If you have ever purchased anything online, you most likely used the services of a payment gateway.
A payment gateway is a financial technology service that acts as the intermediary between buyer and seller during the online payment process. In a nutshell, the gateway receives the payment from the buyer and then makes it available to the seller.
As a seller, the gateway is linked to the pay now checkout facility on your website, and requires some integration by a web developer. Your pay now checkout process may take your customer away from your website, to a secure server with encryption where the payment gateway resides. The gateway will then validate the customers funds through a payment processor, a card association and the customers bank account, or via an e-wallet system. The transaction will either be accepted or declined, and then the customer will be returned to your website to complete whatever processes happen next, such as sending the customer an email confirming their transaction and delivery date.
Once the payment gateway has completed the transfer of funds on the customers side, it is made available to you, the seller, in some form or another.
So if you want to sell online, a payment gateway is one of the most common ways of transacting.
Offerings and requirements from payment gateway providers obviously have some differences, depending on where you are in the world, but there are some more or less universal things to consider when choosing a payment gateway.
Most payment gateways require that you have a bank account to receive funds into, either a merchant account or a business account. A merchant account is a transition account that holds payment from credit card sales temporarily, and then the funds are transferred to a business account.
If you are a merchant, then you will probably get the funds quite quickly deposited into your merchant bank account, perhaps even daily.
However new, smaller or higher risk businesses do not usually qualify for a merchant account.
Payment gateway providers do often have aggregated merchant accounts and can take the funds on your behalf.
Of course, there are costs and other factors involved with using a payment gateway service, and it’s really important that you understand exactly what you are in for.
When looking for a payment gateway for your business, here are a few things to consider:
Is the service offering the payment options that you and your customer base need or want?
Some things you and your customers may need:
- International payments
- Recurring payments for services or products
- Payments via debit cards as well as credit cards
- Payment via e-wallet systems
- Mobile payment systems
- Crypto currency payments
- Loyalty rewards for local schemes
What are the costs involved?
Fees and charges differ with offerings and providers, but you should bear in mind that you could be in for the following costs:
- Website development integration costs
- Set up fees
- Monthly fees
- Transaction costs
- Admin costs
- Settlement fees
- Possible penalty fees
When and how do you get your money?
Different providers may offer different schemes. For example, you could pay a higher fee and get your money sooner, or you could pay a lower fee but have to wait 60 days for payment, for example. This can have a serious effect on your cash flow. Make sure you understand the following:
- When do you get your funds?
- How do you get your funds?
- When are charges and fees due?
What about disputes and chargebacks?
No business has smooth sailing all the time, and transactions do not always go as planned. Understand where you stand with your gateway provider on disputes and chargebacks:
- What is the dispute/chargeback procedure?
- What are the charges involved?
- Are there additional penalties involved?
Is the offering secure and transparent?
Both you and your customers need to feel comfortable and secure in the payment process.
- Is the process facilitated on a secure server with an SSL certificate?
- Does the process comply with standards such as the Payment Card Industry Data Security Standard (PCI DSS)?
- What fraud prevention and detection methods do they offer?
- Is their reporting transparent, accurate and reliable?
- Do they have a good reputation – or have they been in the news with a possible data breach?
- Do they have easily reachable support?
- What is their response time on support?
- Do they have excellent uptime, or do they crash with alarming regularity?
- What happens if you want to cancel the service?
Read ALL the fine print.
We should not need to say this, but make sure you really understand all the ins and outs of the service you are buying.
For example, some providers require a minimum transaction limit – if you don’t make sales above the limit you could be charged extra. Is support free or do you have to pay for it?
And what do they need from you and when? Do you need to provide information such as tax status on an ongoing annual basis in order to continue to use the service? And what are the breaches of contract that will cause immediate termination of your account? And what happens to your funds if they terminate your service?
Ultimately a payment gateway may not be a solution available to you, or even desirable. There are other options, such as payment facilitators that offer different services, for example vouchers that can be purchased elsewhere and redeemed on your website. Talk to us at Baer’s Crest about payment options for your business.