Paulina Twarogal
Times have changed and so has the way people pay. Due to digitalization, payment options that were once widely common are nowhere near what’s available today. Even though cash-based payments still remain popular, people are leaning towards cashless alternatives. Research shows that cash usage has been on a steady decline, making up for only 16% of all transactions.
Given this shift, partnering with the right payment provider is one of the most important steps you can take to grow your business. However, there’s more to this process than just listing potential partners and making a choice. You need to understand your business needs and consider many factors before you select the right payment partner. So, what should you start with then?
Keep reading to learn how to select the right payment partner and understand the benefits of using one to boost your bottom line and enhance customer satisfaction.
What are your payment needs?
Before you jump over to select the right payment partners straight away, take a moment to really understand your business needs and goals. Without that, the chances are that you’ll simply make the wrong decision. Here’s what you need to do:
Identify your business requirements
There are no two businesses alike. Whether small, medium or large, each company has its own unique business needs. So, take into consideration the size of your business, the type of products or services you offer, and the volume of transactions you expect. With a clear picture of your business model at hand, you’ll find it much easier to identify the features you need in a payment partner.
For example, startups and small businesses might require cost-effective and simple payment solutions. Something that integrates smoothly with their systems but doesn’t burden them with complex setup processes. Medium-sized and large companies, on the other hand, are likely to have more sophisticated needs. Since they often deal with global transactions and multiple currencies, such businesses might need robust security, scalability, and multiple payment methods.
Determine your payment processing volume
Another very important aspect to consider is the volume of transactions your business processes monthly. This will influence the type of payment solution that suits you best, as some payment providers offer lower transaction fees and better features for high-volume businesses.
Consider your target audience and their payment preferences
Some customers may prefer credit cards, while others might opt for digital wallets like Apple Pay or Google Pay. To deliver a positive shopping experience, it’s so crucial to know the payment preferences of the target audience.
There’s also geographic reach that requires some attention as well. If a company operates mostly locally, it can focus on regional payment methods. However, those expanding globally and handling various currencies would rather have to find providers with a strong global background.
Getting started with payment gateways
Digital payments have become the new normal. In fact, it’s even hard to imagine a world without cashless payment options these days. It’s the convenience and speed (and also partially the necessity resulting from pandemic lockdowns) that have made digital payments so popular among customers. The total transaction volume in digital payments reached $9.46 trillion in 2023 and is projected to grow to $16.62 trillion by 2028. This only highlights the size of the digital payment market and its growing importance for businesses.
So, it’s not surprising that more and more organizations have been opting for reliable and secure payment gateways. After all, it’s hard to provide their customers with safe payment options without a payment gateway. It secures customers’ sensitive information, simplifies the transaction process, and offers flexibility by allowing a variety of payment methods.
Without a gateway, businesses would risk facing security risks, slower processing times, and limited payment options. That’s why to offer secure, compliant, and efficient digital payments, you need to have a reliable payment gateway—the standard solution for the majority of businesses now. However, there’s a bit more to this than just having a payment gateway.
What do you need to start accepting payments?
To initiate the process of accepting payments for your business, you must have a few components in place. A payment gateway plays a crucial role here, but you’ll also need a merchant account, business bank account, and payment processor.
- A merchant account is a special bank account that allows businesses to accept various payments. It’s a temporary holding place for customer payments before the money is transferred to the business’s main bank account. There are a few types of the merchant account, including retail, e-commerce, and mobile.
- A business bank account is a place where all the money from customer transactions is gathered. This account helps you organize and manage your funds effectively. It securely holds the finances transferred from your merchant account.
- A payment gateway is a secure online system that transfers customer payment information between your app or website and the payment processor. Before sending it off for processing, it encrypts sensitive information to keep customer data safe. Payment gateways also handle the customer-facing side of the transaction, showing a success or decline message.
- A payment processor acts as a middleman behind the scenes. It’s a service that handles the core functionality of authorizing and settling transactions. It receives the encrypted payment data from the payment gateway, verifies it with the customer’s bank (issuing bank), and gets authorization for the transaction. If approved, the processor then sends the funds from the customer’s account to your merchant account.
