If you’re planning to enter the online retail sales market, you will have to provide a way for your clients to pay online. Perhaps you have been operating as a “cash and check only” retail company for a while and you’re ready to move online, or maybe you are just planning to start out online with a great idea for your company. In either case, the idea of sorting through a myriad of different credit card processing companies to find the best payment gateway may seem daunting. Here is a brief overview of what a payment gateway should do, why it’s important, and how to choose the right one.
Why Get a Payment Gateway?
Some business owners think that it’s too much of a hassle and too expensive to set up a system for accepting credit and debit card payments, either in person or online. However, the trend for most consumers is moving toward electronic payment options, and away from cash. You could be losing out on business if you don’t have a convenient way for your clients to pay.
Cash flow is one of the most important aspects of a successful business, and waiting around for a client to send you a check, or waiting for checks to clear the bank, can slow your cash flow to the point that it cripples your business. Whether you are a retail store, a business-to-business operation, or anything in between, getting timely payment from clients is critical to your long-term success.
The right payment gateway services can also enable you to set up recurring payments for clients who purchase from you on a monthly, quarterly, or annual basis. With a payment gateway, you know the money will be deposited in your account in a predictable, timely manner.
How Does a Payment Gateway Work?
Payment gateway solutions are a link between the business (you), the client, the client’s credit card provider, and the bank. They act as a third party to validate the client’s credit card, then ensure that the funds are available so you get paid.
Payment gateways are essential for businesses that plan to sell online because they enable you to accept credit card payments without having the card present (when your client is shopping from home). They can link to existing merchant accounts if you already have something set up to accept credit card payments in person, and they may also require an Internet merchant account if you plan to start selling online.
What are the Costs?
Some business owners avoid setting up payment gateway services because they prefer not to pay the extra fees and costs. While it is true that a payment gateway will cost money to set up and run, the best payment gateway solutions will offer affordable costs and give you the opportunity open up a whole new revenue stream for your business.
Some of the most common costs associated with payment gateway services include:
- Discount rates: This is the commission that is charged on each credit or debit card transaction you process. It usually varies between 2-6%, and is split between your merchant account provider, payment gateway, and the credit card company. Sometimes the percentage charged can vary based on how many transactions you process, decreasing with more transactions or a higher sales volume.
- Monthly fees: These fees may be charged to cover a wide variety of services provided by the payment gateway, from auto-billing and pre-authorized payments to fraud detection. Some companies will have a flat fee and then optional fees for additional services, while others may just charge one rate and give you all the services under that umbrella.
- Transaction fees: This is a small charge added to each transaction when you process it. Usually it’s less than 50 cents, and in some cases depending on how much volume you process, you may be able to negotiate to have this fee reduced or waived.
- Setup fees: When you initially set up your account, there may be some costs associated with this process. They are a one-time charge, and usually just part of the cost of doing business with a payment gateway provider.
How to Choose the Right Provider
There is no right answer on which processer is the best, because choosing the best payment gateway services often depend on how you plan to use it, and what kind of business you have.
A few of questions you can ask to get you started are:
(1) How many transactions do you think you will be processing each month?
(2) Do you need want to use auto-billing?
(3) What is your primary source for payments (in person, online, etc.)?
(4) What kind of added features would you like to have available through your payment gateway service? What peripheral equipment or services would you like to integrate with your payment gateway solutions?
(5) Where is your business based? Payment gateway services may have specific regulations and rules for companies accepting payments internationally.
(6) What kind of support do you need?
From there, it’s just a matter of identifying the providers that are available, reviewing the costs and fee structures, and choosing the one that seems to fit best with your business.
An Overview of Providers
Depending on where you do business, there may be other payment gateway providers, but here is a basic list of some of the most common.
This is the original online payment gateway, and still one of the biggest. It is fairly easy to set up, and offers options for several currencies, a wide variety of upgrades depending on the size of your business, and the ability to be applicable for both very small and very large companies. It is available as just the standard PayPal, or the upgraded PayPal Website Payments Pro, and PayPal Payflow Pro.
This company specializes in working with small businesses, with a simple-to-use gateway, and relatively low prices and fees. For U.S. small businesses that want to accept checks, they also have an eCheck option, which can be useful (this may not be available internationally).
This company is a Canadian payment gateway that also offers services for American transactions. They are well versed in some of the challenges of working with Canadian small businesses, and can help companies that want to be able to process in both the U.S. and its neighbor to the north.
BluePayGo!, iTransact, and First Data
These companies are full service merchant account providers, specializing in the combination of point-of-sale (POS) in-store, and online capabilities.
This company is particularly useful if you are operating in several countries and need flexibility with accepting payments from different currencies. They do not require a merchant account to get setup, so the process is quick and easy.
This is also a solution for people who want easy setup and don’t need a merchant account. Payments are limited to a few Western countries at this time, but will likely expand in the future.
One final note: no matter what payment gateway you choose, be sure that you follow the guidelines to remain PCI compliant. Check the Payment Card Industry (PCI) Data Security Standards to ensure that you and your payment gateway solution are safeguarding sensitive client information according to the laws.
Start your search for the right payment gateway solution by identifying what you need out of your payment gateway, then you can choose the one that meets your needs and gives you the best terms, best prices, and best service.