Often and easily confused with merchant accounts, a payment gateway is the technology that authorizes or declines credit card payments, whereas a merchant account is where funds are held before they hit your bank account. Both are required to collect online payments from customers. Payment gateways are a very competitive landscape, driven by volume, fees and percentages. When it comes to selecting which provider is best for your business, you need to be confident with your choice in terms of cost, ease of use, and customer experience.
We’ve just launched Brightpearl Payments, which connects several payment gateways into our core order processing and customer workflows, allowing users to process payments directly in Brightpearl. Teams using Brightpearl Payments have reduced complexity and errors within the customer service team. We now connect to leading gateways Stripe, Sage Pay, Worldpay and Authorize.net, with plans to add more this year (if you love your payment gateway and they’re not on our list, let us know!). We often get asked 'Which is the “best” payment gateway provider?'.
Unfortunately, there’s no clear cut answer to this question. It really comes down to each business’ priorities around customer experience, ease of use, fees, etc. Within this post, we'll explore the initial points to consider when evaluating a payment gateway.
How payment gateways can affect customer experience
It may seem obvious, but your selection and implementation of a payment gateway can have an affect on your customers, not just your staff. When planning to take online payments, there are three key points we see as a must-have:
- Prioritize a non-hosted solution. The difference between hosted and non-hosted is whether your customers get redirected away from your webstore to make the payment. A non-hosted gateway gets embedded directly into your website checkout, meaning there’s no redirecting - reducing the likelihood of cart abandonment.
- Customer confidence. Build trust and reduce abandon rates by having the logos of your payment gateways visible on forms, or within the ‘select a payment method’ options. Many payment gateways offer additional seals to display on your website to improve customer confidence.
- Optimized workflows. Not such a big point if you’re only selling online, but if you’re taking orders over the phone, then you should consider how easily this can be performed. Are you happy with your customer service team having to use a disconnected payment terminal, and then having to copy and paste the results into your order management tool? If selling wholesale, could you save minutes from future phone calls by saving cards for re-charge later? Look for a payment gateway that allows your sales teams to quickly enter payment information while maintaining checks to validate billing information and prevent fraudulent purchases.
Understanding payment gateway fees
Given the landscape, payment gateway fee structures can be pretty complex once you really get into the detail. Some providers such as Stripe offer all core features, and then charge on usage (resulting in a pay-as-you-go type service). Others such as Worldpay have the same platform charge, but if you’re confident in your volumes, you can pay monthly rather than ad-hoc, which can result in cost savings if volumes are properly estimated.
It's difficult to definitively identify the most and least cost effective payment gateways because bulk discounts and custom pricing are common in the payment gateway market. The key advice from a solution perspective is to ensure that you consider the operational and transactional cost of using any provider.
Are they integrated with your order taking platform? If not, what's the chance and potential cost of mistakes? What’s the likeliness of mis-entering card or billing address information into the separate terminal, resulting in longer and frustrating customer phone conversations? A small transaction cost saving might not be worth it if your staff are forced to spend extra time on each sale.
When I was recent speaking with one of our customers, Angie Sole - MD of Herbert Sports, she said: “We chose Sage Pay some years ago because it was compatible with our old website system and still is now for Magento. Additionally, it's a market leader having credibility with customers in an environment that is highly trust dependent, and they were providing good value.”
There’s lots of comparisons out there to help you do your homework - Memberful have done a nice job of comparing Stripe and Paypal's fees. You won’t be stuck with your provider forever, so you should always keep one eye on the market and can always make a switch should it be more cost effective, or play nicer with the rest of your technology stack.