Choosing a payment gateway provider
After understanding the components necessary for accepting payments, choosing a payment provider—Payment Service Provider, PSP—is the next important step. A payment provider is a company that combines multiple payment-related services into one solution. It integrates several functions that facilitate the payment process within your organization, often simplifying what would be quite a complex setup otherwise. Typically, it combines a payment gateway, processor, and merchant account services.
Types of payment partners
Online payment providers come in various forms, but one way to differentiate them is based on their role in the payment flow. They might fall into three main categories: distributors, collectors, and aggregators. While all these types facilitate online payment solutions, they differ when it comes to fees, payouts, and contracting:
- Distributors help e-commerce merchants connect their stores to various payment methods. As a result, they can accept online payments easily. Distributors are a good choice for those merchants who offer only a few payment options. A good example of a distributor is Skrill.
- Collectors streamline the settlement process by consolidating payments from various methods (credit cards, digital wallets, and more) into one transaction. They also allow businesses that might not qualify for a merchant account to accept payments by acting as an intermediary. This can be helpful for new businesses or those in high-risk industries. Let’s take PayPal as a well-known example here.
- Aggregators handle the entire online payment process for you. They accept the funds, negotiate with payment companies on behalf of the merchants, and settle the money directly into your bank account. This makes them different from distributors, who just manage payment connections, and collectors, who combine payments into single settlements. They typically offer a straightforward setup process and are ideal for small to medium-sized businesses that need a simple payment solution. So, merchants who want an easy way to avoid dealing with multiple banks and payment companies usually go for this solution. Stripe and Square are popular examples of aggregators that provide unified payment processing services.
Benefits of using a payment partner
Integrating a payment service provider into your business operations can be a game changer, bringing numerous advantages. Let’s delve into why partnering with a PSP is a good move.
Streamlined payment process
A PSP provides businesses with a quick and simple way to accept multiple online payments through one platform. This saves you time and money.
Increased efficiency
Streamlined payment processes reduce manual errors and processing times. Automatic checking and reporting systems help maintain accurate financial records and smooth payments. This allows you to focus more on core operations and less on administrative tasks.
Enhanced security
A trusted payment service provider prioritizes security. By implementing robust measures like encryption, tokenization and fraud detection systems, a PSP protects sensitive customer data and transactions from unauthorized access and cyber threats.
Improved customer experience
Offering a variety of payment options and a smooth checkout process increases customer satisfaction. Additionally, advanced analytics from payment partners provide insight into customer preferences. This facilitates personalized marketing that increases loyalty and engagement.
Scalability and compliance
Partnering with a PSP enhances business operations. It offers scalable solutions to handle business growth and seasonal changes. And compliance with standards like PCI DSS ensures data security and protects your business’s reputation.
Key considerations for selecting a payment partner
While choosing the right payment partner, businesses should keep a few key considerations in mind.
Payment gateway location and currency support
Before deciding on a payment provider, you must consider their geographical region. Are they licensed to operate in your country, and can your target audience access their services easily? Additionally, you shouldn’t forget to check the provider’s currency options, conversion rates, and payout frequency. That’s particularly important if you’re working, or planning to expand, globally. Your PSP should then be able to convert money into local currency smoothly.
Available payment methods
Even though credit and debit cards are the most popular payment methods, it doesn’t mean that your PSP’s services should be limited only to these two most-used payment options. The ideal partner should offer a wide range of methods, including digital wallets, online bank transfers, buy now pay later (BNPL) options, or even cryptocurrencies.
What’s really crucial here is that all of the payment options should be relevant to your target audience and industry. After all, providing your customers with various options enhances their convenience and, in turn, increases sales.
Ease of integration with current systems
To ensure a seamless payment process, the partner’s systems must be compatible with your existing infrastructure. Check whether the payment partner integrates well with your e-commerce platform, checkout system, or other business software. Moreover, there must also be clear and comprehensive API documentation for a smooth integration process.
