How to choose the right payment gateway?

If you run a business or just thinking of a startup, you should know that depending on a service you will provide, a payment getaway is a must! This could be an online marketplace, web or mobile app — any kind of product that interacts with the user! In this material, I’ll explain to you why you need a payment gateway and how to select a payment gateway for your business.

Originally I shared this material to Syndicode blog.

Last year I shared the list of 14 best payment systems you should consider. Some of them are still great, some became better, some did not change at all. This time I will not tell you about the existing payment gateways again, but I will try to help you to choose the right one for your business!

What is a payment gateway? Why you need it?

In a nutshell, a payment gateway is an e-commerce service that processes credit card payments for online and traditional stores. This is a software that facilitates a transaction by communicating transaction information and applies to the equivalent of a physical point of sale.

A payment processing functionality allows businesses to accept credit cards or any other payment form of payment online. It connects the merchants with the bank’s processing platform.

Without a payment gateway integration, the customers won’t be able to pay for the services or products they are buying online. It is necessary to accept electronic payments for any business niche.

Payment gateway functions

  • Encryption. The web browser encrypts the data. The gateway then sends the transaction data to the payment processor utilized by the vendor’s acquiring bank.
  • Authorization Request. The payment processor sends the transaction data to a card association. The credit card’s issuing bank views the authorization request and ‘approves’ or ‘denies.’
  • Filling the order. The processor forwards an authorization pertaining to the merchant and consumer to the payment gateway. Once the gateway obtains this response, it transmits it to the website/interface to process the payment.
  • Delivery address verification
  • AVS checks
  • Computer fingerprinting technology
  • Velocity pattern analysis
  • Identity morphing detection
  • Geolocation

Merchant account and its alternatives

A merchant account is a type of bank account that allows businesses to accept payments in multiple ways, typically debit or credit cards. So a merchant account is an agreement between a retailer, a merchant bank and payment processor for the settlement of credit card and/or debit card transactions. If we talk about online shopping, a merchant account goes virtual and becomes a virtual bank account between the retailer, merchant bank and payment processor. You can call it internet merchant account.

If you don’t want to go for a merchant account, you can opt for its alternatives like Paypal or credit card reader.

  1. PayPal offers solutions for online payments that don’t require a merchant account and are ideal for businesses looking to get started with online transactions quickly, easily, and inexpensively.
  2. Credit Card Reader devices that plug into smartphones and iPads are available from a variety of vendors.

How to choose the right payment gateway?

How to select a payment gateway for your business? Consider the following features:

  • Security. The security of the network allows your customers to not worry that their financial information will remain secure when purchasing from your store. Also, look for PCI-compliance, as this is critical when accepting credit cards online. The short list of payment gateway security layers:
    - Every payment gateway has high-level encryption (SSL encryption 128 Bit encrypted) to avoid all types of breaches.
    - The second layer of security is the digital signature; even if a hacker got your ID your account is still safe with digital signatures.
    - After digital signature comes the Dynamic IPs, if your account is used from another IP address then it will be denied.
  • Data Portability. If you will decide to leave your gateway, what about the ownership of your customer’s data?
  • Hosted vs. integrated payment gateways.
    - Hosted gateways redirect your customers to the payment processor’s platform to input their payment information. Hosted gateways are easy to set up and are fantastic for new stores, but can potentially hurt conversion rates if customers aren’t familiar with the processor.
    - An integrated payment gateway connects to your eCommerce website via the gateway’s provided API. The biggest advantage of this is that customers never have to leave your store to input payment information and submit orders.
  • The customer experience. The purchasing process from your online store or service should be convenient for your customers. If it requires too many steps, too much time, or too much personal information, your customer may abandon the purchase and go looking elsewhere. You should look for a payment gateway that allows you to accept all major credit and debit cards, as well as being integrated with all major shopping carts. What is very important, the payment gateway should be optimized for mobile users as well.
  • Internationally acceptable. While the countries use the advantage of the global market, make sure that the chosen payment gateway works internationally. Your customers might come from any corner of the globe. So you should allow global payments.
  • Business model. Check out the list of businesses your chosen gateway supports. Your type of business should be mentioned.
  • Future. If you plan to be in the business for more than a decade then integrate blockchain ledgers like Bitcoin and Ethereum to your online store, website or app.
  • Fees. The fee structure at each payment gateway will differ, so be sure it fits your budget, and that it isn’t excessive compared with other payment gateway offerings.
  • Customer support. Check whether the provider offers live technical support, at least within standard working hours, so that you can quickly resolve any technical problems.

By the way, don’t ignore the discovery session when you start a new project!

This article is brief but contains all the important moments. However, to dive into details, you can explore these useful links:

  1. What is a payment gateway?
  2. Payment Gateway Integration Is A Must For Businesses‘ will tell you how a payment gateway works in details.
  3. What Is a Merchant Account and How Do I Get One?
  4. Hosted payment gateways vs. integrated payment gateways
  5. 12 Factors to Consider While Choosing A Payment Gateway For Your E-Commerce Store

Hope, you find it useful!

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