If you’re like many people, it’s been a while since you last made a payment exclusively with cash. According to Forrester, 69% of adults in the U.S. said they’ve used electronic payment methods to make a transaction in the past three months.
This also applies to your customers. They no longer handle cash and checks. Credit and debit cards, digital wallets, ACH transfers, and other digital payments have become the norm.
To accept electronic payment methods fast and securely, you need a payment gateway. It’s the bridge between your customers’ preferred payment methods and business cash flow.
Instead of juggling through different types of payment processors and platforms, a payment gateway allows you to accept multiple payment methods at once. It makes it easier for your customers to buy from you and also reduces your administrative burden.
But not every gateway is the best payment gateway for your business.
In this blog post, we’ll help you understand the factors and features you need to consider to find the right payment gateway to suit your unique business needs. We’ll also give you our picks of the best payment gateways and look at common pitfalls to avoid.
TL;DR
- Choose a payment gateway compatible with your business model, whether for eCommerce, subscriptions, or omnichannel sales. Consider support for high-risk industries if applicable.
- Opt for gateways that support diverse payment options like credit/debit cards, digital wallets, and international payments to accommodate customer preferences.
- Ensure the gateway offers PCI DSS compliance, encryption, tokenization, and fraud prevention tools to safeguard transactions.
What is a Payment Gateway?
A payment gateway is a tool that allows merchants to authenticate and receive payments from their customers electronically. It’s a digital evolution of the conventional point-of-sale (POS) terminal.
A physical POS terminal requires customers to insert, swipe, or tap their cards on the machine. With a payment gateway, they simply enter their card details online on your website or app.
The payment gateway collects and encrypts sensitive customer payment details and then securely sends them to the payment processor. In turn, the payment processor ensures a seamless transfer of the information between the merchant, issuing bank, and customer.
Today, many payment gateways work as payment processors. They validate the customers’ payment details, ensure there are enough funds to complete the transaction, approve the transaction, and transfer money to the merchant account.
All of this is done in encrypted payment gateway servers so you don’t have to worry about handling sensitive customer payment details.
Payment gateways help merchants accept multiple forms of electronic payments, such as credit or debit cards, digital wallets, and electronic checks.
Key Factors to Consider When Choosing a Payment Gateway
Your payment gateway directly affects your business’s operational efficiency and customer experience. The ideal payment gateway should match your business model, target audience, transaction volume, and nature of products or services.
That’s why choosing the right payment gateway is a vital business decision. Here are the most important factors to consider when choosing a payment gateway:
Compatibility with your business model
When selecting a payment gateway, it’s essential to prioritize your business model. Every business model has unique transaction needs, security requirements, and customer expectations.
So, start by understanding your specific business model needs.
For example, if you operate an online store, you need fast and secure online payment solutions. Choose a payment gateway that seamlessly integrates with your eCommerce platform’s cart and supports one-click and mobile payments.
If you have a Software as a Service (SaaS) or any other subscription-based business, you need a solution that provides recurring payment support. Prioritize payment gateways with subscription billing and automatic renewal features.
The solution should enable you to save and store your customer payment details easily and securely, so you can automatically bill them on predetermined schedules. The payment gateway should also have dunning management features to automatically re-attempt failed initial transactions.
For brick-and-mortar stores with an online presence, you might be looking for a solution with omnichannel support for both online and in-store payments. Go for a payment gateway that provides POS integration.
Ideally, choose a payment gateway that supports your primary sales channels and aligns with your needs.
Also, some businesses in industries like cryptocurrency, gaming, gambling, and travel are considered high risk. Some online payment gateway providers steer clear of such companies. If your business is considered high-risk, you want to ensure your payment gateway deals with your industry.
Supported payment methods
Different customers have different preferred payment methods. The more payment methods you support, the more customers you accommodate. Find out which payment methods your payment gateway accepts.
While credit cards are the most preferred payment method for up to 40% of Americans, not all payment gateways support every type of credit card. For example, most payment gateways accept payments from major credit cards like Visa and Mastercard, but only a small percentage accept Discover and American Express.
If your customers prefer other card options, like debit, charge, or prepaid cards, ensure that your payment gateway supports that card.
