Setting up an eCommerce business involves making a lot of choices, but one important decision you might have overlooked is choosing the best payment gateway to allow your customers to actually make purchases on your site. Pick a good gateway, and youâll be able to accept just about any payment method imaginable, interface with the online shopping cart of your choice, and, perhaps most importantly, easily be able to migrate your customer payment data to a different system if you later decide to change gateway providers. If you pick a not-so-great gateway, you may someday find yourself with a product that no longer meets the needs of your business â and no easy way to switch to a better one.
If youâre new to eCommerce, your first question might be âJust what the heck is a payment gateway, anyway?â Admittedly, payment gateways are something of a nebulous subject. Merchants are often unsure about what they do, and why they might need one in the first place. Theyâre also often confused with merchant accounts, which is a related (but separate) merchant service that youâll also need to accept credit cards and other forms of payment.
Weâll try to keep it as simple as possible. A payment gateway is a software application that establishes a communication link between your eCommerce website and your merchant account providerâs payment processing system. Much like your computerâs BIOS and other operating system functions, payment gateways run in the background, and your customers wonât have to interface with them directly. The primary purpose of a payment gateway is to allow your customers to make purchases on your site using the payment method of their choice. While almost every gateway will support credit card purchases, the better ones will also allow customers to pay using eChecks, debit cards, their PayPal account, and even contactless payment methods such as Apple Pay. Most gateways also maintain a secure database of your customersâ payment method data, shipping and billing addresses, and other information. With this database, returning customers wonât have to re-enter their payment method information every time they make a purchase. This feature naturally translates to increased sales due to the convenience it offers your customers. For more details about payment gateways and how they work, see our article The Complete Guide to Online Credit Card Processing With a Payment Gateway.
Merchant accounts, on the other hand, process payment transactions and disburse the funds to you after a customer makes a purchase. Both retail and eCommerce businesses need a merchant account to accept credit card payments, although today payment service providers (PSPs) such as Square and Stripe can offer basic credit card processing without the need for a full-service merchant account. If your business is strictly retail and you donât make any sales online, you can stop reading now. You wonât need a payment gateway. eCommerce merchants, on the other hand, will usually need both a payment gateway and a merchant account. This is because their transactions will all be in a card-not-present environment where they wonât be able to verify their customerâs identity or have access to the magstripe or EMV-chip data that helps to prevent fraud in the traditional card-present environment of a retail location.
With so many different choices of merchant account and payment gateway providers on the market, you might wonder what the best way is to set your business up with both of these services. There are two methods you can use: an integrated approach, or a non-integrated approach. Under the integrated approach, youâll use the same provider for both services. For example, an account with a payment service provider (PSP) like Stripe includes both payment gateway functions and transaction processing services. The non-integrated approach, on the other hand, requires you to sign up for each service separately. The easiest way to do this is to use the payment gateway offered by your merchant account provider. Often this will be a proprietary product, such as the Quantum Gateway provided by CDGcommerce. While most providers will charge you additional fees for a payment gateway, CDGcommerce will let you use their gateway for free. Many providers also offer access to third-party gateways, which may be a better option if you need more advanced features than what the proprietary gateways have to offer or simply want to have more flexibility to change your merchant account provider at some point in the future. The majority of merchant account providers (including CDGcommerce) offer Authorize.Net as one of their payment gateway options. Signing up for the Authorize.Net gateway through your merchant account provider is often less expensive than going with the company directly, as providers can negotiate discounted rates and fees for their customers.
Another way to take the non-integrated approach is to sign up for your merchant account and payment gateway separately. For example, letâs say youâve found a great merchant account provider that offers significantly lower processing rates than youâve been able to find elsewhere. Unfortunately, they donât offer a gateway that includes all the features you need for your business. You can always sign up for a third-party gateway and integrate it into your merchant account. While this may be the best option for some merchants, be aware that there are two disadvantages to this approach. For one thing, youâll have to make absolutely sure that the two services are fully compatible with each other before you sign up. Also, you will almost always end up paying more money with this approach. Watch out for gateway setup fees and additional per-transaction charges for using a third-party gateway.
