Electronic commerce, aka eCommerce, is without a doubt one of the fastest growing industries that has immense potential. This year’s Black Friday has once again proven its power: Adobe Analytics reports a $6.22 billion revenue in online sales, a 23.6% growth compared to 2017.
Yet, eCommerce is also a very saturated market and is comprised of fierce competition; including the well-known leaders, Amazon and eBay.
While experience has proven that it’s the small benefits that can help you make a name for yourself in eCommerce, there are also dozens of must-have elements no online store can function without: And a smooth checkout experience is one of them.
In this article, we will explore one of the key aspects of the checkout process – the online payment gateway.
What are your options and how do you choose an eCommerce payment gateway for your online store?
Stay with us, keep reading, and let us uncover the answers for you.
What is a payment gateway and how does it work?
A payment gateway is a third-party service that acts as an intermediary between a customer, your online store, and a bank (i.e. payment processor). By integrating with a website/app, it helps validate the transaction credentials and authorizes the transfer of funds between the buyer and the seller, and makes it possible to make/accept online payments.
One of the most obvious examples, PayPal is considered to be the most popular payment gateway in the world.
While it seems fast and easy, online payment processing is, in fact, a complex operation. To understand how a payment gateway really works, let’s break down the process.
Here’s a visual representation of what happens when a customer hits that Pay button.
Comparing the payment gateways: What are the available options?
While the core operating principle behind any eCommerce payment system is pretty standard (getting the money from the customer to the merchant), there are still dozens of payment gateway solutions to consider before making the right choice.
To start with, let’s see what the possible options are and how they differ. To illustrate this, let’s take a look at a high-level payment gateway comparison.
- Hosted (external) payment gateway
Although integrated with your website, it redirects the users to the payment gateway provider website or uses iframe elements on your page for the payment details input.
One of its main benefits is that you don’t need to think about the safety of the transaction yourself – the gateway provider is fully responsible for the security and compliance of their platform. Hosted payment gateway solutions are also very easy to set up and require no customization.
On the other hand, the user experience with a hosted payment gateway is less than perfect. The checkout becomes more complicated, takes more time to complete, and as a result, can lead to a higher cart abandonment rate. The lack of customization mentioned above can also be considered a drawback in some cases.
As for the hosted payment gateway example, most of the popular solutions, including PayPal, Worldpay, Skrill, 2Checkout, and Payza, offer this type of service.
- Integrated (direct or shared) payment gateway
With this type of online payment platform, the customer doesn’t have to leave your website. All interactions are handled right there, on your site. The data provided by the customer is sent to the payment gateway for processing via its API.
As a result, this approach offers a superior UX as well as multiple customization options. You can tailor the checkout process to fit your business needs and branding strategy to ensure a smooth and pleasant experience. It is perfect for use on mobile websites.
On the downside, you will have to take care of the transaction security yourself. Plus, the implementation and maintenance of such a gateway is more complex.
Some of the integrated payment gateway examples are Dwolla, WePay, BlueSnap, etc.
Yet, some providers offer both hosted and integrated solutions or offer them as parts of different service plans. For example, while PayPal is originally a hosted solution, its PayPal Payments Pro plan has advanced customization capabilities and can be fully integrated with into website.
How to choose a payment gateway for your eCommerce store
Once you know what the available options are, a high-level online payment systems comparison should be conducted in order to find a perfect solution.
Here are the key aspects to consider when choosing a payment gateway for your eCommerce business:
- Business specifics
First of all, you need to make sure the chosen solution works across all of your target locations (as well as in your country), and has no limitations as for the type of payments, currencies, accepted cards, etc.
You should also keep your product in mind when choosing a payment gateway. For example, some of them have certain limitations as for the type of services/goods you can sell.
- The audience
Your choice should also take into account the demographics and geography of your clients. This will help you understand which payment types they would prefer.
For example, millennials will most definitely choose payments via PayPal while older audiences prefer traditional methods, i.e. credit/debit cards. Some audience groups might even appreciate the opportunity to pay with cryptocurrency.
So, it’s best to run a survey or conduct an in-depth competitor analysis to find the right solution for your business.
Lack of trust and concerns about the safety of transactions is one of the main drivers of cart abandonment. That is why choosing a secure payment gateway is so important for your online business.
As mentioned above, if you choose the hosted solution, you can avoid a security headache. However, you still need to make sure your vendor is reliable and takes customer data safety seriously.
It is also important to check your payment provider for GDPR compliance if you are planning to sell your products worldwide. If it fails to comply with the regulation, you too might be affected by the penalties.
- Integrational capabilities (and limitations)
This is where you will most definitely need professional assistance. Ask your development team to review the API and available technical documentation for the payment gateway solutions you are considering.
Whether you have a custom website or run your business on one of the popular eCommerce platforms like Magento or Shopify, there might be certain technical issues. So, it is better to know about the possible complications before you actually start integrating the chosen gateway into your online store.
The financial aspect of your choice is almost as important as the technical. So, explore all available avenues (different gateways as well as various service plans offered by a single provider) before making your final decision.
Make sure there are no hidden fees or plan limitations that might force you to overspend. Most online payment gateways have commission/transaction fees. On top of that, some might also have monthly or annual subscription fees and a set-up cost.
- Performance and reliability
As mentioned above, your checkout user experience can have a direct impact on your sales. That’s why processing speed is one of the things you should be looking into when considering payment gateway options.
It also goes without saying that your chosen payment gateway should offer minimal downtime.
Another important aspect is the success/decline rate. Also, there are many reasons why a transaction can be declined – e.g. incorrect or invalid credit card information, not enough money on the account, suspicious activity, etc. – so the more information your payment gateway vendor can provide on the situation, the better.
- Customer support
The quality of customer support (i.e. the medium it uses and the average response/resolution time), offered by your online payment platform can directly impact your business. Thus, you need to find a product you can rely on, especially in the case of an emergency.
Make a choice you won’t regret
Choosing a payment gateway provider is an important step for every eCommerce business. However, considering the vast amount of available options, finding a perfect solution for your business can be a rather tiresome and time-consuming process.
Plus, the chosen system needs to work smoothly with your website or app. That is why seeking professional assistance in this matter seems like an intelligent move (and a sound investment).
Whether you are looking to create an online store from scratch or simply want to improve/scale your business, Eastern Peak is the right choice for you.
Having a proven track record and vast experience in the online marketplace and with eCommerce app development, our team knows the industry’s ins and outs. That’s why we can help you not only find a perfect payment gateway for your store but take your business to a whole new level.
To learn more, request a free expert consultation right now using our contact form.
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