You must consider whether it’s a priority for your business to support payments from multiple credit card companies. But more options often come at a higher cost.
More customers are increasingly considering alternative payment options to credit cards. Check whether the payment gateway supports digital wallets like Apple Pay, Google Pay, and Cash App. Automated clearing house (ACH) and cryptocurrency support would be nice additions if relevant to your customer base.
Also, check for Buy-Now Pay-Later (BNPL) support for customers who may like to have flexible payment options.
If your business deals with international clients, you might need a payment gateway with multiple currencies and international payment support that also provides real-time currency conversion.
For example, if you have some international clients in China, choose a payment gateway that supports Alipay.
Security and compliance
Receiving online payments makes your business an easy target for fraudsters and cybercriminals. A secure and compliant payment gateway makes your customers confident when sharing their sensitive payment details with you.
Consider the following security and compliance features when choosing a payment gateway:
- PCI DSS Compliance – The Payment Card Industry Data Security Standard (PCI DSS) is a set of rules and principles designed to keep payment card information safe and secure. Look for PCI DSS-compliant payment gateways that optimize the security of credit and debit card transactions.
- Encryption – Encryption is a data security measure that ensures only authorized parties can read the data. Check whether the payment gateway encrypts the payment data via Transport Layer Security (TLS) and Secure Sockets Layer (SSL) during transmission to avoid interception by hackers.
- Two-Factor Authentication (2FA) – 2FA is an additional layer of data security that avoids unauthorized access to customer accounts. Payment gateways with 2FA require customers to provide additional identifying information, such as a unique code sent to their phone or email.
- Tokenization – Tokenization replaces sensitive payment information with unique tokens that provide no meaningful information to scammers or fraudsters. Even if the data is intercepted, it doesn’t offer any value and wouldn’t be used to extract the original data.
- Fraud prevention features – Look for additional fraud prevention features like fraud detection, address verification, chargeback protection, and IP geolocation to enhance protection from fraud.
Integration and ease of use
A payment gateway doesn’t function on its own. It’s part of an infrastructure and it’s up to you to evaluate how well the gateway integrates with your website platform for smooth operational workflow.
At the basic level, ensure the payment gateway is compatible with your existing eCommerce platform, whether Shopify, WooCommerce, WordPress, Magento, or a custom-made platform. Also, check for seamless integration with your invoicing, accounting, and CRM tools, as well as any other software vital to your business.
The integration should be straightforward to allow data to flow seamlessly across different systems.
Look for a payment gateway with developer-friendly and well-documented APIs, SDKs, and plugins that allow you to add the gateway to your eCommerce website, mobile app, or POS system.
Some all-in-one payment providers ensure that the payment gateway, payment processing, merchant account, recurring revenue management, and fraud detection and prevention are all within the same environment.
If an integration doesn’t flow smoothly, your payment process will be bumpy and may lead your customers to abandon their carts midway. Remember, flawless user experience is an essential step in the sales funnel.
The look and feel of your payment gateway in terms of user experience depends on how well it integrates with your eCommerce platform.
Transaction fees and pricing structure
Pricing might be one of the first factors you consider when choosing a payment gateway. Payment gateways charge fees for their services, including transaction and monthly fees. Take time to evaluate and understand the pricing structure for the payment gateway you’re considering.
Different gateways adopt different pricing models, including:
- Flat-rate pricing – This model charges a fixed percentage, say 2.5%, on every transaction value. It’s simple and predictable. However, it might only be suitable for smaller transaction volumes. The higher the amount, the higher you pay.
- Interchange-plus pricing – Involves interchange fees and card association fees plus an agreed markup. The markup is calculated as a percentage of the transaction plus a flat fee. This model is more transparent and cost-effective for businesses with higher sales volumes. However, it involves highly detailed statements that may be difficult for businesses to understand.
- Tiered pricing – In tiered pricing, transactions are categorized into three tiers—qualified, mid-qualified, and non-qualified. They are assigned the categories based on criteria selected by the processor. Qualified transactions have the lowest rate. The rate increases as the transactions are downgraded to mid-qualified and non-qualified respectively.
- Subscription-based pricing – Some payment gateway providers may charge a monthly, quarterly, or annual subscription fee. This is a great option for new and growing businesses without a huge number of sales. However, the provider might require you to upgrade your subscription plan as your sales volume grows.
