Choosing the right payment gateway is essential to facilitate the payment process of any online store. This solution allows merchants to have full control over the payment flow while simplifying the technical connection with card acquirers. However, there are many solutions out there. With this in mind, we have prepared a brief guide to help online retailers choose the best option for their stores.
What is a Payment Gateway?
A payment gateway is a technical solution that allows online stores to process payments. It consists of a back-end service that connects the online shop with card acquirers, securely transferring the payment information between them. It basically works as the online equivalent of the POS machines. Merchants establish a contractual relationship and receive the funds collected directly from the card acquirers.
How to Choose a Payment Gateway
There are several points that should be taken into account when considering a payment gateway. To facilitate the process of selecting, we have prepared a list with the most relevant points merchants should bear in mind:
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- Compatibility: A very important point is to verify if a payment gateway is compatible with an online store e-commerce platform. This should be the first thing to be carried out, as there is no point in checking everything else if a payment gateway can’t be integrated with an online store unless merchants are willing to migrate their stores to a different platform.
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- Integration: A good payment gateway should be easy to integrate into any web environment. It should be compatible with shop systems or programming language and provide constant integration. Card acquirers often change their integration parameters, which forces merchants with a direct acquirer integration to adjust their technology integration. On the other hand, a payment gateway should solve this problem for merchants by adapting its platform to the acquirers’ changes, providing online businesses with a stable and consistent integration.
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- Security: The payment industry has strict security standards that a payment gateway needs to be compliant with. Merchants must make sure that the chosen gateway complies with all standards, especially PCI DSS, a standard created by Visa and Mastercard that certifies that the payment gateway is secure to store credit card details. PagBrasil, for instance, is PCI DSS Level 1, version 3.2, certified by Trustwave, the highest security standard available in the payment industry. Furthermore, it is important for the payment gateway to have a proprietary solution, like PagBrasil’s platform, which is developed completely inhouse. By having a proprietary platform, the gateway can quickly adapt to merchants’ and market needs. Likewise, it also enjoys more security as there are no third parties with access to its system and more flexibility to create, test and improve innovative solutions.
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- Reconciliation: Ideally, a payment gateway should provide a series of additional resources, such as business intelligence with reports and customized charts for a better understanding of the entire business operation. For instance, PagBrasil’s gateway offers easy access to information on conversion rates, which are often not displayed by acquirers, who only count approved transactions. For merchants who want more in-depth information, it also provides an optional reconciliation service.
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- Functionality: The payment gateway should provide basic and advanced functionalities such as one-click and recurring payments, which help improve the payment experience, as well as pre-authorization, that can buy merchants some time to run additional risk analysis, partial capture and multi-acquirer reattempt.
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- Fraud prevention: A payment gateway itself doesn’t filter any payment transaction, but it should be compatible and integrated with fraud prevention solutions. Some gateway providers will have their proprietary tools and others will be integrated with third-party anti-fraud services, which allows merchants to add the service without the need for additional technical implementation. PagBrasil offers its PagShield in addition to the possibility of using Konduto antifraud solution through its platform.
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- Direct checkout: Choosing a payment gateway that can be used behind the merchant’s own checkout page gives merchants higher conversion rates. This happens mostly because buyers feel a greater sense of security when they don’t have to leave the stores’ websites to complete the payment, in addition, to avoid adding another step to the checkout process.
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- Bargaining power: As a payment gateway only offers a technical solution, the merchants must establish contractual relationships directly with acquirers. When choosing a gateway, online retailers should check if the gateway is integrated with more than one acquirer. The possibility to switch from one acquirer to the other gives merchants greater bargaining power to negotiate their fees with the different acquirers. In addition, retailers can get access to a wider range of card labels.
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- Support: Another relevant point is technical support. Merchants should make sure a payment gateway is ready to provide them with fast and competent technical support.
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- Costs: Usually, there is a setup fee that merchants must pay prior to implementing the payment gateway platform. The payment gateways usually charge fees per transaction generated, for both completed and failed transactions. The fees apply to payment, refund and chargeback transactions. Costs alone shouldn’t be a determining factor. We strongly recommend analyzing all the other points as well to choose the payment gateway that best suits an e-commerce needs.
It is worth noting that the use of a payment gateway is often a better alternative for merchants with larger sales volumes as it allows them to reduce their overall costs. A gateway setup also requires a company to have a certain structure to handle all the contractual relationships and processes. Therefore, if a business lacks this structure, a payment processor offering collection services, where the payment processor holds any contracts with card acquirers and is responsible for transferring the money collected to the merchants, might just be the best option. If merchants still want to have certain control over payments, choosing a provider that offers a hybrid model can be the solution.