Different fees
Pricing is a significant aspect to consider when selecting a payment provider—there’s no doubt about it. So, to avoid any surprises and unexpected costs, you need to understand all associated fees at the beginning. They might include transaction processing fees, cross-border payment fees, currency exchange rates, setup costs, and monthly or annual charges. Then, compare the fee structures of different PSPs to find the most cost-effective solution for your business.
Technical support
What level of support can you get from your potential partner? Make sure you evaluate whether the solution provider offers responsive support or a ticketing system. Check how you can contact your partner and see if live chat is an option. You’d also need to find out if you’ll have dedicated account managers as well.
Moreover, ask about average response times and service level agreements (SLAs). If you come across any critical issues, will you receive adequate support in time? There are a lot of questions to ask but it’s important to get a clear picture of the support options available. Knowing the answers will help you choose the best provider and will give you peace of mind.
Security features and PCI compliance
It goes without saying that security is paramount when it comes to handling sensitive financial information. In the face of increasing global e-commerce fraud (with losses reaching $41 million in 2022), that gets even more important than ever. Studies show that 83% of consumers are worried about payment security when shopping online.
To provide your consumers with the highest level of security, look for a trusted partner that prioritizes security features like PCI DSS compliance, data encryption, risk monitoring, and fraud prevention tools. Don’t compromise on the safety of your customers’ data. Especially if data security is a major indicator of whether they’ll trust your brand to make a purchase now and in the future.
Reporting and analytics
PSP’s robust reporting and analysis tools can provide valuable insight into your transactions. This data can help you analyze customer behavior, identify trends, and optimize your payment processing strategy. So, check what kind of reporting you’ll get for your transactions. Without this, improving the payment experience would be challenging.
End-to-end payment solutions
Consider whether your PSP offers a complete solution that manages the entire payment process from authorization to settlement. This can simplify your operations and improve reconciliation efforts.
Mobile optimization and user experience
Today, convenience is king. It’s no wonder then that mobile shopping is on the rise—76% of consumers use their mobile devices to make purchases. It saves them time and effort. Doing shopping on their mobile phones takes just a few taps, allowing them to find what they need, buy it, and get on with their day. A clunky mobile checkout process can significantly increase cart abandonment rates. Conversely, a smooth and optimized mobile payment experience from your PSP can boost sales and customer satisfaction.
That’s why you need to verify if your potential PSP prioritizes mobile optimization and offers a responsive design. It should adapt to a variety of screen sizes, load quickly, and have a simple, secure checkout process—all of which are key factors for a positive mobile experience.
Reputation and track record
Nobody wants to work with a payment provider that has poor reviews and little experience in the industry. Thus, to find an honest and reputable PSP, check the company’s experience and if it has a solid track record of customer satisfaction. To get a better picture of the situation, you can also read some user reviews and comparisons on independent review platforms like Capterra and G2. This will be definitely helpful in choosing a partner that meets your needs and contributes to a positive customer experience.
Wrap-up
The right payment solution can be a game-changer for your business. It can improve customer service, increase sales growth, and save on operational costs. Yet, choosing the wrong one can lead to a number of problems: frustrated customers, higher fees, and wasted resources that could be invested elsewhere. These are just a few of the many challenges you may face.
Here, at Neontri we understand how complicated it can be to select the right payment partner. With our broad expertise, we’ll guide you in choosing the best development solution for your unique needs.
FAQ
Can I have multiple payment gateways on my website?
Yes, and this can be a great strategy to cater to a wider audience. For instance, some customers might prefer the convenience of PayPal, while others might be more comfortable with traditional credit card processing. Offering a variety of options can improve customer satisfaction and potentially boost sales.
What are some examples of payment gateways?
Some of the most popular payment gateways include Stripe, PayPal, Square, Authorize.Net, and Braintree. These services act as secure bridges between your website and the payment processors. They handle the encryption of sensitive customer information and facilitate a smooth checkout experience.
What payment gateway should I use for my website?
There’s no one-size-fits-all answer to this question, as the best payment gateway ultimately depends on your specific needs. Consider factors like the size and location of your target audience, the types of payment methods you want to offer, and the transaction fees associated with different processors. By carefully evaluating these points, you can select a payment gateway that empowers your business to thrive.