So, which approach is right for your business? Thereâs simply no clear-cut answer to this question, unfortunately. As a general rule, however, smaller businesses will usually save money by signing up with a payment service provider (PSP) that doesnât charge monthly fees for either transaction processing or the use of their payment gateway. The trade-off, of course, is that you will pay higher per-transaction processing costs, as most PSPs only offer flat-rate pricing. Upgrading to a full-service merchant account and adding in a payment gateway will cost you more in monthly fees, but youâll usually save money on processing charges â at least if your provider offers interchange-plus pricing. Larger businesses that have a higher monthly processing volume can more easily afford the extra fees and will save money overall because of the lower processing rates available from full-service merchant account providers. Because of the number of variables involved, there is no easy way to determine what your processing volume needs to be for a full-service merchant account plus a gateway to be more cost-effective than simply going with a PSP. We recommend that you take a close look at the total percentage of your transactions each month that goes to paying for merchant services and compare this to what you would pay under a different provider.
How We Chose:
While all payment gateways offer the basic function of processing transactions over the internet, thereâs a lot of variability beyond that. The best gateways on the market offer a combination of fair pricing and a robust feature set that will meet the needs of most eCommerce merchants. In evaluating how well each gateway stood up against the competition, we used the following criteria:
- Pricing: While everyone wants to save money, we firmly believe that pricing should be evaluated in terms of overall value rather than simply trying to find the cheapest option available. Trying to save a few dollars can easily result in being stuck with a product that doesnât fully meet your needs. Nonetheless, there are some things to look out for. Many gateway providers, for example, charge a gateway setup fee when you first open your account. While this is a one-time charge, itâs mostly a junk fee that you should avoid paying. Youâre more likely to get hit with a setup fee if you sign up directly with a gateway provider. Merchant account providers often waive this fee if you get your gateway through them. Monthly gateway fees (usually around $15.00 – $25.00 per month), on the other hand, are very hard to avoid. Unless you sign up with a company like CDGcommerce, which doesnât charge a monthly fee for their gateway, you can expect to pay this on top of whatever monthly fee you have to pay for your merchant account. Gateway processing charges (typically $0.05 per transaction) are another thing to look out for. Some companies will charge you separately for this, while others will include it in their processing rates. You might also have to pay PCI compliance fees, particularly if youâve signed up directly with a gateway provider. Usually, however, these fees are included in your merchant account pricing.
- Contracts: Most payment gateway providers will bill you on a month-to-month basis, with no long-term contract and no early termination fee (ETF) if you close your account. However, your merchant account provider might include both of these provisions, so read all your contract documents very carefully before signing up. It wonât do you much good to be able to drop your payment gateway whenever you want if youâre stuck in a three-year contract for your merchant account.
- Features: Obviously, youâll want a gateway that includes the features youâll need to run your business. Confirming that a gateway will meet your needs, however, isnât always as easy as it should be. Companies naturally tend to play up the unique features of their services, but in most cases, they wonât disclose the limitations or shortcomings of those services. For starters, youâll want to confirm that the gateway supports all the payment methods your customers use. For example, almost every gateway on the market will support Visa and MasterCard credit card purchases. Support for less-common cards isnât as easy to find. If your customers use Diners Club (as unusual as that may be), youâll want a gateway that supports it. Support for multiple currencies is also important for some merchants, and youâll obviously need a gateway that supports the specific currencies your customers use. If you prefer a particular online shopping cart for your site, youâll need a gateway that is certified to integrate with it. If you need to customize the integration between your site and your gateway, access to an API that allows you to do that will be essential. Finally, we recommend that you choose a gateway that allows for easy and convenient data portability in case you need to switch to a different gateway.
- Security: No eCommerce merchant ever wants to have their site hacked and their customerâs sensitive payment data exposed in a data breach. Your gateway provider doesnât want this to happen, either, which is why every gateway on the market comes with a number of security and encryption features to keep your account safe. Some of these features, however, are more effective than others. Look for point-to-point encryption (P2PE) and a gateway that meets Level 1 PCI compliance standards. Other features, such as data breach insurance, are also useful to have.
- Customer support: Like any other software product, payment gateways are prone to occasional hiccups and glitches â often at the most inconvenient times. The eCommerce world runs around the clock and isnât limited to just regular business hours. For this reason, youâll want a gateway thatâs backed up by 24/7 customer support. While options like email and online chat are nice to have, you really should be able to talk to a customer service representative via telephone when a problem arises.
Before we dive into our specific recommendations, letâs be clear about one thing: there really isnât a perfect gateway out there that will meet the needs of every merchant. Even the best gateways fall short of perfection in one aspect or another. Nonetheless, there are several gateways that provide a significantly better combination of features and services than others. Here are our recommendations:
Originally founded in 1996, Authorize.Net is one of the oldest and most experienced payment gateway providers in the industry. Thanks to partnerships with a host of merchant account providers, theyâve also cornered the lionâs share of the market for payment gateways. Thereâs a good chance that your merchant account provider offers Authorize.Net as their payment gateway.
