What to Consider When Choosing a Payment Gateway?
When choosing a payment gateway for your eCommerce business, it's important to consider a variety of factors. The right payment gateway can help you process payments quickly and easily, while providing you with the security and features you need to run your business. In this article, we'll take a look at some of the most important things to keep in mind when making your decision.
What Is a Payment Gateway?
A payment gateway is an intermediary technology that process, stores and transmits payment information. There are four parties that involve the payment gateway process: the customer, the merchant, the issuing bank, and the receiving payment or acquiring bank. The customers transfer their personal and financial information between the merchant and customer by inserting their debit/credit card information. Security layers encrypt this exchange in compliance with the PCI DSS and prevent sensitive information from falling into the wrong hands. The payment gateway validates the sensitive payment information securely and apply multiple other validation checks such as available card balance, card validity, etc. After all this, it determines the number of funds in the customer account used for the purchase and, accordingly, notifies the approval or decline of the transaction.
If you need more detailed information on what a payment gateway is and how it works, please read "What is a Payment Gateway and How Does It Work?"
Payment Gateways vs Payment Processors: What’s the difference?
We have explained above how the whole payment process works. Hence, it requires two basic components: payment gateways and payment processors to be successful and secure. While they may sound similar, gateways and processors cannot be used interchangeably. In short, payment gateways are the platforms that allow you to connect your eCommerce store to payment processors. Payment processors handle the actual processing of payments. Following are some differences between the two:
- The payment gateway receives the customer’s information and forwards it to the payment processor for verification through the card system. Payment processors relay the data and verify that the card details are valid and secure.
- Payment gateways inform customers and merchants of approvals and declines of transactions. Through data transmission between issuing and receiving banks, payment processors communicate the response to the payment gateway.
- When transferring data to the payment processor, the payment gateway needs to encrypt and certify it as an ISO 8583-compliant platform. Thus, payment processors have higher development costs and longer development times than payment gateways. Payment gateways need a simple SSL encryption.
- Payment gateway is more economical regarding certification and development costs, making it more suitable for startups and small businesses.
What types of payment gateways are there?
With the advancement of technology, many businesses have moved from direct bank transfers to a more convenient, secure, and credible way of making payments using a payment gateway. Here are some of the most common types of payment gateway:
- Hosted payment gateways
Using this payment gateway, when a customer clicks the ‘buy’ button on the merchant website, the system redirects the customer to the payment service provider’s website. Now, the customer needs to enter the relevant card or bank information. Upon confirmation, the customer then gets back to the merchant’s website to receive their order confirmation message. As a way of ensuring customer confidence, merchants can include their logo on the payment page.
- Self-hosted payment gateways
This type of payment gateway, also known as pro-hosted payment gateways, involves the client providing card or bank details on the merchant’s website. Customers may need to submit information in a specific format. Upon submission, the data is then transmitted to the payment gateway’s URL. As the whole customer’s journey remains on the merchant’s website with no redirects, it makes the customer experience much better and faster. However, this type of payment gateway comes with a more complicated integration.
- API hosted payment gateways
The customer inputs their credit card or bank details on the merchant’s website in this payment gateway. Instead of directing to the URL page, the payments are made via HTTPS queries or APIs. The merchants have complete control over the whole purchase process. However, if you are about to handle payments directly on your website you will need to take care of the security, i.e. merchants must possess SSL certification and PCI DSS compliance.
What to consider when choosing a Secure Payment Gateway?
A reliable payment provider is critical for the merchants to provide a smooth customer experience and increase traffic to their offline or online portals. Here are some things to consider when choosing a payment gateway:
- Online businesses must consider how many payment methods and currencies they wish to include in their payment process. The more payment options available, the more comfortable and satisfied their customers will be. Look for payment gateways that offer multiple global and local payment methods.
- To provide good customer service, the speed of the entire sale process is essential. This includes the transfer of funds from the customer’s account to the merchant’s account. Always pay attention to transaction processing and settlement time. We will dedicate a separate article about this topic in the near future, so stay tuned.
- One of the key factors an online business must consider is the business continuity. Choose a payment gateway with the highest % of system uptime and always have a backup plan. Uptime is the percentage of time that a system is operational. In other words, it's a measure of how often a system is available for use. For example, if a payment gateway has an uptime of 99%, that means it's operational 99% of the time. When you're looking for a payment gateway provider, it's important to find one that offers an SLA level of 99.99% uptime.
- Another aspect to consider is the transaction fees and service costs. Fees depend on the volume of transactions, frequency of transactions, and many other factors. Although most payment gateways charge a fee for their services, the cost structure and amount vary considerably. Aside from examining monthly and transaction costs, consider the hidden expenses such as currency exchange rates and foreign fees. Some may give incentives for big sales volumes, while others may provide bespoke solutions tailored to your company's requirements.
- Merchant accounts are a must for some payment gateways. In comparison to other options, they charge lower transaction fees. Also, they are considerably more safe and secure, especially for large volume businesses.
- Payment gateways must support 3D Secure protocol. 3D Secure is an additional security layer for online credit and debit card transactions. It was developed by Visa and MasterCard in order to reduce the risk of fraud in e-commerce transactions. The protocol works by verifying the cardholder's identity using a personal password or code that is known only to the cardholder and the issuing bank.
- Payment gateways must be compliant with Payment Card Industry Data Security Standard (PCI DSS), a set of security standards designed to protect sensitive credit and debit card information from fraud and theft.
When it comes to choosing a payment gateway for your eCommerce business, there are a lot of factors to consider. But by taking the time to research your options and ask the right questions, you can find the gateway that's perfect for your needs. We at Catalystpay thrive to enable online businesses by providing a complete payment gateway solution with low processing fees, low commissions, and enhanced security. If you are still not sure about what payment gateway work best for you and more importantly your own customers, Contact Us to find out how we can help you take your business to the next level.