quickly, leaving the customer hanging. On the back-end, settlement speed determines how quickly you receive funds.
While difficult to test, speed is an important consideration. Look for reviews and other reputational factors to determine actual performance. Of course, reputation is crucial for numerous other factors such as support and stability, so do your due diligence.
Besides transmitting transaction information, payment gateways can provide other value-added services. Effective reporting can dramatically improve your eCommerce optimization efforts, increasing sales and profits. Fraud detection systems can cut the rate of fraud and decrease charge-backs. Invoicing can simplify account collections.
While some payment gateways focus just on the payment aspect, others offer integration with referral partners and whole networks of capabilities. From attracting customers to managing content, merchandising and fulfillment, there are numerous eCommerce providers that can help your operations.
Getting Started with Payments
Just as you should do your due diligence on your provider, they’ll do their due diligence on you as part of their merchant onboarding process. They want to ensure you are a legitimate company and will not knowingly introduce fraud, money laundering or terrorist funding into their gateway.
Beyond getting your payment system going, be aware of other legal obligations that can greatly impact your eCommerce venture. For example, most countries have threshold limits beyond which companies must perform due diligence on their customers. If a transaction, or series of transactions, is higher than the threshold limit of the jurisdiction, you must perform Anti-Money Laundering and Know Your Customer checks (AML/KYC)
Choosing the right payment gateway for your needs is an important business decision. It affects the success of your eCommerce channel, how you are viewed by potential customers, how quickly you get paid, and how you grow your business going forward in the digital future.
As the slogan in real estate is location, location, location, perhaps the slogan for eCommerce should be gateway, gateway, gateway.