When it comes to setting up your eCommerce business, you’ve poured plenty of blood, sweat and tears into making it all just right.
You’ve created the perfect product, done plenty of market research and might have even started to build your eCommerce website with our guidance. So far so good! You’re almost ready to open your virtual doors and welcome in all those orders.
But before you do so, you should give plenty of time and consideration to how you’ll accept payment from your customers and perhaps most importantly of all, how you can keep the transaction safe and secure.
As well as the eBay favourite, PayPal, there are a variety of ways in which you can take payment from your customers, meet their needs, manage your cash flow and keep your business ticking over nicely.
Today we’ll be taking a closer look at the difference between payment platforms and gateways, investigating the topic of PCI compliance and helping you to choose the best option for your growing business.
How does online payment work?
Before we get into the finer details of accepting payment online, it’s worth taking a few moments to consider how online payment actually works.
In short, every time a customer clicks that ‘buy’ button on your website, they are telling their bank to send money to your bank.
Two elements of this process are called the payment processor and the payment gateway.
The payment processor is the part that transmits data between your customer, their bank, you and your bank. It can often provide you with the equipment you need to take payment including credit card machines.
The payment gateway works much like a security guard. It ensures that you can securely authorise your customer’s payment and help keep everyone’s personal data safe at all times.
Any payment gateway (including merchants and banks) must stick to strict global security standards to maintain this security and become what is known as PCI compliant. Anyone not complying with these rules could find themselves subject to fines, penalties or even be banned from taking payment online.
[Rules include building and maintaining a secure IT system, protecting cardholder information, frequent testing of security systems and so on. If you’d like to know more, visit the UK Cards Association website.]
What different types of payment gateways are there?
There are two main types of payment gateway which are as follows:
Hosted payment gateway
This redirects your customer to a payment provider website or uses an embedded payment method directly on your own website. It’s a simple payment option that needs no customisation; you can just ‘plug and play’.
You won’t need to think about PCI compliance when you use this type of payment gateway because the providers will be responsible. Hosted payment gateways include:
- Stripe: Stripe is easy to use and charges the lowest fee but it can take a while to get the money.
- PayPal: Globally recognised and good for eBay customers, but charge higher fees. Some people don’t like PayPal because of these fees.
- Square: Newer to the market, Square is very good if you’re selling lots of smaller items as the fees don't have a fixed additional charge like Stripe and PayPal. Their free Point of Sale (POS) app is great and you can buy a card reader if you like too.
- Shopify Payments: Shopify Payments is highly recommended if you have a Shopify site because of the fee structure and ability to take small payments. You can use the Shopify POS to accept payments.
Non-hosted/Integrated payment gateway
This is a customisable, brandable payment gateway that does everything directly on your site.
To use this type of gateway, you’ll need to take responsibility for the safe storage of your customers’ data and become PCI compliant. You’ll also need a team of engineers to perform the integration as they are integrated via APIs to your server.
Non-hosted/integrated payment gateways include Barclays and World Pay.
[If you’d like to know more about the requirements for becoming PCI compliant using one of these options, we highly recommend that you read this useful article from World Pay.]
How to choose the right payment gateway for your business
It’s worth considering a few important factors before selecting the payment gateway you’ll use for your eCommerce site. This includes the following:
Who are you selling to?
Which payment gateway would your customers prefer? Are they more comfortable with credit cards or is PayPal fine too? How about the more recent platforms such as Stripe and Square? Make sure you choose the one that works better for your unique customers.
Where are you selling to?
If you’re targeting an international audience, you’ll also need to check if your payment method works worldwide? Are there any restrictions? Again, will your customers feel comfortable using this payment method?
How secure is the payment gateway?
Customer data safety is vital for online sales so make sure your provider pays attention to the rules. Your choice of providers should also be GDPR compliant and PCI compliant unless you’re handling that yourself. If not, do you know how to become PCI compliant?
You should also consider the cost of the service before you make your decision. Are there any hidden costs or fees? What about commission or transaction fees? Set up costs? Plan limitations?
How is their performance?
Ensure you can continue to sell your product 24/7 by choosing a payment gateway that works as well as possible with limited downtime.
Choose the right payment gateway for your eCommerce business and you’ll put one of the last pieces into the selling online puzzle, avoiding stress, getting even closer to running a sustainable source of income.