Before committing to a payment gateway or requesting a quote, assess how much money you receive regularly.
Payout speed and cash flow management
The processing speed has a profound impact on the customer experience and cash flow management. Typically, it refers to how long it takes for the transaction to be approved or denied.
For example, in a typical card payment, the issuing bank approves a payment after verifying the customer has enough funds or credit in their account for the transaction. Even though authorizations might happen almost immediately, the money is often held for a few days before it’s settled in your account.
This is to allow for refunds and chargebacks. The holding period or processing time might be less than 24 hours but could vary from 1-7 days depending on the payment service provider.
A payment service provider that approves transfers immediately isn’t necessarily the best gateway. The key is to check how long it takes to move money after the approval stage into your merchant bank account. This is known as the settlement time.
High-risk businesses often have longer processing and settlement periods than low-risk merchants, so have that in mind too.
Besides confirming that the holding stage doesn’t take too long, check whether the payment gateway has a rolling reserve policy to safeguard themselves in case of refunds and chargebacks.
Processors with this policy in place withhold a percentage of your business’s transactions for a certain period and release the funds back to your business on a rolling basis.
The rolling reserve policy is likely to be used for businesses in high-risk industries.
Customer support and reliability
Like most businesses, thousands of dollars are processed through your payment gateway every day. Downtime for as little as one hour could lead to multiple losses, let alone for an extended period.
Should anything go wrong, you need round-the-clock customer support on multiple channels. This can be extremely helpful in the setup phase.
Ask yourself the following questions:
- Do they provide 24/7 support?
- Can you reach them through multiple channels, like phone, live chat, email, etc?
- Do you get access to a dedicated account manager?
- Are there any self-service support options, such as FAQs, tutorials, and documentation?
- Does the provider have a team of experienced and knowledgeable support specialists who can help you solve your issues quickly and efficiently?
- Who’s responsible for what according to the SLA guarantees? Do they mention uptime and training guarantees?
Before making a final decision, you can reach out to the customer support team with any queries or concerns you might have. This will help you evaluate their responsiveness and willingness to help.
Top Payment Gateway Options to Consider
Not sure where to start? Here are our top picks for the best payment gateway options for you to consider:
Stax
Stax is a simple payment gateway that helps small businesses save money and get paid fast. It’s a subscription-based all-in-one service that eliminates the need to work with multiple payment platforms.
The Stax platform offers 0% markup payment processing services and saves SMBs up to 40% on credit card processing fees. With Stax Pay, merchants of all sizes can accept payments whether in-person, keyed, mobile, contactless, swipe, etc.
Stax offers transparent monthly pricing plans for both emerging and established businesses. Fees range from $99 to $199, based on processing volume. Businesses processing more than $500,000 per year can reach out for a custom quote.
All plans offer recurring and scheduled payments, full PCI compliance, one-click shopping with catalog management, and 24/7 in-house customer and technical support.
The best thing is that you don’t have to pay for anything you don’t need. Optional add-ons include ACH processing, next-day settlement, and customer branding. This flexibility makes Stax a good option for new businesses looking to scale rapidly.
While you can seamlessly integrate with accounting software like QuickBooks, you also get access to RESTful API documentation and support knowledgebase for developers to boost software platform integration.
Other features and benefits of Stax include:
- Mobile app – The Stax mobile app allows you to manage all payment aspects of your business on the go at no extra cost. The app also allows you to use your mobile device as a POS system.
- Seamless shopping cart setup – You can set up a custom shopping cart for your business with a single click. Simply add your products and services, click ‘Create’, and you’re ready to start receiving orders.
- One-click checkout – Your customers complete their purchases with one click, which reduces friction and increases their spending.
Payment Depot
Payment Depot is a subsidiary of Stax, sharing many similarities but targeting different businesses. Payment Depot is better suited for businesses with high transaction volumes.
Instead of charging a monthly subscription fee, customers pay interchange plus a percentage of the transaction amount. The percentage ranges from 0.2% to 1.95%. You don’t have to commit to a lengthy contract and you can terminate without paying early termination fees.
Payment Depot also offers custom pricing plans for businesses of all sizes and growth stages that want to accept credit card payments.
