The payment gateway is probably the most integral part of your e-commerce solution. It’s how you get paid.
These days there are a bunch of offerings out there and trying to figure out which one is best for you can be a bit of a challenge.
Payment gateways can be broadly categorised into two types. Classic Gateways and Modern Gateways.
Classic Gateways
Classic gateways require you to have a merchant account with your bank, and some kind of integration on your website that connects with the banks merchant system.
These gateways can have quicker clearing times, and sometimes lower fees, but can also be harder to set up and maintain. They also require additional steps and responsibility in regards to data compliance and security (go google PCIDSS compliance, it is boring but important).
Modern Gateways
In response to the pain of classic gateways a bunch of modern gateways have popped up. You may have heard of Stripe and of course you have heard of PayPal.
These solutions tend to be more popular with your customers as it can make it easier for them to pay.
Some also offer some kind of buyer protection and dispute resolution.
They also act as a clearing house, meaning that they clear the payments from your customers and pay out into your nominated bank account, so you don’t need a merchant account with your bank.
Generally speaking they’ll have higher fees, but the plus side is they are easier to set up and maintain, especially when it comes to to managing the data compliance and security side of things.
Here are some things to consider when deciding on a Payment Gateway.
What do customers want?
You need to make it easy for people to pay, this is even more important if you sell things that people can easily get somewhere else. If you make it too hard for people to pay they will bail.
Look for a gateway that has a great user experience, preferably in context processng rather than sending customers off to another site to complete the payment.
If you are selling popular consumer products you really want to offer something that people are familiar with. ie. In Australia PayPal really must be an option.
Ongoing costs
Getting paid can be expensive and some providers have some pretty complex fee structures, usually revolving around a monthly fee, a transaction fee, a percentage of sale (either fixed or a sliding scale) or a combination of all the above.
None of the options are a one size fits all solution, you need to consider the margins in the products you are selling and the type of product you are selling.
For instance if you are selling a high ticket, low margin exclusive product, it may be more beneficial to spend the extra money on setting up a classic gateway directly with your banks merchant system to take advantage of the lower transaction fees.
Recurring Payments?
Are you offering subscription style services? Does your payment gateway allow for this and how will it integrate with your e-commerce software.
In Context or Offsite
Some gateways will send you off to the payment processors website to complete payment and others will process the payment on your site, known as in context.
In context payment processing provides a smoother checkout experience reduces the rate of checkout abandonment.
There’s no point having a highly optimised distraction free, easy to use checkout process only to ship the customer off to some clunky payment processor to take their money. They will bail.
Whilst choosing a payment gateway can be a bit of a process, most good e-commerce platforms allow you to have more than one payment gateway and more than one payment method, so you can always try out different options and also give your customers options to choose methods that suit them the best.
This post is based on content from my 6 Week E-commerce Bootcamp, a done-with-you program consisting of professional e-commerce development, training and consulting to ensure both you and your business are set to succeed selling online.
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