But, does being the biggest gateway provider also make them the best? Well, maybe. With over twenty years in business to perfect their product, theyâve definitely managed to add a lot of bells and whistles to their core product. Their gateway can accept all major credit cards (yes, even Dinerâs Club), debit cards, eCheck payments, and even digital payment methods such as PayPal and Apple Pay. They can accept international transactions from just about any country in the world, although your business must be based in the United States, Canada, the United Kingdom, Europe, or Australia. Their Advanced Fraud Detection Suite (AFDS) can protect your site from card-not-present fraud â a common issue with eCommerce. Best of all, their gateway seamlessly integrates with a huge number of third-party eCommerce platforms.
Sounds great, doesnât it? Well, there are a few things to watch out for. Pricing can be on the high side if you sign up directly with Authorize.Net, with a $49.00 gateway setup fee, a $25.00 monthly gateway fee, and a $25.00 fee for chargebacks. If you already have a merchant account, youâll still pay an additional $0.10 per transaction for the use of their gateway. International transactions also pay an additional 1.5% for processing. If you donât have a merchant account, Authorize.Net will set you up with one, but it uses a flat-rate pricing plan of 2.9% + $0.30 per transaction. While this is the same as what youâd pay for PayPal or most other payment service providers (PSPs), you can get lower rates by signing up with a merchant account provider that offers interchange-plus pricing.
The good news is that you can usually get a better deal on the Authorize.Net gateway by signing up with a partner merchant account provider. Most providers will waive the setup fee, and theyâll often charge a lower monthly gateway fee and per-transaction processing fee (typically $0.05 per transaction). However, Authorize.Net does have one major weakness: data portability. Or, rather, the lack of it. Their Customer Information Manager (CIM) is a powerful feature that allows you to store customer data, including credit card numbers, securely. Unfortunately, itâs difficult and very expensive to download that data and take it with you if you ever decide to switch to a competing payment gateway. This is a serious limitation, especially considering that other providers (such as Braintree) offer you the freedom to take your customer data with you if you want to. Youâll want to very carefully evaluate whether Authorize.Net will be able to meet the long-term needs of your business before you sign up.
- Broad support for multiple payment methods and currencies
- Strong security and fraud prevention features
- Month-to-month billing with no long-term contracts
- Pricing is expensive for merchants who sign up with the company directly
- High flat-rate pricing for optional merchant account
- Data portability is unusually difficult and expensive
For a more in-depth look at Authorize.Net, check out our full review.
Braintree Payment Solutions:
Founded in 2010, Braintree Payments Solutions is now a PayPal company. They offer an integrated approach to eCommerce, with each account including both a payment gateway and a full-service merchant account. Itâs available in 44 countries, including the United States, Canada, Australia, and most of Europe. Payments can be accepted in over 130 currencies, including Bitcoin if youâre particularly adventurous.
Standard accounts at Braintree follow a pay-as-you-go pricing model, with no account setup fees, monthly fees, or even gateway fees. All transactions are processed at a flat rate of 2.9% + $0.30 per transaction. Billing is on a month-to-month basis, with no long-term contracts or early termination fees. While the flat-rate pricing is not particularly cost-effective for larger businesses, the lack of monthly fees makes it a great deal for smaller companies. Braintree addresses this limitation by offering enterprise pricing for larger businesses (presumably with interchange-plus rates), but youâll have to process over $80,000 per month to qualify for it.
Braintreeâs gateway includes some excellent standard features, including its Drop-In UI for customer checkouts and support for recurring billing. Itâs also compatible with a huge variety of third-party integrations, including shopping carts, accounting software, and analytics. Developers can further customize the gateway using Braintreeâs client and server SDKs. Perhaps the best feature Braintree has to offer is that they provide complete data portability for free. If your needs change and you want to switch to a different provider, youâre free to take your customer data with you.
While Braintree offers an excellent service at a fair price, itâs not for everyone. If you already have a separate merchant account (particularly if youâre stuck in a long-term contract), their gateway-only option is quite expensive at $49.00 per month and $0.10 per transaction processed over the gateway. Thereâs also almost no support for card-present (i.e., retail) transactions, although they do support a handful of third-party mPOS solutions.
- Pay-as-you-go pricing with no monthly fees
- Simple flat-rate pricing for standard accounts
- Free, unrestricted data portability
- No support for eCheck (ACH) payments
- Gateway-only option is expensive
Check out our full review of Braintree for more information.
