What to Consider When Selecting Payment Gateways in E-commerce

If you run an e-commerce store, you are going to need a payment gateway to process and authorize your customers' transactions. Long gone are the days where merchants collect cash for payments or need to maintain a physical record for these transactions. Today everybody expects to shop online. Implementing a payment gateway may seem complex but it is a necessary step. E-commerce providers need to offer a safe, convenient and accessible method for accepting payments by credit cards, debit cards, e-wallets, bitcoin, etc. Payment gateways are a service that help make the processing of transactions easier and safer for both merchants and sellers.

What are payment gateways?

A payment gateway is a service that acts as intermediary between e-commerce shop and payment processor or bank. It helps to process, validate and authorize credit card and other forms of payments for ecommerce sites, online retailers, and traditional brick and mortar shops. A payment gateway is like a cash register that is responsible for handling and maintaining electronic payments. A few familiar and popular payment gateway services include Paypal, Braintree, Wepay, and Stripe.

How do payment gateways work?

Payment gateways play an important role in the processing of transaction between customer and merchant. They are responsible for safeguarding sensitive information and details concerning the payment (e.g. credit card number, personal information). Data encryption is a crucial step that ensures the consumer's information is passed securely to the merchant. Payment gateways are primarily responsible for authorization, settlement and reporting of transactions. The payment process includes six main steps from the moment an order is placed to the point that the payment is authorized, where it is fulfilled and transferred to the merchant.

Step 1: A Customer will place an order online after completing a checkout process.

Step 2: The merchant transfers the order information to the relevant payment gateway. The customer selects their preferred payment method (Paypal, credit card, debit card, stripe, bitcoin etc.)

Step 3: A transaction request will be delivered to the issuing bank for transaction authentication.

Step 4: After the authentication process is complete, the transaction will be either accepted or declined. This depends on whether the funds are available in the customer's account, issuing bank or credit card provider.

Step 5: The payment gateway notifies the merchant of the transaction status.

Step 6: The payment is settled between the bank and the payment gateway which then delivers the money to the merchant.

Why are payment gateways important?

A payment gateway is a crucial step in the checkout process. Failure to provide a smooth and seamless checkout process can lead to shopping cart abandonment. According to the Baymard Institute, the average cart abandonment rate is 69.57%. In fact, 27% is attributed to bad checkout process and another 8% is due offering a limited number of payment methods.

It is without doubt that selecting the right payment gateway for your service is crucial and can impact your business bottom line. It is recommended to stack on multiple payment gateways in order to provide more options for customers to purchase. This is especially important for international commerce, where local payment methods may only be supported by certain payment gateways.

What to consider when selecting a payment gateway?

There are many things to consider when selecting which payment gateways your e-commerce platform will support.

Security capabilities

First and foremost, it is important to understand what security features are provided with the payment gateway. Does the payment gateway provide P2PE (point to point encryption)? This capability fully protects customer data during every step of the transaction while thwarting outside threats. Second, does the gateway provide tokenization capabilities? Tokenization enables merchants to replace sensitive data with a one-time code that cannot be reused. This ensures that data is encrypted and cannot be breached and reused by cyber thieves. Additionally, tokenization helps merchants ensure customers' securitization of personal data and the ability to meet compliance requirements.

Integration capabilities

There are many payments solutions on the market. In order not to alienate certain consumers from shopping on your website it is best to provide them with different payment solutions to choose from. Thanks to APIs, it is easier than ever to easily integrate to these various third-party services. An important feature to consider is whether the integration can be easily integrated with your e-commerce platform. Does the payment gateway provide an out-of-the box toolkit for developers to easily integrate between the two systems? A gateway that has a simple integration process can save your time and resources as well as enable you to provide your customers with access to additional payment methods that meet their preferences.

Meeting compliance requirements

Payment gateways need not only help merchants protect their customers and business but also meet compliance requirements. The first industry regulation that merchants should be aware of is the Payment Card Industry Data Security Standard (PCI-DSS). It is important that payment gateways meet this regulation as it protects cardholder data.

Another important regulation that payment gateways must comply with is the General Data Protection Regulation (GDPR). It is a European regulation that can affect north American merchants that conduct business with residents in the EU. GDPR is about data transparency and revolve mostly about protection of consumer data rights. Merchants must be transparent about what data is being collected and transmitted across your payment gateway.

Merchants should ensure that the payment gateway that they select complies with these regulations to remove any unnecessary compliance headaches.

Adding value to your business

Adopting the correct payment gateways for your e-commerce shop can provide a lot value for your business. It can help you increase your purchase conversions while decreasing cart abandonment. eZ Commerce solution - a component in our Digital Experience Platform (DXP), eZ platform - is all-in-one solution with various e-commerce features. It provides content teams with an easy-to-use interface which supports all the momentary and transactional aspects of an e-commerce website. eZ commerce uses the Symfony JMS bundle to integrate and support multiple payment systems. And we support numerous payment gateways (e.g. Paypal, Telecash and Ingenico) out of the box.

Talk to us about how we can help you with your e-commerce projects.