The average shopping cart abandonment rate in is . A good payment gateway can reduce that number and thus achieve more conversions.
We are going to explain what a payment gateway is, how it works and the differences with a payment processor. We will also review the best payment gateways in the industry.
What is a payment gateway?
A payment gateway is a portal that connects a bank account with the corresponding payment processor. Transmits transaction information, either virtually through web payment services and APIs or in person through a payment terminal.
This payment service authorizes different modes of online transactions, such as Internet banking, credit cards, IPU (Unified Payment Interface) and other forms of digital wallets.
They need a payment gateway as it guarantees the security of payments and protects sensitive data. Customers can safely store their essential information, such as credit card details, with the standard of (PCI-DSS).
Many payment gateways also include fraud detection tools, such as the CVV (card verification value), the AVS (address verification service) and the strong authenticationto reduce the risk of information loss and theft.
Some payment gateways also support international online payments, making it easy for entrepreneurs to scale their eCommerce business globally.
How does a payment gateway work?
In every online transaction there are four key players. In addition to the buyer and the merchant, there is the issuing bank (which has issued the customer’s card) and the acquiring bank (which collects the funds from the issuing bank).
Although there are many steps, digital transactions usually take minutes.
Once the customer is ready to checkout, the website will direct them to a payment gateway to enter credit card information or bank details.
The next step is encryption. The payment gateway will encrypt the sensitive data that will be used between the buyer and the seller.
In addition, the gateway will perform fraud checks with built-in security protocols, such as TLS (Transport Layer Security).
After ensuring a secure connection, the issuing bank will check if there is sufficient balance in the account.
The payment processor will contact the merchant account. If authorized, the acquiring entity collects and settles the balance in the merchant’s account. Finally, the customer will receive a notification that the transaction has been successful.
If the seller’s account declines the transaction, the seller will ask the customer to choose another payment method. Some of the factors influencing approval are network errors, the seller’s maximum transaction limit, and bank-related issues.
Difference between a payment gateway and a payment processor
Although a payment gateway and a payment processor go hand in hand during a transaction, they are both completely different and are not interchangeable.
A payment processor is what communicates transaction information between the seller, the issuing bank, and the acquiring bank. Its function is to maintain the security of the payment process, from user authentication to the settlement of funds.
Typically, a payment processor also supplies credit card machines or other equipment to accept payments. To do this, you will need a seller account with a service provider.
For merchant purchases, a payment processor will use a terminal as the interface to .
On the other hand, a payment gateway explicitly acts as an intermediary between the buyer and the seller.
If a payment processor is for card transactions, a payment gateway facilitates transactions where there is no need for a card. It is a point of sale terminal for your online business.
Since there is no customer or credit card physically present, the virtual authentication process is more delicate. Payment gateways are tasked with validating customers’ digital data against malicious threats so that payments are secure.
Types of payment gateways
Since having a good payment gateway is important, knowing the pros and cons of each type will help you choose.
redirection
The simplest payment experience, redirection is best for new and small businesses as they are secure and easy to set up. Sellers do not need to create a seller account to set them up.
This type of payment gateway will take your customer to a separate payment page to complete the transaction. At the checkout screen, you can promote your brand by displaying your logo.
With third-party redirect gateways, you can count on them to do the heavy lifting, from security protocols to privacy obligations. However, this can also be a disadvantage, as you will have less control over the process.
Another drawback is that this method can interrupt the user’s shopping experience. The buyer will have to leave the eCommerce site to complete the online payment.
Buy on site, pay off site
The purchase order process is done on the site, without any redirection, which speeds up the user experience.
However, to complete a transaction, this type of gateway will take customers off the site. This means that sellers must ensure security on their own.
Your website must comply with the to protect customer information, which requires more resources and technical knowledge.
Order and payment on the site
This type of payment is ideal for large e-commerce companies hoping to generate a high volume of sales. From purchase to payment processing, everything will work through the seller’s system.
A third party gateway will temporarily redirect your customer away from the site for the transaction. They won’t notice it though, as the hosted checkout page looks just like your eCommerce website.
In this process, you can offer special offers or take advantage of add-ons to encourage people to buy more items.
Once the transaction is done, the system will automatically direct users back to your website. In this way, customers can continue browsing the product pages, which gives you more possibilities to increase conversions.
Although this payment method provides a fast, secure and reliable transaction, it has quite a complicated infrastructure. You will need advanced technical knowledge or hire a developer to set it up.
In addition, the payment on the site comes with many responsibilities, since you will be in control of everything. Along with the payment gateway itself, you will need an SSL certificate (some hosting providers offer ) and comply with the regulations PCI.
Examples of the best payment gateways available for eCommerce businesses
Considering the importance of a payment gateway for the , it is essential that you choose the right payment gateway provider.
We’ve compiled a list of the best payment gateway providers based on ease of use, security, cost, and compatibility.
1.
Surely you recognize PayPal for being one of the most popular payment gateways that supports both transfers and transactions. It offers two types of payment methods: and .
The PayPa Standard Paymentl Allows merchants to accept credit cards online, while PayPal Checkout redirect customers to log in to their PayPal account to complete their transactions.
The latter streamlines the checkout process, as customers do not have to enter their payment information each time they purchase a product.
Advantage:
- quick setup. Adding a PayPal button to your website takes no more than 15 minutes, giving you a head start on working on your sales.
- useful functions. These include fraud protection, 24/7 phone support, and shopping cart integration, all compatible with most eCommerce platforms.
- international payments. PayPal is one of the most widely used payment providers in the world.
Disadvantages:
- Disrupted shopping experience. Because PayPal uses redirection, customers must go to another web page to complete their payments. The automatic redirect feature is only available for business accounts.
two.
Another reputable payment gateway on the list, Stripe is a payment platform that has been trusted by high-end companies like pinterest, lyft Y slack.
Stripe’s solution is ideal for debit and credit card processing, especially for physical transactions. Even so, this payment processor also supports other payment options for all kinds of uses, allowing your business to be more flexible.
Advantage:
- Buy with one click. With Stripe, customers can purchase products by saving their credit or debit card information for one-click payment.
- Access to statistics. With , you will receive complete reports to know how to improve your operations.
- international transactions. Stripe supports all major credit card issuers and over 135 currencies.
Disadvantages:
- Pending payments. Retailers have to wait 7-14 days to receive payments in their accounts.
3.
As one of the most popular payment gateways on the market, Square has maintained its reputation as a trusted platform for over a decade.
With Square, merchants can accept credit card payments via mobile, either through chips or near field communication protocols (NFC).
Advantage:
- Efficient point of sale. Square’s point of sale system has a ton of great features. For example, you can easily set up invoices and run your business offline.
- Multiple payment options. It supports direct payments, invoicing and payments by reservation.
- Value for money. There are no monthly charges or additional fees. In addition, it is free to register and activate the payment.
Disadvantages:
- not as scalable. Square might not be ideal for high-risk industries or large companies with high sales volumes.
Four.
When it comes to mobile payments, Apple Pay takes the lead.
Thanks to its mobile payment structure, Apple Pay allows buyers to make purchases using Face ID and Touch ID.
As long as your store provides an NFC terminal, you can accept credit cards and other electronic payments with this service.
Advantage:
- Security. The anonymous digital token system makes Apple Pay one of the most secure payment solutions.
- Simple payment process. The contactless system provides a quick payment process compared to other credit card payments.
- quick setup. Apple Pay doesn’t require you to…
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