7 things to consider before choosing a payment gateway for your business
As a business, you need to find a way to secure payments. But with so many choices in financial services when you start your e-commerce site, it can be incredibly daunting especially to new entrepreneurs.
Not only that you have to consider the technical and logistical challenges that come with setting up a new payment gateway. You also have to take into consideration your customer’s convenience, as well as the gateway’s security.
In this post, we’ll talk about the things that you need to consider when selecting payment gateways for your business.
- Why are gateways crucial?
- Appropriate payment flow
- Location and incorporation
- Gateway’s security and rraud policies
- Average transaction amounts and rrequency
- Fees and service agreement
- Supported business models
- 24/7 customer support
- Over to you
Why are gateways crucial?
If you’re not familiar yet, a payment gateway is a merchant service utilized as a third party to authorize credit card transactions.
The moment you take a customer’s credit card information, it has to be sent to a payment gateway. Then, the information is forwarded to an acquiring bank and to the issuing credit card company.
Afterward, the credit card company will send back a response informing the vendor whether or not the credit is available. If affirmative, the transaction is processed.
Payment gateways have a lot of features like the detection of fraud, which are issued to banks as an added service. Examples of top payment gateway integrations from Mageplaza such as Stripe, Moneris, Sage Pay, and Cartasi. All of them are compatible with One Step Checkout plugin, in case you are looking for an optimization tool for your checkout page.
Now, we’ll move on to the things that you need to consider when selecting payment gateways for your business.
Appropriate payment flow
As your business grows, your payment getaway should scale effortlessly as well. You need to pick the right payment flow for your business so that you can place a payment gateway to a website.
The primary payment gateways offer the following options for customers who want to pay:
A website with an integrated payment form, as details are being sent to a secure payment gateway: The form contains all the necessary information, passing it to the gateway provider through calling an integrated API.
Redirect for payments or iFrame: Users are either directed to a secured hosted payment page or needed to place their information on an embedded iFrame on the site. Developers can take advantage of this option because it takes less time to integrate.
Escrow system: By creating an escrow system in your platform, funds are withheld until the right authority is given by the admin.
Location and incorporation
Payment gateway providers online will require you to be incorporated. Typically, you’re incorporated into the area that you live or where you conduct your business operations. However, that’s not always the case.
To make things easy, we’ll be discussing two groups: The US payment providers and the European payment providers.
Usually, a US incorporation will link you to an acquiring bank or payment provider in the US. Similarly, European incorporation will allow you to be a contractual payment provider, as well as the acquiring bank that is behind it.
So, if your company is registered in the US, it’s certainly possible to connect with a processor in the US. However, if your company wants to work with a US processor and bank, then it has to incorporate in Europe to make that happen.
Some payment providers have operations in both the USA and Europe. Therefore, this lets you utilize both payment gateway services in the two countries.
Gateway’s security and fraud policies
Several payment gateways specialize in the detection of fraud. This feature helps you identify any kind of suspicious activity before it proceeds with the payment process.
While most shoppers will visit your store, fill in their carts, and happily pay for their purchase, there’s a small percentage that will try to rob you. For instance, they might try to pay you using money from a credit card account that was hacked. Some will complain that they didn’t receive the product, although they did.
Although a majority of online merchants will refund those stolen money, or reship the “missing” product, those are still business expenses. Over time, this can add up.
That’s why you need to find a processor that works for you to avoid having fraudulent transactions.
You also need to pick a processor that secures your customers’ payments with the latest data security. Meaning, you need to utilize technologies like tokenization, fraud management tools, and point to point encryption.
Average transaction amounts and frequency
Several payment providers give tiered pricing depending on the amount and transaction frequency. That’s why it’s essential to pick a package that fits your current needs.
Why? Because if ever you exceed or miss these transaction limits, you’ll end up paying more.
Therefore, you need to pick a payment provider that can flexibly adapt to your needs as your business continues to grow.
Fees and service agreement
Because payment gateways and payment processing are usually based on the type of transaction a business carries forth (online or a combination of online and in-person), it’s essential that you compare how your business model fits the gateway’s fee structure or with the payment provider.
There are a few services that needed contracts and set-up fees, or they may create transaction fees if the transaction volume or order that is expected when the service was created isn’t met.
Supported business models
Ensure that the payment processor that you choose supports your business model. Otherwise, what’s the point of going through the whole compliance process only to be rejected?
Luckily, several providers have a list of businesses they do not support on their site. An excellent idea is to look there first, study it, and give yourself ample time. If there are any doubts or uncertainty on your part, get in touch with a company representative to get yourself pre-approved.
Also note that there are two types of payment gateway providers: The ones that are purely e-commerce business models (low to medium risk) and the high-risk processors.
High-risk processors is a group of businesses that need more involvement from a payment partner in the overall risk management and fraud detection. That way, the account, and the customer are safe when making a purchase online.
Here are a few examples of high-risk industries:
- Adult Entertainment
24/7 customer support
Several payment providers do not give any customer support. If that’s the case, users need to follow the manual instructions to fix an issue.
To avoid being in that situation, check beforehand if the provider offers live technical support that’s within at least the average working hours, to easily resolve whatever technical problems you might encounter.
At the end of the day, you want a provider that’s reachable 24/7 in case something important comes up. Although email is alright for most issues, being able to reach a live person through phone or chat is a lot better.
Over to you
The best payment gateway is a combination of the following factors: Experience, technology, ethical values, alignment, security, and innovation. The best part is, they will consistently do their job, not just in the beginning, but throughout the entire partnership.