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For new online shop owners, choosing a payment processor can be a tough decision to make. Nowadays, there are many different options for payment processing that you to choose from, making the choice all the more complicated. There are a few different factors you should keep in mind when making your decision. Use this guide to help you get started.
Payment Processors: What Are They and Why Do They Matter?
A payment processor, or gateway, is the software you use to accept payments from customers on your website. Your eCommerce business will need some way to accept credit card payments for every sale you make. You may want to have the option for online check payments as well. Picking the right payment gateway for your business is essential. There are a few reasons why this is the case.
1. Improve Customer Confidence
Especially when you are just starting out, you will need to convince your customers that you are running a legitimate business. One way you can accomplish this is by using a trusted and well-known payment gateway that accepts popular forms of payment. If you only accept one form of payment, you will be alienating many of your customers.
2. Avoid Lost Sales
If you use a processor that looks unprofessional or doesn’t work, your customers will abandon their carts and you will not make the sale. This will eat away at your bottom line and potentially ruin your business.
3. Save Money
All payment processors cost money but, if you choose the right now, you can spend less every month. These companies make money by charging a range of fees. Some processors charge an initial signup fee plus a transaction fee and others only charge transaction fees. Before choosing a service, you will need to determine which company will help your business save the most cash. Your personal credit and/or business credit will affect your rates and options. Bad credit options are available but are limited depending on your business model.
Building a strong business credit, such as getting a business line of credit can help improve your options.
There are three common payment methods that your business can accept: credit cards, digital wallets, and offline payments. Think about which type your customers will use and which make the most sense for your business to accept. Then, try to find a processor that accepts that type of payment. Let’s discuss more concerning each payment type.
More than half of all point-of-sale transactions are completed with a credit card. Credit card payments offer your customers convenience as they can buy the product immediately. They also give your business more legitimacy because accepting credit card payments is the standard. When selecting a payment gateway, make sure you choose one that offers credit card payments.
Though payments via a digital wallet are new, they are quickly becoming a very popular option. Digital wallets, like PayPal or Apple Pay, require customers to open an account and enter their credit card information. Customers enjoy this method because of the sense of security and convenience it provides. The fees are expensive and are not in favor of you as the merchant. They are users first which means disputes are leaning towards the customers when it starts.
I have been shut down by Paypal (money on hold etc…). I can tell you that there are some serious horror stories about these type of solutions online.
Offline payments do not require customers to enter any kind of credit or debit card information online. Instead, customers can make a purchase online and arrange to pay outside of the online store. This could be over the phone or in person. If you choose to use this method, be sure to provide thorough instructions for your customers about how to pay and who initiates the payment.
How to Pick the Best Payment Processors
Now that you know what a payment processor is, why it is important, and what types of payment they can accept, you can start looking for the best payment processors. To do so, be sure to take the following questions into consideration.
Is the Gateway Supported by Your eCommerce Platform?
If you already know which eCommerce platform you will be using, you will need to find a payment gateway that is supported by the platform. Regardless of whether you are using a SaaS-based platform like Shopify or a self-hosted platform like WooCommerce, you can find a range of plugins that allow you to integrate different popular payment processors. Just make sure you choose a gateway that already has a plugin or extension for the platform.
You will also want to make sure that your processor accepts alternative payment methods. Many people like myself choose to use prepaid cards or gift cards for “new” website purchases. I just try to avoid the hassle of a card stolen etc.
What Kind of Fees Do They Charge?
As mentioned previously, different gateways charge different fees for payment processing. They typically charge transaction or usage fees which will be taken out monthly or at the time of the transaction. This could be a flat rate per transaction or a percentage of the purchase total. They may also charge an initial fee for setup. Consider your expected sales and determine which processor will cost you the least amount of money.
Do They Offer Special Payment Options?
Special payment options include accepting international currencies and recurring billing options. If you want to ship your products internationally, you will need a gateway that supports that type of purchase and can accept those currencies. They may charge additional fees to do so. Recurring billing is a great feature if you are running a subscription-based eCommerce business. This would allow business owners to set up regular payments from their customers. When your subscribers have to think about paying the bill, you lose them.
Setting up subscription-based businesses is a popular online business model, so check into it even if that is not your initial goal.
Which Payment Methods Do They Support?
The different payment methods were mentioned above. You should think about which method your target audience uses. Then, ensure that the gateway you choose supports that specific method. If you do not offer your customer base’s favorite payment method, you may begin to lose customers.
How Is Their Overall Customer Experience?
This is perhaps the most important factor to consider. Since your customers will be the ones using the gateway regularly, you want to make sure that the one you choose is user-friendly. Keep the following factors in mind when it comes to offering an excellent customer experience.
– On-Site or Off-Site Payment: Certain payment methods will redirect customers to a third-party website to complete their purchase. This is known as an off-site payment, which can be off-putting to some customers. If don’t think your customers will be bothered by this type of payment processor, then feel free to choose on like it. However, many customers find it easier to checkout with an on-site payment.
– User-Friendly: It should be your main priority to make buying your products easy for your customers. Your payment processor is no different. Is it quick and easy for customers to check out? Every time the gateway becomes more complicated, you risk losing customers. Test out the system for yourself. If you find it frustrating, your customers will too.
– Quality of Customer Support: You also want a payment processor that is easy to reach if anything goes wrong. Try to find one with great customer support that both you and your customers can contact. The majority of payment processors offer email support. However, you should try to find one that offers email and phone support so you can solve your customers’ issues even faster. Read reviews so you can really see how the customer support is before opting in for a service.
– Mobile Payments: eCommerce is quickly becoming more and more mobile friendly. You must ensure that your payment gateway works well on mobile devices. This will allow your customers to browse your shop and make purchases from anywhere.
Is There a Contract and How Long Is It?
Determine what type of contract the payment processor offers and how long it is for. Some providers have been known to lock merchants into long contracts of more than two years. This could be an issue if you ever decide you want to switch payment gateways. Other providers offer a monthly rolling contract. Just make sure you understand what you are agreeing to before you sign up.
Do They Have a Good Reputation?
Lastly, you should consider whether or not the payment processor has a good and trustworthy reputation within the industry. Some providers have had issues with outages in the past. Others have a habit of blocking funds for no reason at all. Do some detailed research about the company and their business practices before you pick them.
Will is the Executive Managing Editor at Feedster. Will and his team from Full Epic Lead Generation work with venture capital, marketing co-ops, and companies to attract and gain qualified leads.
His primary focus on developing a sales funnel for a company and finding out of the box / growth hacking style ways to convert and drive traffic.