Perhaps the most important part of any ecommerce website is the checkout. After all, this is where you, as the online retailer, finally get paid. Sure, you might have an attractive website filled with the kinds of products that the general public is just chomping at the bit to buy, but without an effective payment system in place your site is effectively dead in the water.
Of course, knowing which payment options will work best for your website is a difficult call. There are literally dozens of payment gateways from which to choose, and they’re not all created equal.
But before you throw up your hands in frustration, take a breath. We’re here to help. Take a moment to look over this short primer on payment gateways. We’ll talk a bit about how they work and why they’re so critical to your success. We’ll also talk a little about what you should be looking for in a payment gateway, and we’ll review a few of the more popular options available to online retailers.
What is a Payment Gateway?
A payment gateway acts as a conduit between customer and online retailer. When a customer enters their payment details on a website, the payment gateway sends that information securely to the payment processor. The gateway authorizes the payment by making sure that the customer’s data is accurate and true and is sufficient to successfully complete the transaction.
All of the customer’s payment information is encrypted, protecting their personal details while allowing them to complete their online transactions. Payment gateways are, for all intents and purposes, a digital bridge between you and your customers. They make it possible for you to safely and securely accept payment from your online customers.
How Does a Payment Gateway Work?
As a retailer it is not really necessary to fully understand the nuts and bolts of your payment gateway. It should be enough that it works and enables your website to successfully accept online payments from your customers.
However, familiarizing yourself with the basic process can’t hurt and should help to demonstrate the importance of your payment gateway in your online success.
- A customer places merchandise in their cart and proceeds to the checkout
- The customer enters their payment details
- The payment gateway encrypts the customer’s details and directs them to the payment processor
- The customer is redirected to the payment processor to finalize the payment
- The payment processor verifies and confirms the payment
- The customer is returned to the online retail site and completes the transaction
Again, the payment gateway acts as a conduit between the customer and the payment processor, ensuring that all of their personal and private details are encrypted and transactions between buyer and merchant remain safe and secure.
What Should You Look for in a Payment Gateway?
There are dozens of payment gateways from which to choose, and they’re decidedly not interchangeable. This is not a case where one size fits all. You should strive to choose the payment gateway that best suits your ecommerce needs.
To that end, here are a few key points to consider when choosing a payment gateway for your website:
- Is the Payment Gateway Supported by Your Ecommerce platform? – To find out which payment gateways are supported by your ecommerce platform check the ‘payments’ section in the platform’s official extension catalog.
- Should Customers Enter Payment Details Directly on Your Site? – Some gateways are designed to accept payment details directly onsite, while others redirect the customer to a more secure processing area.
- Should Your Payment Gateway be Combined with Your Payment Processor? – Some payment providers, such as PayPal and Stripe, offer a combination gateway and processor service for their clients. Others, such as SagePay and PayPoint, only provide the gateway itself, and you will need to engage a separate payment processor.
- Should You Have More than One Payment Gateway? – Some retailers choose to have more than one payment gateway available to their customers. Keep in mind that some buyers may prefer one gateway to another. If a shopper doesn’t see a payment option they like, you run the risk of losing the sale.
- What is the Gateway’s Fee Structure? – Payment gateways aren’t free, and you should look closely at the fee structure before settling on a gateway for your website.
- How Long is the Contract? – Be leery of getting locked into any long-term contracts. If you find you are not happy with your payment gateway you don’t want to suffer through a multi-year contract before you can change providers.
- How Does the Gateway’s Reputation Stack Up? – Reputation is everything, especially where finances and data security are concerned. Do some research to ensure that the gateway and processor you choose has a proven performance track record.
- Does the Gateway Offer Advanced Features? – All payment gateways can process single payments, but what if you run a subscription service and you need to process recurring payments? What if you want to be able to process payments for third-party sellers? Check the list of features before choosing your gateway.
- Does the Gateway Support Multiple Payment Methods? – There are a surprising number of payment methods in use around the world, and not all payment gateways support every payment method. Just as customers want to see a gateway that they trust, they also want to be able to pay using the method they prefer. Make sure the gateway you choose supports the most popular payment options for your customer base. Remember, if the customer can’t use their preferred payment method there’s a good chance you’ll lose the sale.
Your Choice of Payment Gateway is Critical
As an online retailer your choice of payment gateway is critical. How your customers pay for their purchases is one of the most important decisions you have to make, and the choice of gateway will have a definite impact on your ability to attract and retain customers.
Before you engage any payment gateway for your ecommerce site do your due diligence. Review the terms of service, assess the fee structures, and investigate past performance. Look for payment gateways that not only work for you as a merchant, and that also appeal to your preferred customer base.
Remember, trust is key to closing a sale, and shoppers want to see payment options that they will be comfortable using. If you want your ecommerce site to live up to its potential you need to think about your payment gateway and the role it can play in your online success.
Sprout Funding helps small businesses secure the money needed to stabilize and grow. Keep your funding simple, and straightforward. 866-962-4922
We are available to talk with you weekdays, from 9-5 CST
The Sprout Funding blog offers tips, reports, insights and other ideas to help small business owners learn and grow. Have a question for our team? Email us at: firstname.lastname@example.org, and tell us how we can help you.
If you are ready for the money to grow your business, let's get started!