For in-person transactions, Payment Depot integrates with POS hardware from companies like Dejavoo, SwipeSimple, and Clover. For online payments, it integrates seamlessly with several eCommerce platforms and shopping carts, like WooCommerce, Magento, OpenCart, and BigCommerce.
If you don’t use these platforms, you can integrate with the Authorize.net payment gateway to accept payments.
Other features and benefits of Payment Depot include:
- 24/7 risk monitoring – Payment Depot is proactive when it comes to risk management. It has dedicated teams monitoring bank policy changes, looking out for the latest fraud methods, and acting swiftly. You can also dispute chargebacks from your account.
- Complimentary terminal – Brick-and-mortar customers get one Dejavoo terminal without a contract. Some businesses may receive multiple terminals, which helps reduce physical payment processing costs.
How to Evaluate and Compare Payment Gateways
| Step | Details |
| 1. Define Criteria | Identify key factors such as pricing, supported payment methods, integration capabilities, and security. |
| 2. Create a Comparison Matrix | Use rows for payment gateways and columns for criteria to visually compare options. |
| 3. Test with Demos/Trials | Maximize demos and free trials to explore features, test integrations, and simulate transactions. |
| 4. Gather Feedback | Engage with other merchants, check forums (Reddit, Quora), and attend industry events for peer insights. |
| 5. Read Online Reviews | Explore reviews on platforms like G2 and Capterra for insights on customer support, reliability, and satisfaction. |
Selecting the right payment gateway for your business involves thorough evaluation and comparison based on your specific business needs. To start, you need to create a comparison matrix to visually compare your options based on your criteria.
Identify criteria that matter most to your business, such as pricing, supported payment methods, integration capabilities, and security and compliance.
Once you’ve established your criteria, create a comparison matrix where one row represents a payment gateway and each column corresponds to a criterion.
Now, you have a shortlist of payment gateways that meet your needs best. It’s time for you to maximize demos and free trials to explore their features and get real-world experience with the gateway.
During demos and free trials, take note of the user experience, test integrations, and simulate transactions. You want to test the gateways based on as many situations as possible.
After that, seek feedback from other business owners and forums. Engage with other merchants on the platforms and gain valuable insights based on their experiences.
Check online communities and forums on platforms like Reddit, Quora, and other specialized business forums. Attend industry events and local business meetups to discuss payment gateways with your peers.
You can also check for online reviews on websites like G2 and Capterra and see what other users say about customer support, reliability, and overall satisfaction.
Common Mistakes to Avoid When Selecting a Payment Gateway
Many businesses make some common mistakes when selecting a payment gateway. Here are some common pitfalls to avoid:
- Overlooking hidden fees – Often, the rate advertised by some payment gateways doesn’t represent the actual overall cost. Always evaluate what’s going on beneath the surface to reveal any hidden fees. Extra fees often accumulate fast, negatively impacting your bottom line. Pay attention to statement, cancellation, batch-processing, and PCI compliance fees.
- Ignoring scalability for future growth – Many business owners don’t consider how well a payment gateway can scale as the business grows. Your processing needs evolve as your transaction volume increases and you expand to newer markets. Choose a payment gateway that can scale with your business. Look for features like load balancing, high transaction volume support, and the ability to add new payment methods.
- Choosing based solely on brand recognition – Selecting a payment gateway solely based on brand recognition can be misleading. The most popular solution online isn’t necessarily the best for your business. It’s important to evaluate each gateway’s specific features, customer support, and overall alignment with your needs. A lesser-known brand might be a better fit for you.
Conclusion
Choosing a payment gateway for your business can be overwhelming at first. However, prioritizing features like compatibility with your business model, different payment methods, security and compliance, integration, transaction fees, payout speed, and customer support will get you started on the right foot.
Some common pitfalls to avoid include overlooking hidden fees, ignoring scalability for future growth, and choosing solely based on brand recognition.
Most importantly, prioritize long-term value over short-term cost savings.
Whether you’re a small startup or an established company, a payment gateway like Stax Pay can help you streamline your payment operations, boost customer satisfaction, and bolster your business for success.
Request a demo today and see how our solution matches your business needs.
Request a Quote
