Payment Gateway for Your eCommerce Website – What to Consider First?
It’s natural when you run an online business that you want to grow your sales and get new customers consistently.
We both know that you need to focus on conversion and choose tools and solutions carefully, especially when it’s about payment processing. See what you should know before you make any decisions.
Running an online business can be a great experience, but it is also a challenge. It can be tricky sometimes, so take every chance you get to learn how to improve your business effort.
Are you accepting payments on your website or want to implement them in the near future? If the answer is yes, this post is for you.
First: Merchant Account. Do you need one?
If you want to accept online payments directly on your eCommerce website, you need a merchant account.
It is a special bank account where funds captured from debit and credit card sales are being held before they are transferred to a regular bank account. So, when customers finish their purchases, the payment is not transferred to your bank account immediately.
It is instead, captured and held on special bank account first - the so-called merchant account. The money is usually transferred out to you on a daily or weekly basis.
Do I Really Need a Merchant Account?
This is a question that almost every merchant asks. The answer is: it depends.
Most online businesses that process small amounts of money don’t need a dedicated merchant account. For them, that’s even better when they choose a payment gateway with an aggregated account with funds and payments from several merchants, which they don’t have to set up separately.
It’s one of the simplest ways to start accepting online payments on your website. You don’t need to worry about various types of credit or debit cards, or about many currencies. Services with an aggregator, process transactions through their own merchant account on behalf of merchants.
How to Get a Merchant Account (If You Want to Accept Credit Cards Directly)
The situation changes when you process high volumes of transactions.
Even if you decide to choose a payment gateway, the provider will probably ask you to open your own merchant account. It could be good for your cash flow because it’s easier for you to negotiate commission rates or custom transfer schedules.
To set up a merchant account, you need to sign the legal agreement between you and the issuing bank. Prepare for the whole underwriting and approval process. This may take some time, depending on the provider you choose. Always keep in mind that something might go wrong and your application can be declined.
Note that when you have a high volume of sales, you may negotiate better commission rates with the bank or the institutes that issue your account.
OK, but how do you choose the payment gateway that suits your business best? To sum up, you can do it yourself and open a dedicated account or find a payment gateway with a merchant account attached to it.
Second: Online Payments for Your Website. Things to Ask Yourself
Finding the right payment gateway for your website is not the simplest task, but it’s worth the effort and it’s much easier when you know what to ask.
Here’s a list that might help you to choose the perfect payment provider for your needs.
1. Fee Structure
It’s crucial for your business to know the entire fee structure, which should be simple and clear. You need to find a payment provider that knows what transparency is and doesn’t try to hide anything.
Don’t be afraid to ask questions, you need to know everything about pricing policy. Of course, everyone is looking for the cheapest solution, but watch out when you see very competitive fees. Double check before you choose to make sure there are no hidden or extra fees.
Ask especially for setup or registration fees, monthly, processing, and transaction fees (sometimes it depends on successful and declined payments). Also ask about refunds, chargeback fees, and anything else you may be subjected to.
2. Security Issues
Payments and security need to come together, and having a secure online payment solution is a must.
Be sure that the payment provider you choose offers data encryption, CVV2 verification, VeriSign SSL certificates, and any other solutions which protect your customers better.
Choose a payment gateway with PCI Level 1, which is the most strict security requirement. Also check to see if your payment gateway comes with token technology, which is an extra level of security.
It protects the customer’s data so that it doesn’t even touch your servers, and it makes it impossible for fraudsters to steal sensitive data. Moreover, ask the gateway provider if it offers anti-fraud system and active chargeback management.
3. Business Model
Research the supported business models or services of your payment processors. It’s important to know these before the entire compliance process because it will save you time.
Providers should have a list with non-supported businesses on their website, but if not you can always ask them for one, especially if you run a business in a high-risk industry.
High risk businesses are recognized as being associated with a higher chargeback risk, so the payment processor needs to be more involved in fraud detection.
This means that you should also focus on additional protection and find a payment partner with highly effective fraud detection and chargeback management tools.
You’re probably wondering which industries are considered high-risk. They include: dating businesses, traveling, gaming, gambling, forex, adult content, and more.
Before you can choose the right payment gateway for your business, you need to check their integration process. It should be fast, easy, and simple. Even for less tech-savvy people.
So, ask about the provider’s integration process and options, as well as technical documentation.
It’s great when you have the chance to implement a payment gateway on your website with just a few clicks, as well when there are a clean set of APIs, which allow you to integrate the payment solutions in hours, rather than weeks or months.
It’s all about your money, so seek the best option to save costs and time.
5. Payouts and Reserve
You need to be sure to get paid fast. It affects your cash flow when there’s no delay in payout. Time is money, so check the schedule and make sure it answers your needs so that you can pay your suppliers on time.
Also, check the cost of transfers and make sure that getting paid in the certain frequency is profitable for you. If the fees are too high, maybe it’s better to change the frequency to bi-weekly or monthly.
Note that some banks take the wire cost on themselves, but some others charge a few Euro for a transfer, and some have really high fees. You need to know all these costs beforehand.
You should be prepared for rolling reserve, which is the situation when a bank is holding up to 10% of your money for 3-6 months. It’s some kind of protection from the possibility of significant chargebacks.
And when this happens, the bank will use the reserve to cover the cost, in case your revenue is not sufficient. Don’t be worried, the bank will return the money after a certain period.
6. Customer Support
Online business is a 24/7 experience, so when something goes wrong a really quick reaction is needed. You can automate some parts of customer service, but you also need customer support that can resolve problems immediately.
You know your business well, so you should choose the type of service which suits you best. Sometimes there’s no need to have 24/7 support, especially when it comes with higher fees.
Just make sure that your payment provider can solve your problems within hours. You and your customers shouldn’t have to wait 24 hours or longer, or write tons of emails.
Note that good payment gateways can assign you an account manager, that will help you with any issue. It’s important to have support when you need it.
Make the Best Choice and Increase Your Conversion Rate
Have you ever wondered why online buyers abandon their shopping carts? Did you know that one of the reasons are badly designed checkout processes?
Choosing the right payment gateway with a user-friendly design and great usability can increase your e-commerce conversion instantly. Here’s what you should focus on.
Nowadays consumers want to have everything on time, especially when they buy online. Giving them the option to pay with just a click might instantly increase your e-commerce conversion rate.
It’s possible by using token technology, which is used to recall restored data. When your customer wants to buy something on your website again, he/she can finish the purchase without typing in credit card details (just a CVV number is needed).
Every online business owner knows that it’s not easy to reach targets and make visitors stay on your website. So redirecting them to an external payment service is not a good idea.
When customers see a site with completely different design than yours, they may get a bit confused and not complete the payment process. So let them pay directly on your website and enjoy your increased conversion.
Mobile commerce is growing rapidly, so if you don’t have a responsive website yet, you should make one as soon as possible. It’s the same with payments - let people buy on any devices they want, and don’t make the opportunity for them to buy on your competitor’s mobile site or app any easier.
It’s important, especially when you sell globally. Consider a payment solution with checkout translated into many languages, and with a wide range of currencies to give the customers a true local experience. Make your customers love you and they will return to your website with pleasure.
Currency and country changing option at ASOS
This probably isn’t something you’ve thought about, but checkout’s look and feel matters for online shoppers. Choose a payment gateway that allows you to make some visible changes to make the payment form fit into your website’s design.
Now you know the essentials to make the best possible choice. The number of payment providers is really impressive, but when you consider the most important features for your business, the selection process should be easy.
Ready to implement the right payment solution on your ecommerce website, or do you have some more questions? Let me know in the comments section.