Most card payments and transactions are now online payments. When making these payments, you'll more often than not be doing so through a payment gateway.
These gateways are vital in securing a card's and bank account's details. You may think little about these payment gateways, but they're critical in getting eCommerce customers and keeping them safe online.
Understanding the role of a merchant of record is also crucial in eCommerce, as it involves managing financial transactions, tax collection, and compliance, ensuring a seamless and secure shopping experience for customers.
Many steps are made with payment gateways like Stripe and others to reduce the risk of fraud, stolen information, and more.
Here's a more detailed look at this essential financial tool and how it makes online shopping and spending safer.
In this article:
- What is a Payment Gateway?
- Why are Payment Gateways Important?
- What Makes a Good Payment Gateway?
- Different Types of Payment Gateways
What is a Payment Gateway?
A payment gateway is a merchant service that processes card payments online and in-store. This service authorizes payments while making them more secure and convenient.
The best way to think of a payment gateway is a virtual cash register, which takes the needed information to pay for your goods and services.
It collects, transfers, and authorizes the data in real-time and sends it to the merchant's bank, where the information is processed.
The money is deposited in a merchant account, which is just a bank account, and then sent to your company's bank account.
Of course, all this processing is going on behind the scenes. For the user, a payment gateway is simple and easy to use; all you need to do is enter your card information. This ease of use is one of the critical features of a payment gateway.
According to Coty Perry, CMO at Anglers,
"Buyers may abandon a transaction if it becomes too complicated to complete. That's why payment gateways like Stripe are so important to eCommerce, as they make it convenient, ensuring that no customers are lost."
Why are Payment Gateways Important?
There are many reasons why payment gateways can be important in an eCommerce setting, both for the merchant and the buyer.
One of the most significant benefits of a payment gateway for the merchant is that using one is the fastest way to receive card payments online.
It ensures that they can get their money for the transaction quickly, and this speed of payment also encourages impulse buying.
Payment gateways can also make your online store appear more legitimate and trustworthy.
Completing transactions through payment gateways has become the de facto method of payment, so not having one can make your business look worse than your competitors.
Anthony Martin, Founder and CEO of Choice Mutual, says,
"Having a payment gateway to process transactions on your site has become a trust single to shoppers. Having one makes your online brand more reliable in the eyes of users, encouraging them to shop with you."
Payment gateways are also crucial for merchants to grow their customer base.
With an international payment gateway provider like Stripe, you can start to accept card payments from bank accounts and debit cards from different countries, helping your eCommerce store to become global.
For users, one of the most significant assets of payment gateways is that they make the transaction more secure and safer.
This technology ensures that GDPR and other data-sharing requirements and restrictions are met, reducing fraud and stolen bank information.
Addressing payment gateway challenges is essential in this context, as it helps in fortifying the security measures against such frauds and ensuring a trustworthy transaction environment for users.
These gateways go a long way toward protecting your data as a customer.
A payment gateway is also very important, as it makes shopping a more leisurely experience and accessible for various types of people.
An automated payment gateway can ensure users can buy products anytime; less information is necessary to pay.
What Makes a Good Payment Gateway?
A payment gateway must have a few characteristics to be a good option.
eCommerce business owners have a wide choice of which gateways to use, so consider these factors when looking for one to ensure you get the best.
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Security
The security capabilities of a payment gateway are the biggest indicator of its quality. If it uses current and up-to-date protection methods, it will likely be a good option for you.
A good payment gateway will utilize security features like encryption. It is where your details are scrambled into an unreadable code so that the data is unusable should it be intercepted.
Another great security feature that payment gateways like Stripe use is 2-step verification.
According to Morgan Taylor, Co-Founder of Jolly SEO,
"2-step verification gives you another layer of protection. Although it adds another step in the checkout process, it keeps customers safe and secure and is a great feature for a payment gateway to have."
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Convenience
As well as being secure, a good payment gateway is easy to use and convenient. Ease of use encourages spending, helping you reach your sales targets.
One way payment gateways add convenience is through one-click checkout. It is where past customers' details are saved so they can go through the checkout process without re-entering their information.
Alex Milligan, CMO of NuggMD, says,
"A past customer is more likely to become a repeat customer if you offer one-click checkout. It makes things easier for them and offers a more tailored experience, which is highly valuable."
The speed of the payment gateway is also essential for convenience.
You don't want a payment gateway to spend a lot of time processing a payment, as this can make a customer feel unnerved and that something is wrong. Prioritize fast gateways like Stripe.
Different Types of Payment Gateways
There are three main types of payment gateways, so it's worthwhile being aware of them to choose the best option for your website.
- Redirect
- Checkout on site
- On-site payment
1. Redirect
A redirect is where the user is taken off-site to complete the checkout process.
Small businesses often use these to ensure the transaction has the security of a larger company, but having the redirect adds an extra step for the customers to go through.
Gerald Lombardo, Head of Growth at Popl, says,
"Redirects allow sellers to add alternative payment methods and access secure payment options without hosting it on their domain. It makes things simple for the merchant, but you surrender control over the experience."
2. Checkout on site
This method is where the transaction checkout is on your website, but the payment is handled off-site via the gateway. It keeps the process simple but ensures added security on the back end.
There's no control over the user's entire experience through the process, so you need to partner with a trusted payment gateway.
3. On-site payment
Payments are handled on the website's servers and are often the choice for large-scale businesses.
It is because it gives the merchant more control and responsibility, as they can tweak things to improve the experience.
Volodymyr Shchegel, VP of Engineering at Clario, thinks,
"Offering on-site payment is a great option for larger businesses with the resources, as it creates a smooth transaction process. As you're handling it all yourself, there's a lot of pressure to ensure your website has good performance metrics."
Conclusion
Payment gateways are essential for purchasing eCommerce products, especially if you want to grow and attract more buyers.
They make things more convenient for you and the user, but more importantly, they keep things secure and safe.
Incorporating a payment gateway into your checkout process can help you elevate your game, and with options for collecting payments like Stripe, it's easy to add this vital tool.
