Choosing a payment gateway for your business
When starting your next online business you will undoubtedly be faced with the choice of integrating a payment gateway. Whether you make this choice yourself or leave it up to your web developer, there are now more payment gateways available than ever before.
Here is a quick look at some of your likely options.
PayPal has long been considered the default payment gateway – mainly because it is so easy to integrate with an abundance of available plugins especially for the open source e-commerce platforms such as Magento, Drupal and WordPress.
Stripe is the new kid on the block after launching in 2011 and raising a total of $130 million at a valuation of $1.75 billion. Currently operating in beta in Australia while they set up office (operating from Inspire9 in Melbourne), Stripe have been gathering lots of market share in the US – mainly due to their developer-friendly highly secure platform.
Braintree started out specialising in the mobile payment space in 2007. Braintree received Series A funding in 2011 for $34 million and Series B funding for $35 million in 2012 before eventually being acquired in 2013 by PayPal for $800 million as an answer to Stripe.
Pin Payments, an Australian-based startup operating from Melbourne and Perth, is also performing strongly in this space after getting a grant from Commercialisation Australia and partnering with some of the Australian banks. They have a similar offering to Braintree and Stripe with onsite payments and a developer API.
Australian-based eWay launched their service in 2000. They have been around for a long time and have altered their offering in recent years to allow an option with no monthly or annual fees to remain competitive with the new players.
Another Australian born company, SecurePay was founded in 1999 and grew their customer base dramatically here in Australia before acquisition by Australia Post in 2010.
When it comes time to choose between these options, it can be hard to decide what's best for your business. So before you end up just opting for the default, here are a few key metrics to help differentiate between each gateway to make the decision process a little easier.
Cost is usually an easy metric to measure products on, but on face value it doesn’t help too much with payment gateways as they are all fairly evenly aligned, from between 2.4% and $0.30 a transaction on the low end (Braintree) up to 3.0% and $0.30 a transaction on the higher end (Pin Payments). SecurePay was the only gateway not to opt for this approach, sticking firm to its annual fee model of $395 but not taking a percentage of the transaction fee – instead a higher $0.45 clipping.
Providers offer volume discount options to lower fees as your business scales as you push through more transactions. Depending on the gateway you choose, volume discounts can start to take effect anywhere from $5000 per month (PayPal) on the low end up to $40,000 per month (Stripe) on the high end. Most of these discounts are gained by application/negotiation directly with the provider.
When choosing your payment gateway, make sure you read the fine print and be aware of your cost obligations, especially in regards to:
- Refunds: Some gateways charge for refunds – best to check for this.
- Chargeback fees: A chargeback occurs where a customer disputes a transaction and the merchant must refund the value of the goods/service – most gateway providers will charge you for this, usually ranging between $15 (Stripe, PayPal) and $25 (Pin Payments).
- Multi-currency/international cards: Be aware that multi-currency/international cards generally attract different percentage transaction fees than the glossy percentage rates advertised on the front of the website. If you’re going to be doing a lot of sales overseas then this is an area to check.
When setting up your e-commerce store/payment gateway combination you may need to think about PCI compliance to protect your business from fraud. If your web server stores, accepts or interprets the clients credit card data in any way then you will be required to become compliant and may be have to be audited.
Payment gateways such as Stripe, Braintree and Pin Payments are doing a great job of circumventing the need for compliance while still allowing payments to be processed on your website securely without the credit card data ever touching your server – providing instant access to complete PCI compliance for online merchants.
What is PCI compliance?
Payments Card Industry (PCI) Compliance involves completing six main requirements:
1. Build and maintain a secure network
2. Protect cardholder data
3. Maintain a vulnerability management program
4. Implement strong access control measures
5. Regularly monitor and test networks
6. Maintain an information security policy
API and documentation
If your website requires custom payment forms the API and informative documentation is paramount. Since Stripe entered the market armed with a developer-friendly API and an abundance of cross-platform sample-ready documentation, other players have been forced to step up their game. Now Braintree, Pin Payments and even PayPal are following suit bringing their developer sections up to speed to enable payment integration to be as easy as possible.
Access to your money and data
If cash flow is important to your business survival then investigate how long the gateway is going to hold your money before paying it out to you post sale. Note: this can be anywhere from two days (Braintree, eWay) to seven days (Stripe, Pin Payments).
Make sure you own your customer data. Providers such as PayPal will not let you take your data with you when you choose to leave. It's worth investigating this early in the piece before asking a couple of thousand customers to again provide you with their details.
Customer and phone support
While every payment gateway provider is going to boast they have brilliant customer support, it's best to read up on some of the forum stories to see who is really doing this well.
If you're the kind of customer that must get someone on the phone to discuss issues then note that not all payment gateways are going to have that as an option (Stripe has no telephone support at all) so best to do a bit of investigation into what's going to be important to you and the hours your business is likely to operate. eWay was the only gateway offering 24/7 telephone support for clients.
Things to watch out for
Products you are selling
What you are selling is definitely important to the gateway providers and if they don't like what you're up to they can and will freeze/suspend accounts without notice. It's better to investigate this stuff early on before going to the effort of setting everything up. Choose the right gateway for your product types at the start.
If you are an early adopter you might be eager to embrace the world of bitcoin. Check to see if your payment gateway has plans to support this currency. Stripe is currently beta testing this feature.
The payment gateway landscape is still evolving here in Australia and it’s good to see some local payment gateways matching it with some of the giants from Silicon Valley. It will be exciting to see how it plays out over the next few years.
Ben Nicoll is an e-commerce consultant with a career spanning roles in technology, creative strategy and business management, including: marketing, public relations, digital production, project management, web development and systems administration. Ben is best known for architecting scalable e-commerce applications, user experience design, responsive design techniques, social /fan /user engagement strategies and rapid prototype development. Twitter: @Ben_Nicoll