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What we will cover
What is a Payment Gateway?
Payment gateways are one of the four parties involved in any credit or debit card transaction. But do you know which payment gateway is right for you?
Every online or store card sale you make involves the issuing bank (the customer’s bank account); the acquiring bank (your bank account); the card payment processor (VISA, Mastercard, AMEX, etc.) and a payment gateway.
A payment gateway is not just a convenience, it is a legal requirement. Merchants are not allowed to transmit customer data directly from their websites or POS systems to the payment processor.
Making Your Choice
Choosing the right payment gateway is a serious business decision so avoid being pressurised into signing anything.
This article looks at the factors you need to carefully weigh up before deciding on a payment gateway provider.
Hosted vs Integrated Gateways
The most significant difference between payment gateways is around where the storage and processing of customer data happens. The two main categories are hosted payment gateways and integrated payment gateways.
With hosted payment gateways, the data crunching happens on a third party website. When customers pay for their goods or services they will be redirected away from your website.
With integrated payment gateways, customer data is stored and processed on your website.
To make things a bit more complicated, some hosted systems will process the data on a third party website while using i-frame elements to make it look as if the processing is happening on the merchant’s site.
Opting for a hosted or integrated payment gateway will impact on several of the factors below, including compliance and user experience.
PCI DSS Compliance
All merchants must comply with the security protocols set out by the big payment processors (VISA, Mastercard, AMEX, etc.) These are set out in the PCI DSS (Payment Card Industry Data Security Standard). We have written a blog post detailing your responsibilities under PCI DSS. For the purpose of choosing a payment gateway, you should understand that the choice you make will affect how much admin you have to do and how exposed you are to risk.
For example, a fully hosted payment gateway (think Stripe or PayPal), will handle most of the compliance for you, leaving you with just a simple form to complete.
On the other hand, an integrated gateway that you host yourself will require you to carry out (and pay for) an annual vulnerability scan.
You should also note that some payment gateway providers (e.g. Sage Pay) offer both hosted and integrated services so make sure you know exactly what you are signing up for.
If you are new to the world of e-commerce website, Vu Online can make sure you do things properly from the get go.
User Experience
We’ve all experienced the frustration of trying to complete a payment online, only to have it rejected. Or of having to fill out lengthy online forms to make a simple purchase.
The best payment gateways for your business will accept the payment methods your customers prefer and make it simple for them to complete the transaction.
Putting a customer survey on your website or talking to your customer service team can help identify what your customers would expect from a payment gateway.
If you already sell online, check your analytics and look for pain points. Abandoned carts and a high bounce rate on checkout or order pages are red flags for poor user experience. Consider running an online survey to get more details on what is going wrong. If your payment gateway is the problem, make sure your new provider will solve it.
We have found that Stripe and PayPal tick the usability box for most customers which is not surprising given their size and experience.
Trust and Reputation
Closely related to both compliance and user experience is user trust and company reputation.
If you are using a well-known hosted gateway provider like Stripe and PayPal, chances are that most customers (especially young buyers) will trust them as much – if not more – than your company. Most online consumers are used to popping over to PayPal and back to complete their transactions.
Unless you are a well-known, reputable brand, you might find that attempting to set up an integrated payment gateway on your website might make potential buyers nervous.
On the other hand, if you are a trusted brand, outsourcing to a relatively unknown hosted gateway provider might be a bad idea. You might find that customers abandon their shopping carts when they find themselves being redirected to an unfamiliar third party site.
Fees and Cash Flow
All payment gateways will charge a fee per transaction and this will obviously be a big factor in your decision-making. Many will also charge a monthly or annual subscription fee. However, it can be false economy to base your decision on cost alone. A slick, reputable gateway could boost your sales enough to outweigh a slightly higher cut.
Make sure you factor in any set-up fees and other hidden expenses before signing anything. For example, some payment gateway contracts include cancellation charges which can be an issue if you decide to switch at a later date.
You should also understand how often your gateway provider reconciles payments. If cash flow is tight, the difference between three and seven days can seem an eternity.
Business Fit
Does the payment gateway you are interested in meet all of your business needs? This includes the currencies you trade in, the products you sell and your business processes.
For example, if you have customers from a non-UK country that doesn’t use British Pounds or US dollars, you might find that the gateway doesn’t accept their currency or charges hefty conversion rates.
Some payment gateways will not work with businesses involved in certain products or services (e.g. gambling, alcohol, adult entertainment, etc.)
Another potential issue is that your payment gateway isn’t flexible enough to meet your business needs. If you offer customers part refunds, for example, can this be done through the gateway you are considering?
System Integration
Whatever type of payment gateway provider you decide on, your life will be much simpler if it integrates with the rest of your e-commerce system.
At Vu Online, we develop e-commerce websites using WooCommerce partly because of the hundreds of payment gateways it plays nicely with.
The WooCommerce plugin for WordPress transforms any website into a powerful e-commerce site which includes order management, product filtering, image galleries and many more features.
By carefully considering all of the factors above, you can benefit from a payment gateway that enhances user experience and meets all of your business needs while minimising unnecessary compliance headaches.
Hopefully this has helped shed some light on the reach for choosing how those few fields on a checkout page impact your business, hopefully we have helped you know which payment gateway is right for you.
If you are interested in a fully-fledged e-commerce solution for your business, contact us with your vision. We look forward to exploring the possibilities with you.
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