You might not think of PayPal as a payment gateway provider, but their Payflow Payment Gateway is actually a very capable product. In fact, PayPal offers a host of merchant services for eCommerce businesses, and you can integrate most of them with the merchant account, shopping cart, or another service youâre already using.
Offering PayPal as an additional payment method is the simplest option, as itâs free to set up and there are no monthly fees or long-term contracts. Pricing is pay-as-you-go and based on a flat rate of 2.9% + $0.30 per transaction (4.4% + $0.30 per transaction for international transactions). While this is certainly the least expensive option, realize that as a payment service provider (PSP), PayPal is not giving you a full merchant account. Instead, your account is aggregated with those of other sellers so that you wonât have a unique merchant ID number for your business. The downsides to this arrangement, of course, are that your account wonât be nearly as stable as a merchant account, plus account freezes and holds on your funds are more common. PayPal is rather notorious for withholding sellerâs funds at the slightest suspicion of fraud, so itâs better to use them as a backup payment method rather than relying on them entirely for your transaction processing needs.
If you already have a merchant account through a different provider, the Payflow Payment Gateway is designed to integrate with it and expand your payment options. There are two pricing plans for the Payflow gateway: Payflow Link and Payflow Pro. Payflow Link (the best choice for most merchants) is practically free. There are no gateway setup or monthly fees. You pay an extra $0.10 per transaction, and thatâs it. You can use a PayPal-hosted payment page or a template embedded on your website. Payflow Pro, on the other hand, offers full customization and additional PCI compliance features. However, itâs rather expensive, with a $99.00 setup fee and a $25.00 monthly fee after that. Youâll also still pay $0.10 per transaction with this option.
- No setup or monthly fees (for Payflow Link)
- Simple, transparent flat-rate pricing with no hidden fees
- Easy to setup and begin accepting payments
- Flat-rate processing charges are higher than most merchant accounts offer
- Elevated risk of account holds, freezes, and terminations
- Inconsistent quality of customer support
For more detailed information about PayPal, see our complete review here.
While theyâre not nearly as well-known as the other heavy hitters in the payment gateway industry, PayTrace offers a solid product with lots of specialized features, particularly for merchants in the B2B sphere. Unlike other merchant services providers who offer a broad range of products and services, PayTrace is a payment gateway provider first and foremost. They donât offer merchant accounts or any hardware, so youâll have to go with a third-party provider for these items. Although the PayTrace gateway is their primary product, the company also offers a virtual terminal and a mobile payments app.
PayTrace offers both Basic and Pro pricing plans, with the former being suitable for small eCommerce businesses and the latter offering specialized options for larger B2B merchants. The Basic plan has no setup fee and costs only $15.00 per month after that. Youâll also pay $0.30 per transaction processed over the gateway, which is in addition to any processing charge you pay to your merchant account provider. The Pro plan requires a $75.00 setup fee, and $20.00 per month after that. However, your gateway processing fee drops to $0.10 per transaction. Youâll also be able to process Level II and Level III credit card data, which will save you up to 1.0% in processing charges due to the lower interchange rates for these transactions. Processing Level III data requires some additional data input on your part and is mostly useful for B2B transactions, but if you process a lot of these types of transactions, the savings could be significant.
The PayTrace gateway also supports additional features such as eCheck (ACH) processing and recurring billing. However, these are optional features requiring additional fees, and are only available under the Pro plan. PayTrace bills on a month-to-month basis only, so thereâs no long-term contract and no early termination fee to worry about. Be aware, however, that your merchant account provider might not be so generous. As always, we highly recommend that you read all contract documents thoroughly before signing up for a merchant account. The same advice goes for payment gateways, even though gateway providers are generally much more flexible about contract terms.
Like most gateway providers, PayTrace also offers a customer information database so returning customers donât have to re-enter their payment method data every time they make a purchase. Unfortunately, itâs only available under the Pro pricing plan. Data portability is supported, although PayTrace notes on its website that âonly truncated payment information is available for export from the system.â
- Month-to-month billing with no long-term contracts
- Integrates with most merchant account providers and shopping carts
- Supports Level II and Level III credit card data for B2B merchants
- High per-transaction processing charge under Basic pricing plan
To learn more about PayTrace, check out our full review.
