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How to Choose the Best Payment Gateway for Your eCommerce Store

Last Updated on 16th May, 2024 | Ecommerce

Best Payment Gateway

What to Know Before Choosing The Right Payment Gateway

For any ecommerce business, setting up a payment gateway is one of the most critical steps in the process of selling products or services online. The payment gateway acts as the bridge between the customer’s order and your merchant account, facilitating the transfer of funds from the customer to your business.

Having the right payment gateway in place can make or break your ecommerce operations. It impacts factors like the payment methods you can accept, the customer checkout experience, transaction fees, fraud prevention capabilities, global sales reach, and much more.

This comprehensive guide will provide an in-depth look at everything you need to know to select, integrate, and optimize the best payment gateway for your specific ecommerce business requirements and goals.

By the end of this guide, you will be able to:

  • Understand what payment gateways are and how they function
  • Learn about the different types of payment gateways
  • Identify the key factors to evaluate when choosing a gateway
  • Compare the pros and cons of leading gateway providers
  • Determine the best payment gateway for your ecommerce store
  • Successfully integrate and implement the new payment gateway
  • Monitor and optimize the gateway for peak performance

With the right payment gateway powering your ecommerce store, you can provide a seamless checkout experience, accept payments globally, minimize transaction costs, and maximize conversion rates and sales revenue for your online business.

What is a Payment Gateway?

A payment gateway is a merchant service provided by an e-commerce application service provider that authorizes credit card or direct payment processing for e-businesses and online retailers.

In simple terms, the payment gateway serves as the intermediary between the customer’s bank and the merchant’s bank to facilitate online transactions.

When a customer purchases a product or service from an online store, the payment gateway receives the customer’s credit card details. It processes the transaction securely between the payment networks and the merchant’s acquiring bank to complete the payment.

The key roles performed by a payment gateway include:

  • Securely transferring sensitive customer payment data between the customer, merchant, and payment networks. This data is encrypted throughout the transaction process.
  • Authenticating the customer’s payment details by verifying information like account numbers, expiry dates, CVV codes etc.
  • Authorizing the payment by checking with issuing banks, payment processors, and credit card companies.
  • Settling funds into the merchant’s account after completing the transaction.
  • Sending payment confirmation notifications to both the customer and the merchant.

How Payment Gateways Work in Ecommerce

Here is an overview of the step-by-step flow for an online transaction completed via a payment gateway:

  • Customer initiates checkout on the online store and enters payment details like credit card number, expiry date and CVV code.
  • The ecommerce platform captures the payment information and passes it securely to the payment gateway.
  • The payment gateway receives the data and sends it to the payment processor.
  • The processor forwards the data to card networks like Visa, Mastercard, AmEx, etc.
  • The card network routes the payment information to the issuing bank.
  • The issuing bank verifies the availability of funds in the customer’s account and sends an authorization code back to the processor.
  • The processor relays the authorization to the payment gateway.
  • The gateway completes the payment by transferring funds into the merchant’s account minus any transaction fees.
  • Confirmation emails are sent to the customer and the merchant about the successful transaction.

This entire sequence happens in just a matter of seconds in most cases. The payment gateway acts as the facilitator for the entire checkout process without the customer ever leaving the ecommerce store’s website.

Key Functionalities of Payment Gateways

Some of the major features and capabilities offered by payment gateways include:

  • PCI compliance for secure transactions: Gateways adhere to stringent data security standards, such as PCI DSS, to protect sensitive cardholder information.
  • Support for multiple payment modes: Top payment gateways allow customers to pay using credit cards, debit cards, net banking, mobile wallets, gift cards, and more.
  • Multi-currency transactions: Gateways enable international ecommerce stores to accept payments in different global currencies.
  • Recurring billing and subscriptions: Merchants can bill customers automatically on a recurring schedule via the gateway, which is useful for subscription models.
  • Mobile payments: Customers can checkout quickly and securely using mobile wallets like Apple Pay and Google Pay.
  • Fraud prevention tools: Gateways use technologies like AVS, CVV verification, and 3D Secure to screen orders and minimize fraud.
  • Payment analytics and reporting: Detailed reports on transactions, payments, fees, chargebacks, etc., help the business better understand itself.
  • POI/POS capabilities: Integrate point-of-sale and point-of-invoice systems with the payment gateway for in-person retail.
  • Developer APIs and integrations: Gateways provide APIs, SDKs, plugins, and tools to integrate with the ecommerce platform.
  • Tokenization: Customer payment details are substituted with tokenized values or digital tokens for enhanced security.
  • Easy refunds and chargebacks: Gateways allow merchants to seamlessly refund payments or manage disputed charges directly in the portal.

