Setting up a business these days does not require nearly as much legwork as it did just five years ago. Even a blog or a plain website can be transformed into a full blown commercial site, capable of handling e-commerce transactions with a simple shopping cart plugin like ShopIntegrator. However, that’s the easy part.
To a layman payment happens in either cash or on-cash modes. In cash payments mode, you need to have physical outlets that can collect payments before releasing the items purchased. In a non-cash system, users swipe credit or debit cards on your site to transfer cash from their bank accounts to yours. Alternately, they pay via a service like PayPal where no cash changes hands, no cards are swiped, instead the user’s bank account is charged for a product they bought and transferred into PayPal’s account. Till the product gets delivered to the buyer, the amount does not get transferred to your bank account.
By and large, e-commerce stores in the developed world, only accept non-cash payments. Even after you pick your e-commerce template or shopping cart plugin, you still need to make one final choice before the money can start rolling in – choosing your payments processor. Here we shall go a little further in depth on how to pick the perfect payment processing service for your new store.
Processing an Online Payment
A non-cash payment online requires three basic entities to be processed.
a. The payment gateway
b. The payment processors
c. The merchant accounts
The payment gateway is like a fact checker that sits between your site and the customer. It verifies the authenticity of a user’s payment method and allows the transaction to proceed.
The payment processor does the actual transfer of money from the user’s account into the merchant account.
The merchant account holds cash that is transferred from the user’s account before it is moved into your bank account.
Typically, payment processors and merchant accounts come bundled together, while payment gateways are separate. However, lately there has been the emergence of three-in-one accounts that bundle all three entities into a single consolidated service. Services like Stripe or PayPal are examples of consolidated payment services. However, this convenience comes at a cost. These consolidated payment services typically charge the merchant a much higher per transaction fee, which can add up to a lot once you outgrow your startup status and start having some real good transaction volumes.
Once your business starts growing bigger and bigger in terms of revenues and transaction volume, it makes financial sense to switch to having your own merchant account and payment processor combination separate from the payment gateway.
Considerations While Selecting a Payment Processor
So you decided to go the route of a separate payment processor and merchant account to save some much needed extra cash. But what do you look for in a good payment processor before you make the final call? Here are the key factors that you ought to consider.
With the spate of data breaches that online retailers have suffered in the last couple of years, your number one concern while picking a payment processor has to be security.
a. Data encryption is a basic must have for a payment processor, where user data is encrypted into uncrackable codes before it is transferred from one party to the other.
b. PCI Standards compliance or Payment Card Industry Security Standards compliance is a must have to be able to compete effectively in the modern e-commerce space.
c. Verisign SSL certificate tells you that the payment processor offers your users SSL security for payment transactions. In other words, payments sent over an SSL connection are doubly secure than regular connections.
d. Address Verification – Payment processors ask for billing address for a credit or debit card from a user to verify it against the actual billing address listed against said card. This minimizes the risk of fraudulent transactions and protects user data.
e. CVV2 verification refers to the three digits that appear alongside the signature panel at the back of a credit or debit card. Asking for this number ensures that the user actually has physically with him / her and is not misusing a credit card number found accidentally on a credit card statement or other such correspondence.
f. Reputation – Finally, check for the reputation of a payment processor before you commit to one. A quick online search with keywords like ‘data breach’ or ‘security lapse’ accompanied by the payment processor’s name will give you a wealth of information about whichever processor you may be considering.
2. User Friendliness
When a user is mid-transaction on your website, even a small hitch in payments or page load time or even unexpected shipping charges is enough to scare them away into abandoning the cart altogether. Hence, the best e-commerce sites seek to minimize friction in a user’s experience, especially in the checkout stage. Having a payment processor that handles the transaction as smoothly as possible plays a huge role in ensuring that the user experience remains exemplary.
a. Onsite vs. offsite processing – When payment data is collected and processed in a single flow without the user ever having to leave your website, you have onsite seamless processing. While this may be great from a UX perspective, it puts the liability of data security, firewalls and more squarely on your shoulders.
The other option is offsite processing, where the user is taken to the payment processor’s site and any financial data is handled directly by the payment processor, thus vastly reducing liability on you as a website owner. The other benefit of offsite processing is the fact that users are usually familiar with processing companies like PayPal and trust them implicitly. So even if you are a new startup, by offering processors that are reputed and trusted, you earn some of that user faith by association.
Incidentally, ShopIntegrator offers offsite processing to ensure peace of mind for all its users.
b. Analytics – Many payment processors offer customer data to the websites that they service. Detailed analytics like purchase frequency, average order value and more can be available without you running a single report in your own analytics software. An added bonus that verifies your numbers is always welcome.
c. Multiple cards supported – Look out for processors that can support multiple types of cards and payment modes. A potential customer who does not see his preferred payment mode supported is bound to drop off your site leading to a lost opportunity. Check whether your payment processor covers the entire gamut from Visa, MasterCard, American Express, Discover, Diner’s Club to digital wallets like PayPal.
d. Mobile Payments Supported – With more users now accessing the internet via their mobile phones than PCs, it is imperative that your payment processor support mobile payments. Top e-commerce sites in emerging markets like India have over 50% of their total transactions coming from mobile platforms. The growing popularity of Apple Pay and consequently the renewed focus on Google Wallet and other mobile wallets like Venmo, make mobile payments support even more critical.
