As an existing business owner or a budding entrepreneur, choosing a reliable payment method for eCommerce is crucial.
Finalizing a payment processing system for eCommerce sites is not as simple as creating a social media presence. In this article, we will break down this process for you and help you choose the best payment method for your eCommerce site.
What is an eCommerce payment gateway?
An eCommerce payment gateway is essentially a company or service provider that processes electronic payments for another website, business, or online store.
These are specialized companies that mainly do two things:
- To be the intermediary between you and your client that facilitates payments and cash transactions
- To make the overall process of closing a purchase transaction on your online store smooth, secure, and hassle-free.
Choosing an eCommerce payment gateway
Now that we know what a payment gateway is, the next step is to understand how to choose a payment gateway. While there are several payment methods for eCommerce sites in the market, all of these vary in terms of features and fees.
To make sure that you choose the payment gateway most appropriate for your business, below are some key tips that you, as an entrepreneur, should keep in mind before deploying an eCommerce payment gateway on your online store. These are:
1. Brand reputation
Money is an essential commodity. Hence, when it comes to trusting an online payment source, people are exceedingly conscious. Users are often skeptical about where they are giving their financial details.
Also, there is an increasing amount of phishing scams and cybercrimes. Thus, consumer faith in digital payment gateways is dwindling by the day.
To ensure your online store visitors convert into customers, you must be particular about the brand reputation and the market sentiment regarding the payment method you’re about to use.
2. Security
As mentioned above, a payment processing merchant has a very sensitive job. Hence, you should ensure that the company has employed all necessary safety standards and licenses required to safeguard the personal financial details of users.
If there is a security lapse in the payment gateway, critical financial data of your clients can be exposed to illegal activities, putting the credibility of your business in jeopardy.
For instance, compliance with the Payment Card Industry Data Security Standards (PCI DSS) is the most basic security standard that your chosen method should comply with.
Further, some payment gateways, like PayPal and Google Pay. also apply a second or third layer of security to ensure sensitive data is safe. This is an added advantage.
3. Ease Of Installation And Usage
A payment page is the last stage of completing the sale. Complicated payment pages may result in discouraging the customer and lead to cancellation of the transaction.
The chosen payment method should be easy to register, maintain, upgrade, and navigate, even for the most non–tech–savvy users.
Another defining factor of a good payment system is one that accepts a variety of payment options from several different places, thus allowing you to have a wider consumer base.
So far, PayPal is leading the market in this domain, with Google Pay and Amazon Pay slowly catching up.
4. Customer Support
Even the most seamless system can never be 100% error-free. Software upgrades and new technology issues are sure to arise.
In this kind of situation, especially since it involves money from a third party, customer support should be readily available and easily accessible. Make sure to choose a payment method that offers good customer service.
5. Processing Fees
You don’t want to put all that effort into converting visitors into sales and then hand over the entire amount to your payment partner as processing fees.
Hence, you must carefully read and understand the terms of the contract and ascertain the processing charges involved before deploying any payment method.
Since this is one of the most important determining factors while selecting a payment method for an eCommerce site, we have explained the intricate details about processing fees and transaction costs in greater detail below.
What Are eCommerce Transaction Costs?
eCommerce transaction cost or processing fee is the amount that a payment gateway provider or merchant charges every time a sale closes.
This is the fee that your payment gateway will charge you for rendering the payment processing services. Generally, it ranges from 1% – 6% of the transaction value.
For example, if a customer buys a commodity for $100 and the transaction cost charged by the payment gateway provider is 3%; a sum of $97 will be sent to you as sale proceeds, and $3 will be deposited to the payment gateway provider.
It must be noted here that transaction costs are not uniform across all platforms.
There are different types of processing fees charged by different payment gateways. Some examples of transaction costs that are involved in an online payment are:
- Processing Fees: Fees charged on each transaction. For example, one of the most famous eCommerce payment gateways, PayPal, charges a percentage-based fee per transaction within the United States of America.
- Installation and Registration Charges: Charges paid by the website owner for installing the payment gateway on the online store.
- Fixed/ Per Item Fees: Fixed transaction fee or per item fee charged by the payment gateway instead of or sometimes added to the processing fee.
- Credit/ Debit Card Fees: Service fees charged on debit/ credit transactions.
- Fees charged for payments from other countries: Some, like PayPal, charges an additional service fee for payments that are received from outside the United States of America
Top 5 eCommerce Payment Gateways for Online Stores
Based on the key pointers above, below is a list of the best eCommerce payment gateways you can use on your website to process transactions seamlessly.
1. PayPal
Undoubtedly, one of the most popular payment gateways in the market. PayPal is the most preferred payment gateway partner for most websites in the USA.
The main reasons for this are the ease of operation and a wide range of payment options available. A hassle-free system of accepting and delivering international payments is an added advantage.
However, processing charges and other costs in PayPal are slightly towards the higher side compared to its competitors.
2. Google Pay
Google Pay, a digital wallet, is one of the most user-friendly and quick payment gateways available. With an almost instant deposit or withdrawal to the merchant’s bank account, this is one of the easiest payment methods for eCommerce sites to integrate with an online store.
3. Amazon Pay
Amazon Pay already has consumer trust and brand loyalty amongst users. A simplified user interface, brilliant customer support, and relatively lower transaction fees make it one of the most commercially viable and preferred payment methods for eCommerce sites.
4. Stripe
Stripe is the second most popular payment method after PayPal and is just as revered. It has a transaction fee similar to PayPal and a delightful interface that makes tracking payments and analytics easy. Stripe and PayPal differ in their geographic reach and currency support, so it is worth comparing both based on your target market.
5. Klarna
Klarna is a leading buy-now-pay-later payment solution that lets customers split purchases into instalments. It is particularly popular in Europe and has seen strong adoption globally. For eCommerce stores looking to reduce cart abandonment and increase average order value, Klarna is a compelling addition to your payment options.`
Conclusion
A business takes a lot of effort. From sourcing to sales, a successful and profitable enterprise is an owner’s labor of love. Thus, processing and receiving payments should be one of the top priorities in your entrepreneurial journey.
The options for payment methods for eCommerce are many, but not each one may suit your business goals and target consumers.
Hence, it would help if you took the time to study each one of them before sealing the deal on the most fitting one. Carefully pondering over the factors mentioned above will help you decide on the most profitable payment method and get the ball rolling on your business goals.
