Ecommerce has come a long way since the creation of online shopping. Every business has a different set of requirements to achieve success, depending on the owner’s individual goals.
However, all online retailers need a way of accepting payment from their shoppers. The checkout process has a big impact on customer experience, so selecting a payment processor is a critical decision for your business.
Not all payment gateways are the same, and not every business needs the same features in a payment processor. It’s important to understand what a payment gateway is, why the provider you choose matters, and how you can narrow down your search and find the best option.
What is an ecommerce payment gateway?
A payment gateway is software that allows for the secure transaction of credit card information and other direct payments. There are three main components to any payment gateway: the seller, the customer, and the software.
The seller partners with a merchant bank that accepts and deposits the payments after the customer provides their credit or debit card information. Next, the payment gateway links your website to the card processor.
Finally, the software verifies the billing information, authenticates the funds, and approves the transaction request.
Different payment processors and merchant banks can function in slightly different ways. Some allow you to access the funds immediately, and others hold onto the payments for a day or two before they become available.
Why is choosing the right payment gateway important?
Your payment processing is one of the most important elements of your ecommerce store. The payment gateway you choose can make or break the shopping experience for your customers, so it’s essential that you choose wisely.
Here are four ways the right payment gateway can benefit your business!
Reduces shopping cart abandonment
It’s unfortunately common for consumers to abandon their carts at the very end of their shopping experience. If the payment process is lengthy, confusing, or insecure, your shoppers may not want to complete the transaction.
Using a high-quality, trustworthy payment gateway can make checkout much more manageable for your customers. This in turn will reduce the number of abandoned carts.
Boosts customer confidence
Some shoppers are wary of online transactions because they’re concerned about the security of their card information. To legitimize your business in the eyes of your customers, your store should accept a variety of payments through a secure channel.
At the very minimum, your site should accept all major credit cards. However, alternative payments like Apple Pay and Google Pay are becoming more common. The more major online payment methods you accept, the more trustworthy and professional you’ll appear.
Increases conversion rate
The main goal of using a payment gateway is to increase conversions. A safe and speedy checkout is a great way to keep visitors on the page until the transaction is complete.
It also can increase the likelihood of your customers returning for future purchases and recommending your store to others. Customer experience is key, and checkout is a major factor.
Avoids unnecessary costs
Payment gateways aren’t free. No matter which software you choose, you’ll have to pay transaction fees and possibly a signup fee.
The costs vary, though, so carefully researching your options will help you find the best deal. Choosing the right payment gateway for your business could save you hundreds or even thousands of dollars every year.
What to consider when choosing your ecommerce payment gateway
There are plenty of reputable, popular payment gateways available. It can be difficult to figure out which one is the best fit for your ecommerce store, but the following 13 tips will help you to get started.
1. Pick the best payment flow for your business
The appropriate payment flow for your store depends on the size of your business and the number of transactions you process. If you expect your ecommerce business to grow, your payment system should be scalable.
Some sites do well using an integrated payment form. This utilizes a secure payment gateway to send payment information from your checkout page to the payment processor.
Others prefer to redirect their customers to a hosted payment page that will ask for their information. This system is usually cheaper and easier to implement than the integrated payment form. However, it may not handle a large volume of transactions as effectively.
2. Ensure that your customers feel protected
Security should be your biggest priority when choosing a payment gateway. Your customers should have no reason to be concerned about their information being compromised.
Not only is this essential for keeping consumers’ information safe, but it’s also important for your reputation. Even if a shopper only has a hunch that something is insecure, you could lose their business.
The payment gateway you work with should have a certification like one from the Payment Card Industry Data Security Standard (PCI DSS), which confirms that it complies with security standards.
Keep in mind, too, that different countries may have different preferences for certifications and other security protocols. If your store ships globally, consider the locations of your customers when choosing your payment gateway.
3. Examine fees
Price is a significant factor in selecting a payment gateway, especially for small ecommerce retailers. You don’t want to lose out on the majority of your profits by paying massive transaction fees. Some payment gateways will charge an extra fee if you don’t meet a certain transaction volume, too.
Before committing to a gateway, make sure you know exactly what their terms are. Carefully read the agreement for startup costs or hidden fees. Consider how your experience with the payment gateway may change if you either gain or lose sales.
4. Study conditions of the service agreement
Don’t sign up with a payment gateway until you’ve read every word of the service agreement. While you should work with a service provider that’s transparent, some companies place hidden terms in their contracts.
Make sure that you understand the payment structure, the startup process, and all other details of the agreement.
If anything in the agreement doesn't sound ideal, follow your gut instincts. You can always search for another service provider to use instead. When it comes to processing payments and handling financial information, you have to be able to trust the payment gateway.
5. Make transactions simple
A complicated checkout process is one of the most common reasons people abandon their ecommerce shopping carts. With online shopping, it’s very easy for consumers to take their business elsewhere.
All they have to do is click away from your site and open a new window. To convince your shoppers to stay on the page through the transaction, the entire process should be simple and straightforward.
One of the most common mistakes ecommerce entrepreneurs make is requiring visitors to sign up for an account before checking out. Many shoppers don’t want to take the time to set up an account or give out their email address.
