Opinions expressed by Entrepreneur contributors are their own.
Online shopping is set for a bumper holiday season in 2021. Worldwide, ecommerce sales surpassed $4.2 trillion in 2020, according to Statista, and further growth is forecasted through the rest of the year. Of course, one of the most important attributes of a successful ecommerce business is a reliable payment gateway and payment processor, as a company is, quite literally, only worth as much as the choices it makes in this realm.
Payment gateways vs. payment processors
Payment gateways facilitate purchases when a credit card is not physically present, making them a must-have for any ecommerce business. (Companies such as Stripe, Square and CardPointe provide such virtual point-of-sale terminals.) Customers enter their credit card information, and the gateway creates a secure, encrypted connection to the card-issuing bank. The bank then checks and confirms the purchase. Ideally, shoppers only see a convenient check-out form.
Payment processors, meanwhile, facilitate the transaction between individual accounts. These include your merchant account, the bank that issued your customer’s credit card and your bank (which is receiving the funds). Generally, payment processors will provide any point-of-sales equipment needed for the transaction, but not all processors also offer payment gateway services.
Related: Think It’s Too Early to Strategize for Holiday Ecommerce Sales? Think Again.
Payment handling and business performance
Credit and debit cards are the most popular payment method for online shoppers in the Americas. With more than one in five retail dollars now spent online, making it easy to use cards for purchases has become one of the keys to success. Yet, businesses continue to lose out because of badly chosen or set up payment procedures. According to the Baymard Institute, roughly 70% of online shopping carts are abandoned before a purchase is completed. A checkout process that is too complicated is one of the reasons for those failed transactions. Baymard researchers estimate that small formatting changes to payment processes could help retailers recover up to one third of them, translating to approximately $260 billion in additional sales.
Choosing the best provider for your business
Whether you are just starting out as an ecommerce retailer or looking to increase existing sales, selecting the most suitable provider can have a huge impact on both the bottom line and your customers’ satisfaction.
Some of the key points to consider include:
• Convenience. This applies to both ease of operation for your company as well as the convenience of the customer experience. The latter group is looking for simple forms, and tends to avoid complicated payment processes, so making payments easy needs to be part of the site development process.
Consider how much information your business needs from its customers. Today’s online shoppers are wary of disclosing too many personal details. Selecting a payment provider that understands this will help minimize abandoned shopping carts and transactions.
Convenience also means ensuring that payment systems integrate with existing software. Ideally, payments can be tied into your customer relationship management procedures and other operational tools. As a result, different tasks can be streamlined and carried out more efficiently.
Related: Convenience vs Security in Online Shopping
• Cost of payment solutions. It’s important to take into account the time needed to set up a payment solution, and the costs associated with it. Put simply, making the right choice will save you money. Most payment gateways and payment processors charge a monthly fee for their services, as well as a percentage of each transaction. Before committing to a contract with a provider, consider these costs; most providers will have several options to accommodate different types of businesses, as well as real-time access to merchant support.
• Fraud prevention. Ecommerce stores are targets for fraudsters. A serious, reputable payment provider will offer automated security features as part of their product. Such technology spots suspicious transactions and prevents data breaches or leaks, without making the buying process more cumbersome.
Related: 9 Crucial Tips to Protect Your Small Business From Credit Card Fraud
• Compliance. When credit card payments are processed, a payment gateway temporarily stores customers’ credit card information. Handline sensitive data like this is tied to strict regulation and other compliance requirements. Check your prospective payment provider’s accreditation before committing to a contract.