With the steady increase in online shopping, it’s crucial to start selling your products online to grow your business. However, it’s harder than you may expect to make your website capable of handling online transactions. Connecting your site with a payment processing provider often requires advanced technical knowledge.
Luckily, third-party payment service providers give you this capability without the complexity. These type of providers deliver the solutions to process transactions and create a better shopping experience for your customers.
But, there are multiple types of payment service providers available. They have different features, capabilities and rates. How do you figure out which one is best for you?
Online Payment Solution Terms
When comparing and contrasting payment solutions, here are some terms you need to know:
- Merchant Account: An online bank account that allows businesses to accept online payments by payment cards. It temporarily holds your payment money until it is moved into your actual bank account.
- Payment Gateway: An eCommerce application service provider service that authorizes credit card payments and processes transactions for retailers.
- Payment Service Provider (PSP): Offers services to online stores for accepting electronic payments including credit card, debit card, and bank transfers, without a merchant account of your own. A PSP fully manages the connections and relationships with necessary external networks.
Merchant Account Vs. Payment Gateway
Do you need both a merchant account and payment gateway to sell online? Short answer, no.
The brilliance of a third-party payment processor like PayPal is that you don’t need a merchant account to sell items. Customers complete the purchase through the provider via your website. You pay a transaction fee for the charge. This type of scenario occurs when you use a provider as a payment gateway.
However, the customer completes the transaction on the provider’s website, which could lead to a more complicated check out. Still, this option is more affordable for smaller businesses. You don’t have to deal with setting up and managing a merchant account.
If you want more control of your account and want to sell directly on your site, you need your own merchant account and a payment gateway. Some providers offer both a merchant account and payment gateway solutions. You can always start with a payment gateway and then find a merchant account later, when you can take on the costs and responsibility.
How to Choose an Online Payment Solution
When evaluating payment providers, for your website, look for these key attributes:
- Fees: Because you’re using a provider’s service, they will charge service and transaction fees. Be aware of companies who also charge for set-up, monthly, and by different volume levels. Different pricing structures can impact your profitability in different ways.
- Transaction Processing: Note how many days it takes for you to get paid after the transaction takes place. Cash is king.
- Integration : Make sure the payment solution integrates with your website, or any of your other applications before considering a provider. Understand the complexity of that integration.
- Customers: Consider your customer base’s preferences. Using a provider that consumers already use for their own payments means a speedier and hassle-free check out for a majority of your customers. Have a lot eBay customers? They are likely comfortable with PayPal, for example.
- PCI Compliance: Make sure your provider meets PCI DSS standards to ensure safe transactions for your customers and yourself. (Haven’t heard of PCI DSS before? Find out more about why it matters).
Comparison of the Top 5 Online Payment Solutions
|Transaction Cost||API Capability||Integrations||Payment Type Acceptance||Support|
|Authorize.Net||2.9% + $0.30*||✓||50+||Credit, Debit, PayPal, Apple Pay||24x7
Online chat/Phone/ Email/eTickets
|PayPal||2.9% + $0.30 or less||✓||250+||Credit, Debit, PayPal||Phone/Email/Online help center|
|Amazon Payments||2.9% + $0.30 or less||✓||30+||Credit,Debit||Online help center|
|Google Wallet||Free||✓||N/A||Credit, Debit||Online help center|
|Stripe||2.9% + $0.30 or less||✓||180+||Credit, Debit, Apple Pay||Email/IRC Channel for developers and engineers|
|*For payment gateway only. Additional set up, monthly, and batch fees|
Reviews of the Top Online Payment Solutions
Founded in 1996 by Jeff Knowles, Authorize.Net Payment Gateway is one of the largest and most well-known payment gateways providers in the industry. Merchants can sign up for a payment gateway only or a full payment solution that includes a merchant account. They manage their account through Authorize.Net’s Merchant Interface. Merchants can set up multiple user accounts with permissions to control access for each user. With an even more additional features, Authorize.net is a safe bet to run your online business.
Founded in 1998, PayPal is the chosen method of payment for millions of users and business owners worldwide. They offer a three-tiered plan: PayPal Express Checkout, PayPal Payments Standard and PayPal Payments Pro.
PayPal Express Checkout requires customers to leave your site during checkout and log in with their PayPal account or create a new one. You’ll have the PayPal button included on your site.
When using PayPal standard, customers leave your site to checkout and log into their PayPal account or they pay by credit card without having to sign up for an account. PayPal Pro allows you to host and customize your entire check out process and does not require the customer to leave your site. It is also accepts credit cards via phone, fax, and mail.
The biggest compliant about PayPal is that they can limit your account or freeze your funds for seemingly no reason and the horror stories have racked up over the years.
Launched in 2007, Amazon Payments joined the industry to compete with PayPal and Google Checkout. Amazon Payments allows people to make online purchase via their Amazon.com account. Amazon Payments offer merchants two options: Checkout by Amazon and Amazon Simple Pay.
Checkout by Amazon’s major advantage is that a user doesn’t have to leave the retailer’s website to complete the process. Users log in with their Amazon account to complete the transaction. Amazon Simple Pay is for eTailers that sell digital and virtual products or subscription services.
The downside to Amazon Payments is that you’re assuming that your customers have Amazon accounts or want to sign-up for one. Customers cannot make a purchase without an account. However, you can access stored information from their Amazon account enabling you to personalize their on-site experience. If you serve a large base of Amazon customers, Amazon payments is a great way to streamline check out for those customers.
The newest solution on our list, Google Wallet launched in 2011. It is an app that allows customers to make purchases by linked credit or debit cards. Merchants integrate Google Wallet on their website by including a “Buy with Google” button as a payment option. Customers then bypass any sort of log in and pay within two clicks, if logged into Google account.
Google Wallet processes all transactions through your existing payment processor, so there are no additional fees. Google Wallet allows you to offer services to customers like including gift cards in their wallet and saving coupons to wallet that are redeemable in your store. The “Buy with Google” button is a must have for any one selling to customers with Google Wallet.
It also offers POS payment solutions that use Near Field Communication technology.
Established in 2010, Stripe offers payment processing services to merchants. Their extensive developer tools sets them apart from other payment processing providers. Their APIs (application programming interfaces) allows developers to integrate with and build upon Stripe’s payment platform. For this reason, Stripe is a good choice for an online retailer, with access to developers, who is looking to build a customized check out process.
If you don’t want to design payment forms from scratch, Stripe Checkout is for you. It is an embeddable payment form for desktop, tablet, and mobile devices. Customers store their payment information with Stripe and they do not leave your site to complete the transaction. Stripe is making a name for itself in the industry and there’s a good reason why.
What about Apple Pay?
In October 2014, Apple announced its new service, called Apple Pay. The mobile payment and digital wallet service rivals Google Wallet and PayPal. It allows iPhone users to make quicker purchases in-store and through apps. So, why didn’t it make the list?
Because of the novelty still surrounding Apple Pay, we didn’t want to include it as a top solution just yet. While there have been some rave reviews of the service, reports are circulating of stores already disabling it. We’ll see how Apple responds to the critics and makes improvements over time. Then we’ll decide if it’s a contender for a top spot.
What to Do Next
With this information narrowing down the list of payment solution options, you’ll be ready to further research and select the solution that’s best for you. Once you start selling online, you’ll need a solution that integrates your web store with your marketplaces and/or bricks-and-mortar stores. That’s where it really gets fun!