A payment processor will let your users transact via their existing infrastructure, but these services come at a cost. Many e-commerce sites make the mistake of picking the processor with the lowest fee, without balancing those out against the services that they render. Avoid this trap of opting for the cheapest service out there, but simultaneously don’t forget to keep close tabs on the cost of associating with your chosen payment processor. I say this, because it’s not one, but a host of fees that a typical payment processor will charge you. These include:
a. Setup Fees – Usually a one-time fee at the time of registration.
b. Variable Fees – These are fees that depend on the transaction volumes on your site as well as the types of services you opt for from the processor, e.g. per transaction fees, authorization fees, address verification fees, and more.
c. Recurring monthly / annual fees – Recurring monthly or annual fees are levied when you’re not charged a per transaction fee. This works well for larger e-commerce sites where the transaction volume is high and a per-transaction fee would not be cost effective.
d. Extras – These are fees that pop up, often unexpectedly. They’re rarely advertised on a payment processor’s website, usually finding their home in the fine print of some contract that you click ‘I agree’ on. Make sure you check upfront with your payment processor about these very specifically, as many processors attempt to make a quick buck out of these vague fees like cancellation fees for transactions that were cancelled by a customer. When a user’s details entered during the transaction do not match their real details, a transaction can be labelled ‘disqualified’ and your site gets charged an ‘unqualified transaction fee’.
4. Currency Support
The USP of having an e-commerce business is having the ability to sell to any one, located anywhere in the world. Most leading payment processors like FirstData, PayPal and Stripe tend to offer support for multiple currency types. This ensures that your user does not have to face the complication of currency conversions at the time of payment, leading to a lower chance of cart abandonment. However, multi-currency support comes at a price. Many processors (not all) charge a currency conversion fee for cross border transactions.
But offering multiple currencies on your site has more upsides to it than downsides. Multiple currency support means your site can even cater to visiting foreigners who might only have credit cards in their home currency. Moreover, the fact that your site already supports multiple currencies makes it easier for you to officially make a foray into new countries, opening up new avenues for your business and its revenue generating potential. Always a great thing to have!
5. Country Support
You might think I’m being repetitive here, but I’m actually not.
While people can pay with multiple currencies while still within the geographical boundaries of your home country, having multi-country support is a completely different ballgame. Most payment processors allow users to pay from different geographical locations as long as they pay in just a handful of supported currencies. While having limited currency support can be a limiting factor, not having multi-country support means your loyal customers can’t use your services anymore if they decide to travel or move away from home base.
6. Platform Support
Is your payment processor compatible with your e-commerce platform? However awesome a payment processor maybe, if their technology does not match up to that of your platform’s there’s not much you can do about it. Since both payment processing and overall design, layout and functionality are key factors that affect the success of any e-commerce site, it makes sense to first do your research about all the various e-commerce platforms you like and match them up against the payment processors that these can work with, before you make the big decision of building your site with any one platform.
I’m going to make your life easier by offering you a handy peek at the various payment processors that ShopIntegrator works with, just in case you’re shopping around for a reliable and functional e-commerce platform!
7. Business Support
So you’ve finally narrowed down your payment processors to a handful. These are not too expensive, are secure, are easy to use, are compatible with your e-commerce platform and more. You’re all set, right? Wrong.
Even if a payment processor ticks off all the boxes in the list above, it still needs to fulfill one critical condition – whether it supports your business or not. Confused? Allow me to explain. Many e-commerce sites deal with products that may or may not be endorsed by all payment processors for various factors ranging from moral reasons, to health reasons, to riskiness of the venture. If your e-commerce site sells items like tobacco, arms and ammunitions, adult toys or content etc. there is a good chance that you may either get rejected by the payment processor you approach or may be stuck paying much higher fees than businesses that operate in less ‘risky’ sectors.
8. Customer Service
Just as your users expect great customer service from you, you have a right to receive professional customer service from your payment processor. Check whether the processor you’ve shortlisted offers round the clock customer service. What languages do they offer support in? Are they at least available during the time the majority of your users are online? How proactive are they at fixing potential problems? Do they need to be chased continuously and hounded down for basic troubleshooting services? All these are legitimate questions that you ought to have answers to before making such a large commitment. Remember, a failure on the payment processor’s part can result in a negative user experience for your own customer, usually for no fault of yours at all. You don’t want to lose customers or be constantly on the backfoot with a payment processor who is highly unreliable.
As before, you can either Google this info or visit forums that offer inside news about individual payment processor. Better still, if you personally know someone who has used their services in the past, it’s a good idea to pick their brains before embarking on a partnership with a new payment processor.
These pieces of advice are just an aggregation of my personal knowledge about the payment processing industry, its players and their relationships with their merchant partners. By no means is this an exhaustive list. However, it does give you an idea of what to expect once the deed is done. Choosing a payment processor is like choosing a spouse – preferably a once in a lifetime event that has a whole lot riding on it. Don’t hurry this decision. Weigh all your options carefully and then go with what makes most sense taking all possible aspects into consideration.
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