Much like Braintree, Stripe Payments is a tech-focused merchant services provider that specializes in serving the eCommerce community. Those services are tightly integrated into their payments system, so the company doesnât offer a discrete Stripe-branded payment gateway. Instead, itâs built into their overall payments platform and comes with every Stripe account. For small businesses, this is a very affordable approach, as thereâs no separate account setup fee, no monthly gateway fees, and no additional per-transaction processing fee. You also donât have to worry about trying to integrate two or more third-party services into your website. Another advantage is that Stripe includes several additional features for free that most gateway providers charge extra for, including eCheck (ACH) processing and recurring billing.
Stripeâs pay-as-you-go pricing couldnât be simpler. Credit card transactions are processed at a single flat rate of 2.9% + $0.30 per transaction. eChecks are 0.8%, up to a maximum of $5.00. Stripe also supports digital payment methods such as Bitcoin and Apple Pay. Qualified nonprofit corporations get a discount on these rates, and enterprise users (i.e., those processing over $80,000 per month) can also negotiate volume discounts on their processing rates. Like most of its direct competitors, Stripe bills month-to-month only and doesnât impose long-term contracts or early termination fees.
Sounds great, doesnât it? If you think that there must be a catch â of course there is. Stripe is a payment service provider (PSP), and so they donât provide true full-service merchant accounts. Like other PSPs (i.e., Square or PayPal), funding holds and account freezes or terminations are distressingly common. Customer service is another weak point, with almost all communications between Stripe and its merchants being conducted via email.
The best thing about Stripe is that itâs designed specifically for eCommerce merchants. Most providers are more focused on the retail sector, and their support for eCommerce always comes at a higher cost in the form of gateway fees and additional per-transaction charges. With Stripe, new eCommerce merchants get everything they need to start accepting payments as soon as their account is approved. While a Stripe account covers all the basics, you can also add or customize features through their huge API library or supported third-party integrations. Stripe also supports data portability, so you can easily take your customer information with you if you decide to change providers later.
- Pay-as-you-go pricing with no setup or monthly fees
- Simple, transparent flat-rate pricing structure
- No long-term contracts or early termination fees
- Huge API library for developers
- Flat-rate pricing is more expensive than interchange-plus for high-volume merchants
- Frequent account holds and terminations
- No telephone customer support
For more information, see our complete review of Stripe Payments here.
If youâve been reading this far, youâve probably concluded that selecting a payment gateway provider can be a very complicated decision. While thatâs sometimes true, it doesnât have to be all that difficult. Gateway providers offer a dizzying array of options, customizations, and add-ons, but in most cases, you wonât need all of them. Take a close look at what your business needs are today, and consider how those needs might expand over time as your business grows. For example, if you donât need recurring billing, thereâs no reason to pay extra for it. If your needs change later, you can always add it to your service. Level II and III credit card data processing is another feature that a sales agent might try to upsell you on. Yes, the rates are lower, but you still pay extra to access them, and if you donât take many B2B transactions, youâll wind up paying extra for something you donât use.
Youâll also want to put some thought into whether the integrated or non-integrated approach will work best for you. Payment service providers (PSPs) like PayPal or Stripe are an excellent way to add credit card processing to your business without spending any money up front. However, once your business grows large enough, the high flat-rate pricing will end up costing you more money than youâd pay with a traditional merchant account offering interchange-plus pricing. Since thereâs no long-term contract to worry about, itâs relatively easy to make the switch once this happens. However, youâll probably have to find a merchant account provider and a new gateway.
Although there are no hard and fast rules, we recommend providers such as PayPal or Stripe for new, low-volume eCommerce businesses. Braintree is also a good option, especially if youâd like to get all your merchant services from the same company. When youâre ready to step up to a full-service merchant account, Authorize.Net is a good option. However, we recommend getting their gateway through a third-party provider rather than the company itself due to the generally lower costs. PayTrace is also an excellent choice if you already have a merchant account, especially if you run a lot of B2B transactions.
Much like merchant account providers, there is no single âbestâ gateway provider. Even the companies weâve profiled here have their shortcomings. Every business has different needs, and itâs up to you to decide what features your business needs the most. Fortunately, most payment gateway providers offer a similar set of standard features that cover the most common requirements of a majority of businesses. They also provide a very high degree of customization to make their service work with your business, although in many cases youâll have to have developer skills (or hire one) to implement them. If youâve had any experience with the providers profiled in this article or you want to highlight a gateway provider we havenât mentioned, please feel free to tell us about it in the Comments section below.
The post The Top 5 Payment Gateways for Online Credit Card Processing appeared first on Merchant Maverick.