Types of Payment Gateways

Payment gateways typically fall into three primary categories based on how they facilitate the checkout process on the merchant website:

On-site Payment Gateways

On-site or hosted payment gateways allow the entire checkout process to be completed on the merchant’s website without redirecting the customer to any external site.

Here are the steps in an on-site gateway transaction:

Step 1 – Customer proceeds to payment page on merchant’s site.

Step 2. – Customer enters payment details like card numbers, etc., on the checkout form.

Step 3 – Details are securely forwarded to the gateway, which verifies and processes the transaction.

Step 4 – Customer is displayed a payment confirmation/receipt on the merchant site itself.

Since the customer never leaves the ecommerce site, it provides a seamless checkout experience, and the merchant can customize the payment pages and flows.

On-site gateways may require integrating a payment SDK or API with the website. Leading providers include Authorize.Net, Braintree, Stripe, and PayPal Payments Pro.

Checkout On-site, Payment Off-site

In this model, the initial checkout process occurs on the merchant’s website. However, once the customer submits payment details, they are redirected to the gateway’s secure site to complete the transaction.

The typical flow is:

  • Customer selects purchase option on merchant site.
  • They enter payment data on the merchant’s checkout page.
  • The details are verified, and the customer is redirected to the gateway site for authentication.
  • The customer logs into their payment account on the gateway site to approve the transaction if required.
  • They are redirected back to the merchant site after approval.
  • The merchant site displays a payment confirmation message.

No coding is required to integrate the payment pages, making this model quick and easy to set up. PayPal Standard is a popular example of an off-site payment gateway.

Redirect Payment Gateways

With redirect gateways, the customer is sent directly from the merchant’s website to the payment provider’s site to complete the entire checkout and payment process.

The typical workflow is:

  • Customer clicks purchase or checkout button on merchant site.
  • They are redirected straight to the gateway site.
  • Customer completes the checkout and payment on the gateway site.
  • Gateway site confirms the successful transaction.
  • Customer is redirected back to a receipt or thank you page on the merchant website.

This approach is best suited for merchants looking for a simplified checkout without investing time in customizing the payment process or flows on their website. Amazon Pay and Skrill are commonly used redirect gateways.

Factors to Consider When Choosing a Payment Gateway

Selecting the right payment gateway for your ecommerce business depends on weighing several factors:

Payment Methods Supported

One of the top criteria is to choose a gateway that supports your preferred payment modes. Evaluate which of these payment methods are essential for your customer base:

  • Credit cards – Visa, Mastercard, American Express, Discover
  • Debit cards and prepaid cards
  • Net banking – Direct bank transfers
  • Mobile wallets – Apple Pay, Google Pay, Samsung Pay
  • Cryptocurrencies like Bitcoin, Ethereum, etc.
  • Installment payments – Split, Affirm, Afterpay etc.
  • EMI options for high-ticket purchases
  • UPI payments for India, specifically

Ideally, pick a gateway with the most comprehensive payment method support or multiple gateway accounts.

Pricing and Fees

Transaction fees largely determine the profitability of your online business. Compare pricing models to get the best value:

  • Interchange-plus pricing – Charges a flat rate plus interchange fees per transaction—more transparency in pricing.
  • Tiered pricing – Fixed rate slabs based on monthly or annual transaction volumes. It can be costlier for higher volumes.
  • Flat rate—A fixed fee per transaction, irrespective of volume. It is simpler to calculate but potentially more expensive.
  • Payment based on payment volume – Fees based on your total payment volume processed via the gateway.
  • Per-transaction pricing – Fees charged per transaction.
  • Setup fees – One-time fee for initial integration and setup.
  • Monthly fees – Fixed recurring gateway subscription charges.
  • Chargeback fees – Assess fees for disputed transactions or chargebacks.
  • Payment method fees – Additional charges for accepting certain types of payments.

Aside from transaction fees, it also accounts for any hidden costs, additional charges for extra features, early termination fees, currency conversion rates, etc.

Security and Compliance

For any ecommerce business, the security of transactions and customer data is paramount. Review the gateway’s safety measures:

  • PCI DSS compliant – Complies with stringent Payment Card Industry Data Security Standards.
  • End-to-end encryption – Sensitive customer data is encrypted as soon as it is captured.
  • Tokenization – Credit card numbers are replaced with unique tokens or aliases.
  • Fraud prevention tools – These include technologies like AVS, CVV, 3D Secure, machine learning, etc.
  • GDPR compliant – Complies with EU’s General Data Protection Regulation for data privacy.
  • Data centers – Uses trusted hosting providers like AWS with high security.

Selecting a gateway that prioritizes compliance and security can help minimize risks significantly.

