How to Choose the Right Payment Processor for Your Small Business
If you’re new to online businesses, then you probably have no idea what a payment gateway is and how the process works. Accepting online payments isn’t as easy as it seems, but payment gateways make it a lot easier for new business owners to set up shop and start accepting payments from their clients. But what is a payment gateway exactly and how can you choose the right one for your business?
What is a Payment Gateway?
Simply put, a payment gateway works as an application that allows business owners to collect payments from their clients securely online or through point of sales. If you’ve ever made a purchase online, you’ve probably used a payment gateway before.
The payment gateway is in charge of collecting the client’s payment information, verifying if the client has sufficient funds, sending confirmation and finally transferring funds to you once the payment is confirmed. A good payment gateway should do all these things efficiently and securely.
Payment Processors: Old vs New
Payment processors have changed a lot over the course of the last few years. There was a time when you had to actually apply for a merchant account with a bank to be able to accept credit card payments. You also had to pay for expensive POS terminals to accept physical payments.
But with the advent of modern payment processors such as PayPal and MyPaymentSavvy, there is no need for a merchant account to get started. All you need is a bank account to be able to transfer the funds to, that’s it.
However, there are pros and cons with working with modern payment gateways. For one, they usually have higher per transaction fees which can easily add up after a while, so you may have to adjust pricing accordingly. Second, most payment gateways that don’t require a merchant account will send visitors to a third party site, which could reduce conversions or even scare away some clients who aren’t familiar with online payments.
The Advantages of Modern Gateways
The convenience modern payment gateways offer is great for people who simply cannot get a merchant account for some reason. Most merchant accounts will have a lengthy set of prerequisites in order to qualify. In addition, implementing these payment solutions on your website will be much more complicated and will require you to conform to certain state imposed internet security protocols before you get started.
A good payment processor should have a secure gateway, be trusted by most customers and have a good pricing structure. You also have to get a feel for your market. In some instances, people might prefer a third party solution such as PayPal while others will prefer an integrated gateway.
Also, you have to look at things such as recurrent billing options, transfer times and charge back protection. It would also be a good idea to test a certain payment gateway yourself to see how it will feel to your own customers.
At the end of the day, choosing the right payment gateway comes down to reliance, fees, security and whether you want a self hosted solution or one that is fully integrated with your website. Whatever you do, make sure to do the proper research before you make any decision and don’t be afraid to ask for second opinions from fellow business owners so they can give you a first hand account of their experience.