eCommerce Payment Gateways: What are They and How to Use
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eCommerce Payment Gateways: What Are They and How to Use Them

18.03.2022

If you’re working hard to grow your eCommerce business then one factor you can’t ignore is understanding what an eCommerce payment gateway is, why it’s so important, and how they work. With so many eCommerce payment gateways to choose from, you’ll need to clearly understand your business needs and the needs of your target audience.

By the end of this guide, you’ll be better versed in the world of eCommerce payment gateways, and should be able to make a more informed decision on which eCommerce payment gateway is the best fit for you!

What Are eCommerce Payment Gateways?

So what exactly are eCommerce payment gateways? eCommerce payment gateways are like cash registers for any kind of electronic transactions that process credit card payments for eCommerce sites, as well as traditional brick and mortar stores.

Since many eCommerce payment gateways are subject to cyber attacks, it is extremely important that the eCommerce payment gateway you choose for your business is highly secure. You’ll also want to make sure that customer services are convenient and easy to use.

You’ve probably already encountered some of the more common eCommerce payment platforms like PayPal, Stripe, and Amazon Pay.

How eCommerce Payment Gateways Work

So what is a payment gateway and how does it work? There are several components to a functioning eCommerce payment gateway, and while it may seem like a lot of steps, the entire process takes place in a matter of seconds, making transactions not only secure but fast and convenient.

Let’s take a look at all the bolts and nuts that make an eCommerce payment gateway work:

Merchant: This is the business, or individual making the sale.

Cardholder: The customer who is making the purchase.

Issuing Bank: The financial institution tied to the cardholder’s account, be it a credit card account, checking account, or debit card.

Card Schemes: The credit card companies that manage the card (companies such as Visa, Mastercard, American Express, etc.).

Acquiring Bank: This is the financial institution that is connected to the merchant’s account.

Now let’s take a step-by-step look at how payment gateways work.

  1. The cardholder begins the process of making a purchase by, for example, clicking on the “buy now” button on the merchant’s website.
  2. The eCommerce payment gateway kicks into gear by first and foremost checking with the issuing bank to make sure that there are enough funds available to make the purchase. It will check to see that the transaction that is being made won’t exceed the cardholder’s credit limit or bank account balance.
  3. The eCommerce payment gateway sends encrypted card information to the card schemes to process the transactions.
  4. The card schemes send approval for the transaction and the payment gateway sends that information back to the merchant website in order for the transaction to be completed.
  5. The eCommerce payment gateway sends the information to the acquiring bank to move money from the customer’s issuing bank account to the merchant’s account.

Oftentimes, payment gateways are confused with payment processors because they do a lot of the same things. But while a payment processor analyzes and transmits transaction data, a payment gateway takes the extra step of authorizing the transfer of funds between the buyer and seller (something that a payment processor doesn’t do).

What else should you consider when adding a payment gateway to your website? Well, there are three main types of payment gateways.

Redirect: In this scenario, the payment gateway takes a customer to a payment processor like PayPal or Stripe to process the transaction.

Hosted: Also known as off-site payment, the customer makes a purchase and the payment information goes to the payment provider’s servers for processing. This is how popular point of sales systems like Stripe and Square operate.

Self-hosted: Also known as on-site payment, in this case, the whole transaction takes place on your servers.

5 Payment Gateways To Consider For Your eCommerce Store

We’ve consolidated a list of top eCommerce payment gateways in the market and provided information on their advantages, disadvantages, pricing, and more.

PayPal

PayPal Payment Gateway

When it comes to listing the best payment gateways for eCommerce, you can’t leave out everyone’s favorite, PayPal. In fact, PayPal is considered one of the top 10 international payment gateway providers. PayPal operates in approximately 200 countries, with support for over 100 currencies!

With PayPal, you can send and receive payments around the world. It is one of the oldest and most popular payment gateways with almost 400 million active users. It is also a PCI compliant international payment gateway provider, offering features like express checkout, bill me later, barcode scanning, credit card reader, mobile card reader, and more.

PayPal Pros and Cons

Stripe

Stripe Payment Gateway

Unlike PayPal, Stripe is a cloud-based eCommerce payment gateway that gives merchants a lot more control when it comes to integrating new payment options. Stripe is considered to be one of the top eCommerce payment gateways for startups and small/medium businesses that are looking to scale. It offers powerful security and fraud prevention measures, making the sales process go smoothly.

Furthermore, Stripe supports more than 135 currencies and also offers an array of features like consolidated checkout, a mobile interface, recurring payments, a custom UI toolkit, 24/7 technical support, and more! Like PayPal, Stripe is PCI compliant.

Stripe Pros and Cons

Amazon Pay

Amazon Pay Payment Gateway

Amazon Pay launched in 2007 and gives the option to Amazon users to pay with their Amazon accounts on external merchant websites in a secure and simple way, making transactions effortless both for shoppers and merchants alike.

Amazon Pay is considered to be one of the top eCommerce payment gateways. It is available in over 18 countries, with multiple currencies, and has plenty of features to make the process of online shopping stress-free, fast and smooth.

Amazon Pay Pros and Cons

Alipay Global

Airpay Payment Gateway

Alipay Global is one of the fastest-growing international payment gateway providers with over 550 million active users, processing over 8.5 million payment transactions per day! This Chinese-based payment gateway is the perfect solution for fast-paced innovative businesses, especially smart vending machines, smart restaurants, and cashless taxis.