To simplify the experience, your payment gateway should allow your customers to check out as a guest.
The gateway should also ask for as little information as possible. It should never waste the customer’s time by requesting irrelevant or unnecessary information.
For example, some payment gateways require the customer to type in their billing and shipping details separately even if the addresses are the same.
There should instead be a checkbox that states something like the following: “My billing address is the same as my shipping address.”
6. Ensure that checkout is also mobile friendly
The percentage of online sales that occur on mobile phones has been steadily rising for years. To appeal to mobile shoppers and meet the needs of evolving ecommerce payment trends, your payment gateway needs to be as easy and functional on mobile devices as it is on desktop devices.
Before signing up with a payment gateway, test it out on a desktop computer, a smartphone, and a tablet. Try it on different browsers with each device, too.
The page should load quickly and be easy to navigate. Efficiency is especially important for mobile shoppers, so set your standards high when evaluating your options.
7. Determine what features are needed for your business
Each payment gateway you consider may offer different features. All businesses have different needs, so you have to think about what’s important for your store.
Where are your customers located?
If you serve customers around the world, your payment gateway must accommodate for that. Some gateways will accept multiple currencies, but others only work with U.S. dollars.
Do you have a high volume of smaller transactions, or do you have larger but less frequent sales? What’s the most common form of payment you encounter?
Is it essential for your store to accept alternative payments like Apple Pay, or do your customers prefer traditional payment methods like credit cards?
When determining which features you want to prioritize for your payment gateway, think about your target audience. Consider what their values and preferences may be, and look for service providers that will appeal to that demographic.
8. Make sure that the integration process is straightforward
When selecting a gateway, you’ll have to choose between hosted or integrated systems. A hosted gateway will redirect the customer to the processor’s platform. With this setup, the service provider is responsible for security, so you don’t have to worry about PCI compliance.
Integrated systems build the processor into your site, so the customer never leaves your store. Customers may prefer to stay on your site to complete the transaction instead of redirecting to another page. For this reason, this option can be good for your conversion rates.
Integrating your payment gateway with your site can be simple or complicated, depending on your shopping cart software and the gateway you choose. Consider which payment gateways your ecommerce platform supports. These will integrate much more easily.
You could choose a gateway that isn’t supported by your platform, but it’ll take some extra programming to connect it to your website. It’s best to only do this if you can be sure that the gateway will integrate smoothly and you test it often before launching your site.
9. Determine if a merchant account is required
Some payment gateways require the seller to create a merchant account, which is a separate account to receive credit card payments. This used to be the only way for payment processors to deposit your money.
Today, though, many payment gateways don’t use a merchant account. These modern systems withdraw the payments from the customers’ cards and transfer them to your account after validating them.
There are pros and cons to both types of gateways. With a traditional gateway system, you’ll have to create a new bank account.
However, newer gateways that don’t require a merchant account tend to charge higher transaction fees. You’ll have to consider whether the cost savings of a traditional payment gateway is worth the inconvenience of switching accounts.
10. Check to see if it’s easy to set up recurring billing
If your business uses a subscription or membership model, your payment gateway should support recurring or automatic payments. This is far easier for both you and your customers than manually renewing the subscriptions whenever they're due.
Some gateways let customers easily change the date and amount of their payments, and others can only change the payment information by canceling the subscription. If you offer multiple types of subscriptions, make sure that your customers can switch between them without hassle.
11. See what kind of customer support is available
Technical problems regarding payments should be handled right away. Unfortunately, some service providers only respond to customer support requests through email, and it can take hours to get a response.
If you’re going to use a payment gateway not included with your ecommerce platform, be sure to go with a provider that offers live support 24/7 so that you don’t have to keep customers waiting if they have a payment issue.
12. Determine the preferred payment method of customers in your target market
Payment preferences can vary by location and by age group. In some countries, most shoppers prefer to use a credit or debit card. In others, consumers may prefer methods like PayPal or prepaid cards.
Older shoppers tend to stick with traditional forms of payment like debit cards. However, younger shoppers may like alternative payment methods like Google Pay.
Research your target market to identify their most frequently used payment methods, and look for a gateway that accommodates for those systems. Appealing to your target demographic should be one of your priorities, and accepting their desired payment methods is a great way to attract loyal customers.
13. See if the payment gateway supports mobile payments
Mobile shopping accounts for a significant portion of ecommerce sales, and it’s only becoming more popular. If your payment gateway doesn’t support mobile sales, you could be missing out on lots of potential customers.
Your payment gateway should allow shoppers to complete transactions either through your mobile site or your app. The checkout process on mobile devices should be just as quick and easy as it is on your desktop site.
Picking a payment gateway can be difficult. There are so many different options, and it can be tough to know how one will perform until you actually integrate it into your website.
What’s most important is that you take your time and choose carefully. Start your search by writing out a list of features you're looking for in order of priority.
This will help you narrow down your search to a handful of providers that best fit your needs. Then, you can look more closely at the details to determine which one is optimal for your site.
Consumers value businesses that allow them to shop conveniently, efficiently, and securely. When you use a high-quality payment gateway, you can improve your ecommerce site’s customer experience and establish a loyal following!