When you set up an online store, one of the first things you must do is enable payments so you can start selling products and services to your customers. The first steps are to apply for a high-risk merchant account and to choose a payment gateway that integrates smoothly with that account and your site. Let’s take a look at the process and the types of payment gateways.
Image via Flickr by Robbert Noordzij
A payment gateway is an application you install on your website to securely take payments from customers. It works with your merchant account to make the process easy for everyone involved. When a customer clicks on “order,” the payment gateway takes over to summarize the ordering steps and to receive payment. It verifies customer billing information, verifies funds from the client’s payment method, approves requests, and ensures you get paid for your products and services. It is essential to your online store.
In the past, all payment gateways required you also to have a merchant account. Now, this isn’t entirely necessary because some gateways can directly deposit money into your account. However, classic payment gateways that work through a merchant account are still a good idea, especially if you have a high-risk business. A high-risk merchant account helps you manage credit card processing fees and negotiate rates, whereas gateways that do not require a merchant account have higher costs.
Another reason classic payment gateways that work through a merchant account are better is that they don’t send customers off-site to complete the payment. Many customers don’t like the jarring process of leaving your site to make payment, and you can lose sales if the client gets nervous about the security of your payment system.
As your store grows, using a merchant account and a payment gateway together will make payments easier and more secure for customers and help you manage fees better. It does take more time to set up a merchant account along with a payment gateway than a simpler stand-alone gateway because you have to find a merchant account provider and then wait for approval. However, it’s worth the extra effort when setting up your online store because you won’t have to switch as your business grows. If your business requires a high-risk merchant account, then you should set them up together.
One of the most important factors to consider when choosing a payment gateway is the cost. A one-percent transaction fee sounds small, but they add up quickly. Make sure to compare the monthly costs of payment gateways and look for reasonable fees. A merchant account helps you manage costs better, and you’ll know what to expect in fees for your payment gateway. You also need to consider the initial costs of purchasing a payment gateway. Some are free, but others cost money, especially if you need any customization.
If you want to offer subscriptions or monthly memberships to your customers, you must find a payment gateway with automatic billing support, which not all of them offer. Most customers won’t take the time to renew their subscription every month, so electronic billing is essential for a subscription-based business model.
As you research payment gateways, be sure to note how each will appear on your site and how this will affect your customer experience. For instance, customers hate taking extra steps, so it helps to choose a payment gateway that minimizes the amount of time and number of steps it takes to end up at an order confirmation page. If payment takes too long or requires too many steps, you’ll see many customers abandon their carts. Most payment gateways offer a demo so you can try the product out before installing it on your site.
Adding a payment gateway to your online store is a critical step before you’re able to go live. Make sure you take the time to research all the options so you can choose the best one for your particular business and prevent having to change in the future. It’s best to integrate your payment gateway with a merchant account from the beginning to save hassle down the road, but you must also consider your budget and the timeframe for launching your online store.