Online U.S. shoppers are predicted to reach 224 million in 2019, according to Statista. Retailers are responding by focusing on their eCommerce strategy.
An integral part of that strategy is choosing and installing a payment solution for your webstore. Without a payment solution, you can’t accept payment on your webstore.
This article will serve as your guide to better understanding what payment solutions are and how to choose the best one for your eCommerce site.
Why Payment Solutions are Important
Payment solution make it possible for you to receive money from your online customers. Without proper set up of a payment solution, you won’t be able to process a customer’s credit card information to complete the transaction.
However, eCommerce sellers shouldn’t use just any payment solution. You should take careful consideration in choosing the technology you use to receive a customer’s payment.
Choosing the right payment solution affects your security level. Customers must trust you to safeguard their personal payment information. You can land yourself in some serious trouble if you don’t take security seriously.
Your payment solution also affects the customer’s experience when shopping with you. It can determine the speed, complexity, and reliability of your checkout process. When shoppers don’t have a good online checkout process with you, they often abandon their carts or opt to shop somewhere else next time.
There’s many payment solutions available to eCommerce sellers. How do you choose the best one for your customers and business?
Payment Solution Terms
Before you can start to differentiate payment solutions on capabilities, eCommerce sellers need to know some key terms. Payment solution is just a general term that applies to the entire technology needed to accept a customer transaction on your site. When talking about payment solution, you’re going to come across these terms.
A merchant account is a bank account that you hold directly with a bank. Every credit card payment involves the transfer of funds to a merchant account. Each bank has its own terms of service for merchant accounts.
So, all eCommerce sellers must use a merchant account to be able to accept credit card payments for their webstore.
A payment gateway is a service that authorizes credit card payments and processes them securely with a seller’s merchant account. Payment gateways are what ensure that your customer’s credit card information is encrypted and stored securely.
Most payment solution companies offer to set up both a payment gateway and merchant account in the same process. However, there is another option for sellers.
A payment service provider (PSP) is a third-party processer that lets sellers accept online payments without a merchant account of their own. Instead, you use the PSP’s merchant account under their own terms of service. The main benefit of this solution is that it requires very little setup on the seller’s part.
There are different types of payment solutions. eCommerce sellers can choose to set up a merchant account and payment gateway on their own. Sellers also have the option to use a third-party payment service provider, like PayPal, that requires minimal set up. It’s up to you to decide what’s best for your business.
How to Choose a Payment Solution
It can be overwhelming when researching so many different payment solutions. Here’s the critical areas you should focus on when comparing options.
Type of Payment Solution
The type of payment solution, third-party PSP or not, determines the amount of set up required. Sellers can get up and running with a PSP in very little time. There’s very little leg work for you to do. On the other hand, payment gateways require setting up a merchant account with a bank.
The type of payment solution you choose also affects other critical areas such as fees and customer experience, which you’ll learn more about below. Know how each payment solution differs in their advantages and disadvantages.
Each payment solution is going to have different fees associated with using the service.
For example, a PSP typically has higher fees because you’re using their payment gateway and merchant account.
When not using a PSP, sellers must compare fees between payment gateways and merchant accounts. These fees can vary by each transaction cost. Also, be aware of companies who additionally charge for set up, monthly, and volume fees.
Each service’s pricing structure can impact your profitability in different ways. Comparing your top choices allows you to see what makes the biggest impact on your bottom line.
Depending on how the service is set up, payment solutions can also vary in how long it takes for you to get paid after the transaction takes place. You don’t want to be waiting forever to get your cash. Be sure to compare this among payment solutions.
Supported by eCommerce Site
If you already have your eCommerce platform chosen, check to make sure that they payment solution you’re considering is supported. eCommerce platforms usually provide lists of the compatible payment solutions. Most eCommerce platforms will support the majority of popular payment solutions.
Hosted vs Integrated
A hosted payment solution, like PayPal, redirects your customers to the payment processor’s platform to complete their payment information. With hosted solutions, the provider is responsible for all PCI compliance and customer security. For some sellers, this is exactly the low maintenance solution that you’re looking for.
For others, you’ll want more control over the process and your brand. An integrated solution is payment gateway that is connected to your site via APIs. You’ll have full control of the checkout process and your customers won’t leave your site to complete payment information.
With more control though, comes more responsibility. You’ll have to ensure that the payment gateway is integrated and that you meet PCI compliance standards. Sellers though are willing to take on these extra work to have more control.
Different payment solutions change how your checkout process works. Some causes visitors to leave your site, others do not. Both of these options affect the customer experience.
In some cases, customers like using convenient payment solutions like PayPal. For others, it can be jarring to leave the site in the middle of the checkout process. It’s extra steps, extra page loading time, and to some even feels unsecure. These problems can affect your conversion rate and cause cart abandonment before the purchase is complete.
Other payment solutions might be more work to get running, but can be worth the extra time because of the improved customer experience. You can ensure customers have an easy, fast, and secure checkout process, which can improve your conversion rate. Your customer won’t have to leave your site to finish their payment.
Always be sure to consider what the checkout experience will be like for your customer.
What to Do Next: Comparing Payment Solutions
Keep these criteria in mind when comparing payment solutions for your eCommerce site. You’ll be glad you took time to make a thoughtful decision for your checkout process.
If you’re ready to start comparing solutions, check out this article that compares the top 5 online payment solutions.