Fast, secure and ease of payment processes enable a smooth online customer experience – one that is likely to drive retention and customer growth. Payments are essentially the lifeblood of an eCommerce business and the choice of the right payment gateway is critical to the success of your online store. As there are numerous payment gateway options available, this article addresses the key areas to consider when deciding which payment gateway to adopt.
What is a payment gateway?
A payment gateway is the system and infrastructure that facilitates the payments from your eCommerce store. It processes the transactions from a website, thus enabling merchants to accept and manage payments and mitigate fraud in a secure way. In simple terms, think of them as the cash register for your online business. When looking into payment gateways, one will frequently come across the term “Merchant accounts”. A merchant account is a specific kind of bank account for receiving payments from credit and debit cards. The merchant account sits separately from your normal account, as this is where the bank holds the funds from debit and credit cards for a certain period of time. Your bank will then batch process the payments on a regular basis, with most banks doing so daily. Do keep in mind that financial institutions usually charge merchant accounts fees for set up, transactions and account keeping.
Merchant accounts come in two options – dedicated accounts that are provisioned specifically for your business and aggregated accounts (such as those provided by PayPal) that use a single merchant account to provide credit card processing for an entire portfolio of companies. The differences between these two options come down to three key points:
- Management – Dedicated accounts provide better control over your funds as you liaise directly with the bank regarding queries, processing and errors. On the other hand, aggregator accounts involve an additional step, where aggregators act as middlemen.
- Speed – Setting up a dedicated account requires extensive checks on credit-worthiness which takes more time to be approved. Aggregator accounts can be set up as soon as within an hour.
- Control – As its name says, a dedicated account is specifically set up for your business so you have maximum visibility on transactions and processes. Aggregated accounts, on the other hand, are a collation of businesses. This reduces visibility of all ongoing behavior in your aggregated account.
In short, if you are a middle to large eCommerce business, it is recommended to go through the process for a dedicated merchant account from your bank – the initial upfront costs and time spent setting up such an account will reap greater benefits in the mid to long term.
What do I need to consider for my payment gateway?
Every business is different. Some operate purely online; others have physical stores and offer an omni-channel shopping experience to their customer. Some businesses have a small number of transactions per month, whilst others have thousands of transactions. It is therefore important for every business to understand the requirements for their operations and then assess the variety of payment gateways and understand their features relevant for your organization.
There are eight main factors to take into account when considering a payment gateway:
1. Payment Types
There are a number of payment types that are now commonplace and that gateways process. The traditional key entry credit card or scheme debit card purchases are still the most prevalent, however other options are now becoming popular.
These include the likes of PayPal and AliPay where only the entry of a password is required to complete the transaction rather than the entry of billing, shipping and card details. Only the leading gateways provide these payment types as part of their solution. You can however integrate to them directly but at additional integration time and cost. Either way you do need to register a merchant account with them. It is recommended that you offer such payment methods because you need to cater for consumer’s preferred way to pay.
Online retailing crosses geographic boundaries and opens your business to international consumers from a range of countries. Within the Asia Pacific market this is of particular importance with its high cross border rates. If you are willing to ship to such markets you need to ensure that you can process transactions from such markets. Ensure that the gateway can process the currencies you want to accept and that it can connect to merchant banks where you want to set up a website locally. It is also worth considering if the gateway can provide Dynamic Currency Conversion (DCC) whereby consumers can choose their preferred currency when paying.