Alipay Global offers great features including easy integration, secure transactions, efficient payment settlements, and mobile payments. Despite having a reputation for being one of the top eCommerce payment gateways, Alipay Global only supports 12 currencies.

Airpay Pros and Cons

Unfortunately, the official website has no clear information on their pricing, fees, and other charges.

Braintree

Braintree Payment Gateway

Finally, among our top eCommerce payment gateways is Braintree, which was founded in 2007 but was acquired by PayPal in 2013. It has since expanded its services to more than 45 different countries and regions. Not only is Braintree able to make payment transactions, but it has the added benefit of accepting Bitcoin payments in partnership with Coinbase.

Some features include 3D secure and fraud protection measures and 24/7 support via both phone and email. Braintree is an eCommerce payment gateway that also allows buyers to pay via PayPal, Venmo, Apple Pay, Google Pay, Visa, American Express, Mastercard, and more for that added level of customer convenience.

Braintree Pros and Cons

How To Pick a Payment Gateway For Your eCommerce Store

Making a decision may not seem easy at first, but you can simplify the process by asking yourself important questions like:

  • Is the eCommerce payment gateway available in your country and the country of your customers?
  • Do you have a preference for hosted or self-hosted payment gateways?
  • Does it cover the needs of your customers?
  • Does it offer certain features that your business needs?
  • How secure is it? Does it use encryption or other methods?
  • Is it considered payment card industry compliant for online payments?
  • Which payment methods does it accept?

Many if not all of the more eCommerce payment gateways will cover all your bases. If you’ve tried balancing the pros and cons and are still stuck, try paying attention to these main deciding factors.

Level Of Payment Security

Try to understand the preferences of your target customers. In the end, you want to make sure that they feel secure making a purchase on your eCommerce website. Nowadays, regardless of the size of your business, customers expect only the best quality of websites with the most secure payment options, so this is definitely an arena in which you cannot afford to lag behind the competition.

Remember that it is extremely important that the best payment gateways for eCommerce are certified for following information security standards, and specifically uses the Payment Card Industry Data Security Standard (PCI DSS) system.

Flexible Features and Customization Capabilities

Keep in mind that some eCommerce payment gateway options have an added feature of allowing you to customize the payment experience in such a way that it reflects your brand. Everything from the color palette to the logo and typeface can be customized in such a way, that your customers will barely even notice that they are being temporarily redirected to a third-party website in order to safely process their transactions.

A deciding factor may also be specific features like the ability to support electronic invoicing, text or email reminders for customers, smart chargeback management, support of all payment types, etc.

Maybe your business is a subscription-based service like Netflix or Ipsy. In this case, you’ll want to find an eCommerce payment gateway that allows you to set up an automatic recurring billing cycle for your customers.

Pay Attention To Processing Fees

Pricing among the different eCommerce payment gateways varies, and it’s important to look at the fine print before committing to one eCommerce payment platform.

While there are different factors that can affect the transaction fees, it’s important to understand if there are any hidden fees, what the fixed transaction fees are and if there are any extra fees for not reaching a certain order quota or transaction volume.

Are there fees for chargebacks, for example? Are there maintenance fees, or charges for making withdrawals? While the fees may seem like a small pain, they can eventually add up and become more than just a minor inconvenience.

Availability In Customers Geolocation

So much depends on where the majority of your customers are from. You will want to make sure that your eCommerce payment platform of choice will be able to cater to not only the country of your business but also to those of your customers.

First, understand the basic geolocation information of your customers, and make sure that it is among the list of supported countries of your eCommerce payment gateway.

Integration Capabilities

Depending on what platform your eCommerce business is, you may need to implement online payment gateway integration. The most popular eCommerce platforms that require integration would be WooCommerce or Shopify, etc.

As such, you will want to find out which payment gateway providers integrate smoothly, without slowing down the user experience of your website or the payment process. The more flexible it is, allowing customers to make payments on the website with their preferred payment method, the better it will be for you!

Pay Attention To User Experience Stats Before Choosing

It should come as no surprise that UX (user experience) optimization is key to a successful business, both offline and online. As an eCommerce business owner, you should pay very close attention to user experience statistics, making informed decisions based on the information gathered about your client base.

For example, did you know that you could boost your conversions by up to 50% by simply eliminating any unnecessary redundancies, like expecting your customers to input both their billing and shipping information when the addresses are exactly the same? Processing speed can make or break your brand’s user experience.

Will it help streamline payments on mobile devices? It turns out that 79% of smartphone users have made purchases online in the past 6 months using their mobile devices. Will you be able to cater to their needs?

When you are adding a payment gateway to your website, you’ll want to make sure that the services line up with the demands and preferences of your customers.

Final Words

The key to finding the best payment gateway for your eCommerce business is really a question of digging deep and truly understanding your business needs. Once you have a clear understanding of what it is that you need specifically, picking a payment gateway for your eCommerce store can be easier than you think.

What’s more, once you find the perfect payment gateway for you, you’ll likely notice an immediate positive impact on not only your brand’s customer experience but also your profitability.

There are many important factors to keep in mind when choosing your ideal eCommerce payment gateway, but the most important ones have been covered above. If certain technical aspects of integration get a bit too complicated for you, for example, your best route would be to hire an expert to take the wheel.

The bottom line is that your chosen eCommerce payment gateway should work smoothly and securely with your website or mobile app.

Angela Hassassian

Hailing from Massachusetts, Angela is a hyperactive content writer, avid reader, lifelong student, curious tech enthusiast, and an adventure-loving social butterfly who firmly believes that knowledge from all realms should be sought out and shared.

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