Payment Gateway

A payment gateway serves a channel between an eCommerce website and the bank that processes a customer’s credit card payment. It can also process debit card and eCheck (ACH) payments. The main function of the payment gateway is to securely transmit the consumer’s confidential credit/debit card and bank account data to the issuing bank and get a reply from it about whether the transaction is accepted or declined.

In case you aren’t familiar, a payment gateway is a merchant service used as a third party to authorize credit card transactions. Essentially, when you capture a customer’s credit card information, you’ll send it to a payment gateway. It will then forward the information to the acquiring bank, and finally to the issuing credit card company.

The credit card company will then relay back a response that informs the vendor whether credit is available. If so, the transaction goes through. Payment gateways may also have proactive features, such as fraud detection, and may be issued through banks as an added service.

Main considerations

You shouldn’t go with the first payment gateway you happen across. Instead, you should take your time, and pay careful attention to these considerations:

1. Modern or classic

First, you’ll need to decide whether you want a “classic” payment gateway setup or a modern one. Classic payment gateways require you to apply for a direct merchant account. However, modern payment gateways allow you to use their services without one. In general, modern payment gateways are easier to set up, but have higher fees and may send your customers offsite to make a payment, which has the potential to reduce conversions. PayPal is a good example of a modern payment gateway, while is an example of a classic gateway.

2. Encryption standards

Next, you’ll need to consider the encryption standards of the payment gateway you’re using. This company will be handling your customers’ sensitive payment data, and if there’s even a slight breach, it could reflect poorly on your company’s reputation. Payment gateways like EBizCharge often advertise their encryption standards. One of these standards, tokenization, removes card data entirely, adding another level of security.

Additionally, more secure gateways lower risk and are able to achieve lower processing costs as a result. With native, seamless integrations into other platforms (including accounting, ERP and ecommerce systems such as QuickBooks, Microsoft Dynamics, Sage, SAP, NetSuite, Magento and WooCommerce), payment acceptance is more secure and more automated. This also greatly reduces the chance of human error and offers greater reporting visibility.

3. Compatibility

Some payment gateways are easier to integrate than others, though most payment gateways strive for compatibility with as many technological systems as possible to maximize their user bases. However, you may have unique needs or requests, such as linking your payment gateway to your invoicing software or another financial data management platform you use.

4. Speed

Different payment gateways offer different speeds, as well. If you’re looking to maximize the average user experience and complete transactions as fast as possible, you’ll want a processor that can secure credit card authorization in a matter of seconds. You may also consider how quickly these payment providers can secure the money for your account, as transactions often take two to three days to fully complete --and getting that payment a day earlier could be important for your startup. MyGate is an example of a payment gateway known for its speed.

5. Reporting features

Depending on your business, you may require a gateway with thorough reporting features. For example, you may wish to review all transaction activity, or specifically review any chargebacks you may have gotten. You may want a detailed analysis of any fees you’ve incurred while using the platform, or need to review your commissions (if you’re a reseller). Different gateways offer different formats and types of reports, so try them out before committing.

6. Fraud detection and other security features

Some payment gateways, like CyberSource, specialize in fraud detection. They’ll help you proactively identify suspicious activity before it gets any further in the payment process. If you plan on handling large volumes, this is especially important for you.

7. Invoicing capabilities

Depending on what systems you’re already using, it could be in your best interest to secure a payment gateway with built-in invoicing capabilities. This would help you streamline your payment process, and may reduce your reliance on other platforms.

8. UI and usability

Your financial team will need to log into your payment gateway at least occasionally to review fees, chargebacks, transactions and other high-level data. When they do, you’ll want them to have the best possible user experience. Some platforms are better designed than others, and are more intuitive to learn. However, since different people have different preferences, the only way to evaluate this is to try the platforms for yourself.

9. Costs and fees

Finally, you’ll need to consider the costs and fees associated with each payment gateway. Some may have better features, but will also come with an accompanying greater cost. Some platforms offer zero setup costs and zero monthly payments, but may have higher fees for things like chargebacks. Others will offer a flat monthly fee, with no additional fees for other types of transactions. Your choice depends on your budget and how you expect your business to perform.