Integration Capabilities

The payment gateway should seamlessly integrate with your ecommerce platform via:

  • Ready-to-use plugins, extensions, or integrations for popular ecommerce platforms.
  • Developed APIs, SDKs, and documentation to build customized integrations.
  • Availability of libraries and code samples for easier integrations.
  • Options for guest checkouts without leaving your website.
  • Support for integrating with ERP, accounting, shipping, and CRM systems.
  • Ability to work across different platforms and architectures.

This ensures a unified customer experience across stores, payments, and other systems.

Customer Experience

The gateway should provide a smooth, fast, and frustration-free payment experience for your customers.

  • Mobile responsive payment forms.
  • Support for one-click payments.
  • Flexibility to customize checkout flows and design payment pages.
  • Alternative payment options when cards fail.
  • Remembering logged payment details for repeat purchases.
  • Payment retry logic in case of failures.
  • Accept payments in multiple currencies and languages.

Delivering a superior checkout experience can help boost customer satisfaction and conversion rates.

Global Transaction Support

If you sell to an international customer base, ensure the gateway can power global ecommerce transactions by:

  • Accepting payments from customers across the world.
  • Supporting transactions in all major currencies.
  • Providing localized payment experiences.
  • Offering dynamic currency conversion at checkout.
  • Managing complex taxation, compliance, and accounting needs across borders.
  • Enabling cross-border shipping, tracking, and returns management.

Customer Support

Choose a gateway provider that offers stellar round-the-clock customer support via:

  • Phone, email, and chat support.
  • Online knowledge bases, documentation, and FAQs.
  • Ticketed support and case management.
  • Onboarding assistance and dedicated account management.

This helps when you face technical issues, service disruptions, or queries.

Reliability and Uptime

Minimal downtime is critical for avoiding lost sales. The gateway must guarantee high reliability and uptime exceeding 99.9%.

Other pointers include:

  • Globally distributed and redundant infrastructure without a single point of failure.
  • Proven uptime track record.
  • Transparent communication during any outages.
  • Quick failover and disaster recovery capabilities.

Scalability and Growth Potential

As your business grows, the gateway should seamlessly scale up to handle the increasing transaction volumes and customers across geographies.

Factors to evaluate:

  • Ability to auto-scale with cloud infrastructure.
  • Capacity to handle seasonal spikes in traffic.
  • Options to upgrade to higher processing tiers easily.
  • Global reach and availability of new features.
  • Roadmap for supporting expanded payment options.

This ensures your payment gateway can support current and future business needs.

Fraud Detection and Prevention

Choose a gateway with robust capabilities to identify and mitigate fraudulent transactions and chargebacks.

Some features to look for include:

  • Sophisticated algorithms to screen orders.
  • Blocking known fraudster data.
  • Device fingerprinting to flag suspicious devices.
  • Geolocation tracking to identify location fraud.
  • Rules engines to customize fraud checks.
  • Options to securely hold and review flagged orders.
  • 3D Secure support as an additional verification layer.

Strong fraud protection can reduce the loss of revenues and inventory due to criminal activity.

Reputation and Credibility of the Provider

Opt for an established payment gateway backed by a reputed financial institution or card network.

Check for:

  • Years of experience in the payments industry.
  • Strong merchant customer base across business sizes.
  • Positive reputation based on merchant reviews and testimonials.
  • Active development and support of the product.
  • Responsiveness to customer concerns and feedback.

This provides confidence that the provider is committed for the long haul and will continually enhance the product.

Evaluating Payment Gateway Options

With a clear understanding of your key business requirements, you can now deeply evaluate potential payment gateways against those criteria.

Define Your Business Requirements

Begin by identifying your must-have payment gateway features based on your specific ecommerce model, product, customers, and compliance needs.

Some questions to consider:

  • What payment methods do my customers prefer? Credit cards? Debit cards? Digital wallets?
  • What pricing model makes the most sense based on order values and volumes?
  • Is global payment acceptance required for my cross-border customer base?
  • How critical is uptime, reliability, and customer support?
  • What capabilities are needed to reduce fraud and chargebacks?
  • Should the gateway integrate seamlessly with my ecommerce platform and accounting software?
  • Will a mobile-optimized payment experience be important for conversions?

Document these key requirements that the ideal payment gateway should meet. They will drive your evaluation process.

Research Payment Gateway Providers

With your business needs identified, create a list of promising payment gateway providers to investigate further.

Ways to compile this initial list include:

  • Getting recommendations from other merchants in your industry
  • Checking reviews on G2, Capterra, and other software review sites
  • Seeing which payment gateways your ecommerce platform officially integrates with or recommends
  • Evaluating offerings from major payment processors like Stripe, PayPal, Square, etc.
  • Searching merchant marketplace app stores for top payment gateway apps

Make a list of 8-10 potential payment gateways for further review. Cast a wide net early on.

