What is a payment gateway and a payment services provider, and how to choose the right one? DPO PayGate explains.
Online payments happen so fast that most business owners might not realise how many steps are instantaneously happening in the background. But it’s important to understand how it works so you can make the right decisions for your business and customers. There are a few different options to get a shopper’s money into your bank account.
The first item you need to accept payments online is a payment gateway, the ‘now what’ that follows from the ‘pay now’. A payment gateway is exactly what it sounds like – a system that connects your e-commerce website to your bank. Once the customer chooses ‘pay now’, the payment gateway will request money from the shopper’s bank and, once approved, transfer it to your bank through a secure, trusted platform so you are not put at risk for fraudulent behaviours or transactions.
The second item you need is a merchant account. This is a special type of bank account that allows you to receive online or e-commerce payments, including credit and debit card payments, and then transfers these to your business bank account.
The term ‘payment service provider or PSP’ is used to describe experts that provide online business owners with all the services you need to manage, accept and streamline your electronic payments. Reliable PSPs offer a variety of payment methods to the store owner which can include anything from debit and credit card payments to secure instant EFTs. One of the core functions of a PSP is to provide merchants with a payment gateway that ensures all payments are authorised and processed correctly by transferring information between the site of the payment – the online store – and the bank.
Selecting a PSP and a payment gateway can be a very personal decision – after all, there are numerous providers in the market today and finding the right one requires insight into how they work, the different services on offer, and which one best suits your business.
Here are ten tips to finding the perfect payment gateway for your business:
1. A merchant versus an aggregator account
A merchant account allows you, the business owner or ‘merchant’, to accept the online card transactions from your customers, based on a direct agreement with your PSP and the bank.
A merchant account can offer you preferential card transaction rates which is helpful once you have larger sales volumes. You can also settle transactions directly into your own merchant account with the bank.
In most cases PSPs will help you get your merchant account from the bank of your choice. But one of the biggest hurdles is that the onboarding process is lengthy and involves a great deal of compliance-related paperwork.
Some PSPs offer an aggregation service which allows them to onboard you on behalf of the banks – a better option for most business owners who are just starting out. In this case the PSP holds the merchant account with the banks and have agreements with the banks that allows them to settle the funds of all the individual business owners as a single entity. Your agreement with the PSP will then determine how they pay your money out to you.
Advantage: You can benefit from payment aggregator facilities through solutions that would normally be out of your reach. With an aggregator account, you can start accepting payments online very quickly. It offers you a multitude of payment options, making collecting payment from the customer quick and painless. Often, the PSP will also offer an array of value-added services to make it even more advantageous. These can include anything from fraud and transaction monitoring to payment plug-ins and website optimisation services.
2. Hosted versus redirect solutions
A hosted payment is where you will accept customer payment information directly, ensuring that the customer isn’t redirected to another site – often one that belongs to the PSP – to collect their payment data. As a merchant, you can benefit from a hosted solution as it puts you in complete control of the customer experience and your payment page.
However, a hosted solution means that you are responsible for the security of this data and card information. This is a serious consideration and will mean that you understand issues of compliance, regulation and the Protection of Personal Information Act (POPIA). You will also need to have a good understanding of programming and website development.
If you use a redirect payment solution provided by your PSP, it redirects the customer to a dedicated payment page where shoppers will then enter their payment information.
Advantage: If you use a redirect payment gateway, you are placing the responsibility for development, integration and data protection firmly into the hands of the PSP. The PSP will take over the management of customer data and Payment Card Industry Data Security Standard (PCI) compliance and security. For anyone starting out with a new business, this is a quick and easy solution that will get you going at speed.
3. Flexibility of fees
One consideration that’s top of your mind is, of course, costs. You want to know what fees you are in for when you work with a PSP and make an informed choice around your payment gateway. You don’t want to be liable for heavy monthly fees when you first launch your business, nor do you want to be cash-strapped when you are facing a quiet season.
Advantage: Look for a PSP that allows you to start out paying only a small percentage of your transaction amounts. Also look for a payments partner that will allow you to upgrade and downgrade your package at any time. This will give you the flexibility you need to adapt your transaction rates according to demand and budget.
4. Availability of payment methods
When you launch your online store or expand your offering it’s a good idea to look for a PSP that offers you a wide selection of payment options. This will not only improve the level of service you provide to your customers, but will engender a sense of trust. Some people want to pay by card, others prefer secure instant EFTs, and others want to use a QR code solution such as Zapper – give them what they want.
Advantage: A bouquet of payment options in your chosen payment gateway will make customers feel secure and more inclined to return. Easy and simple are two vital components of a successful payment process.
5. Ease of integration
Your payment gateway choice must include the ability to integrate with major shopping cart solutions like WooCommerce, Magento, Shopify, Zencart and Prestashop. You don’t need the hassle that comes with limited access, poor integration capabilities and other technical challenges.
Advantage: Using a payment gateway that integrates with leading shopping cart solutions means you can get started with your online store within minutes. Some PSPs will even offer you free, supported plugins for all major shopping carts.
6. Reporting and analytics
Want to know what choices your customers most commonly make? Need to understand at what point they abandon their cart? Need insights into the funds coming in? Your payment gateway should include a variety of reporting and analytical tools that give you a clear overview of your business transactions.
Advantage: Look for a PSP with a payment gateway that can give you instant oversight of your funds, transactions and customer behaviours. This allows you to make more informed decisions about your business and how it engages with people.
7. Security and fraud prevention
It doesn’t matter how small your business is. It doesn’t matter how tiny your income or your store. Criminals and fraudsters don’t look at size, they look at vulnerability. Small businesses also need to worry about fraud and ensuring the security of funds. A fraudulent customer can cause untold harm. A hack into customer data when you are not PCI or POPIA compliant, or unaware of the strictures of General Data Protection Regulation (GDPR) with shoppers from Europe, can ruin your business.
Advantage: When you choose a payment gateway, make security and fraud prevention standards a priority. If you ensure that they are PCI, POPIA and GDPR compliant as well as adhering to high security standards, then you know that you have done the best to protect yourself and your business.
8. Value-added services
The right payment gateway already has a lot of work to do but there’s nothing wrong with expecting your PSP to offer just that little bit more. You should look to a PSP that provides you with more than just simple payment processing and instead gives you tools that help you to grow your business.
Advantage: There are some PSPs that can offer you anything from fraud monitoring to advertising to foreign currency conversions. These services add value to your life and give you an edge when dealing with your customers.
9. International acceptance
Is it important for you to be able to work with customers on a global scale? It may sound daunting when you first start out, but a customer in South Africa is the same as a customer in Brazil.
Advantage: You can add immense value to your business if you allow people with foreign credit cards to shop on your site. As e-commerce grows, you can offer your products and services to people in many other markets. With the right PSP, you can even scale across Africa and you can engage with people in the payment terms of their choice.
10. A payment gateway that grows with you
Whether you choose an aggregator account or could afford the time to get your own merchant account, the right payment gateway and PSP partner will grow with your business. You want to choose a company that is flexible enough to recognise your individual needs and strong enough to support you as you expand and grow. Every business is unique so choose a payment gateway and provider that recognise this, and help you to celebrate it.
Advantage: Opting into simple, easy, customisable, flexible, global and integrated offerings is as easy as opting into complex, difficult and slow. Choose the PSP that ticks all the right boxes for you and you will grow together.
Selecting the right payment gateway for your business isn’t an afterthought. It shouldn’t be technology you quickly tacked on to get payments going, it should be a solid investment into your future. Finding the right services can make all the difference to your business.