Compare Payment Gateways in Detail

With your initial list of promising payment gateways compiled, you can now analyze each option in greater depth.

Follow these steps to compare and evaluate contenders:

  • Visit the gateway provider’s website and documentation to understand features, options, and pricing.
  • Review online content, merchant community forums, and trusted review sites to gauge satisfaction.
  • Compare supported integrations, APIs, security measures, and development resources.
  • Analyze pricing models and all associated fees carefully based on your order value and volume estimates.
  • Check for compatibility with your ecommerce platform, accounting tools, and other systems.
  • Assess fraud protection, global sales capabilities, uptime track record, and customer support.
  • Sign up for a trial account to test the gateway hands-on if available. Evaluate the overall experience.

Develop an evaluation matrix to score each gateway option against your documented requirements. This will help identify the optimal fit.

Determine the Best Fit Payment Gateway

After a thorough side-by-side analysis, you likely have 2-3 strong contenders for your ideal payment gateway.

Here are some final tips for selecting the winner:

  • Revisit which gateways scored highest on your must-have requirements. This should carry the most weight.
  • Assess ease of integration and available developer resources for implementation.
  • Consider long-term costs based on projected sales growth and additional fees.
  • Check for positive merchant feedback and reviews specifically related to your industry.
  • Select the gateway offering the best overall value, not necessarily the cheapest.

By carefully evaluating all options against your needs, you can determine the payment gateway that provides the ideal combination of functionality, cost, security, and ease of use.

Integrating the Payment Gateway

With the winning payment gateway provider selected, it’s time to tackle the integration process. Follow best practices to ensure a smooth implementation:

Follow the Technical Integration Guidelines

Closely adhere to the payment provider’s technical documentation for integrating their gateway with your ecommerce platform and other systems.

Typical steps include:

  • Downloading the required SDKs or APIs and adding dependencies.
  • Configuring API keys and authentication credentials.
  • Installing any ecommerce platform extensions or plug-ins.
  • Implementing payment forms, order flows, and callback handling on the site.
  • Passing order details like amount, currency, and customer data from the store to the gateway.
  • Handling the authorized payment response back from the gateway after approval.
  • Displaying appropriate payment confirmation or error messages to customers.

Follow coding guidelines and use official libraries, code samples, and helpers where available.

Thoroughly Test the Implementation

Rigorously test the payment gateway integration to identify any issues before going live.

Testing activities should cover:

  • Successful and failed test payments with different amounts using the gateway sandbox.
  • Retry logic and error handling for failed payments.
  • Confirming payment confirmation and order tracking emails are sent.
  • Testing refunds and cancellations.
  • Checking payment reporting and reconciliation works.
  • Assessing performance under load with simulated traffic.
  • Ensuring compliance with security policies like SSL.
  • Confirming the mobile checkout experience is seamless.

Address any bugs or issues before launch.

Complete Onboarding and Staff Training

Schedule an implementation call with the payment gateway provider to walk through the onboarding process.

Topics to cover:

  • Getting support contacts for ongoing assistance.
  • Reviewing the features you plan to use initially.
  • Understanding the reporting dashboard and key metrics.
  • Setting up fraud rules and defenses appropriately.
  • Confirming terms of services and SLA commitments.
  • Identifying opportunities for further optimization.

Additionally, train customer service and support staff on the gateway workflows and equip them to troubleshoot payment issues.

With the right knowledge transfer, your staff will be fully prepared to manage payments confidently.

Monitor Performance Post Launch

Actively monitor the payment gateway once it goes live to ensure everything is running smoothly.

Recommended practices:

  • Review detailed transaction data, fees, and payment reporting regularly.
  • Keep an eye on transaction times, payment success rates, and fraud rejections.
  • Monitor for any downtime, performance lags, or error spikes.
  • Check gateway status pages and subscriber alerts.
  • Proactively reach out to the provider for any concerns identified.
  • Gather customer feedback about the checkout experience.
  • Identify opportunities to optimize conversion funnels over time further.

Ongoing monitoring helps maximize the value realized from the payment gateway.

Final Thoughts

Selecting and implementing the right payment gateway is a highly strategic decision for your ecommerce business. It impacts everything from the customer experience to your global sales reach, revenue, margins, and security.

By clearly defining your requirements, methodically evaluating the top providers, testing rigorously, and continuously optimizing, you can ensure your payment gateway becomes a key competitive advantage rather than a bottleneck.

So, leverage these best practices to select and implement a payment solution that will power the growth of your online business.