eCommerce Payment Gateways

Online Payment Gateway resources and references

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Payment Gateway Types & Their Advantages and Disadvantages

Payment gateway is an application on an e-commerce website that allows the website to link the client payment account with the website’s account. Payment gateways allows for the credit account details to be secure instead being sent online. That notwithstanding transfer of money is far much faster and eases the hassle involved. Online shopping has become a breeze with payment gateways. There are various payment gateways that exist out there and it takes a discerning eye to know the best option out there. Currently, PayPal and WorldPay are some of the most popular payment gateways.

Categories of payment gateways:

There are two major categories of payment gateways: Hosted and Shared Gateways.

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Hosted Payment Gateways:

Hosted Payment Gateways are those that direct your user away from your ecommerce website. While making payments, the customer is redirected to the real gateway page by clicking the gateway link. This leaves your website for some time before returning back. The benefit of these gateways is that you do not need a Merchant ID since no confidential details are needed from your website. Examples here include PayPal, WorldPay and Nochex.

Shared Payment Gateway:

While making the payments, a customer is directed to the payment page and not out of your website. Here, a Post form is used once one clicks on a payment link/button. The payment page is maintained securely by the payment gateway. After all details about credit card and other required fields are complete, the user fully gets back to the main website. The main benefit is that one does not get away from your website thus fast and easy to use. Example of a gateway is eWay.

Here is the list of some popular payment gateways and the advantage and disadvantages of the gateways.

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1. PayPal Inc

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PayPal is a well known online payment processor. It connects people and businesses on an online platform to enable in the purchase of goods and services. Formally PayPal’s official website address is https://www.paypal.com. The company which was started in San Jose, California was acquired by eBay in early 2000. The positive for PayPal is that it is easy to use and has easy access as it has no strict registration requirements.

Advantages

Guaranteed fraud protection Mechanisms in place:

With PayPal you can be assured against unauthorised transactions from your account. In normal circumstances, your financial information is not always secure while shopping online. Some uncertified e-commerce websites can take advantage of your financial details to perform unauthorised transactions. This may ultimately result in you losing a lot of money. PayPal ensures double-checked details before a transaction is authorised.

PayPal guarantees customer personal data protection:

PayPal in cooperates a very important feature called payment tokenisation. Payment tokenisation is the representation of customers’ details and payment transactions as a code. In the scenario that there is a breach in the network security, PayPal guarantees a business of its customers’ personal information. The above feature described is one of the modern data encryption methods employed by PayPal to guarantee data security.

PayPal supports multicurrency payment processing:

PayPal supports over 24 international currencies and therefore enables easy currency exchange. The currency exchange rate is supplied at the prevailing market rates; hence you save money and time. PayPal is also available in many countries and still has a growing list of supported countries. This international appeal favours global business transaction at reduced cost and in good time.

PayPal has ease of access and use:

Requirements that are needed to register with PayPal are few and non-involving. The graphical user interface does not require training and is user friendly. PayPal has real-time payment processing updates. PayPal offers fast and reliable services.

PayPal has relatively good rates on money transfer:

Sending and receiving money across borders could be costly. PayPal has been popular due to its cheap payment transfer plans and offers.

Disadvantages

PayPal can freeze your money and account at will:

Being a private company, PayPal is not subject to the federal banking regulations. PayPal simply does not require your consent in order to freeze your account. In the process PayPal can also withhold your money until they deem fit to reactive your account.

Although PayPal may be global not all online businesses have adopted it.

2. WorldPay

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Founded in the United Kingdom in the year 2000, it is a major payment gateway provider. Affordability being an important feature of this payment gateway provider, it has competitive rates for accounts. WorldPay is popular for its debit and credit facilities, as it is backed by the Royal Bank of Scotland. The formal website of WorldPay is the http://www.worldpay.com.

Advantages

WorldPay is backed by the Royal Bank of Scotland hence authenticity guaranteed:

One can rest assured of secure money transfer using WorldPay. Through their services, people can transact online and be sure to get paid. Since the payment gateway is under a bank, all transactions and payment processing are thoroughly scrutinised.

WorldPay is known for favourable money transfer rates:

The Royal Bank of Scotland has facilitated in establishing very affordable money transfer charges. Using WorldPay is really economical since their transfer rates are flexible. The rates favour large, small and medium sized businesses.

Multicurrency enabled:

Users from different countries can use WorldPay services without worrying about exchange rates. WorldPay is located in most countries globally, enabling international transactions with ease.

Has good fraud screening mechanisms:

WorldPay has put in place appropriate mechanisms against unauthorised access to customers’ data or information. Transactions are thoroughly verified before they are authorised to avoid malicious payments.

Offers specialised/Customised Features:

Apart from offering the basic payment processing services WorldPay has gone an extra mile to offer miscellaneous services. Some of the services under this category include: account reconciliation, custom branding and online management. Also, its reputation has stemmed from its PCI DSS Level 1 Compliance.

Disadvantages

High Account Setup Cost:

Initial cost of setting up a merchant account is relatively high and this discourages new user from partnering with WorldPay. Compared to other payment processing gateway providers, one would be charged more to setup an account.

There is a waiting phase during money transactions:

Ideally a user should get their money in real time but the practical case is that one is forced to wait for four to six weeks for their money. In the case that an individual needs the money urgently WorldPay may be inconveniencing.

Fluctuating and discriminative rates:

The contract terms do not remain fixed. Once one has become a member, the initial attractive rates are not upheld. WorldPay keeps on renegotiating the rates depending on the financial status of their clients. Consequently, the rates end up favouring the most successful clients.

WorldPay has not demonstrated keenness to grow their number of countries served:

Other continents other than Europe, have not embraced WorldPay services since their availability is limited. Transacting through WorldPay has not been easy globally since their services are not found in most countries outside Europe.

3. 2Checkout:

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This is an American based payment gateway company. Having been established as an International company, 2Checkout has already built a mark in online payment processing. It has been operating for over a decade now. It features a number of favourable services which have made it one of the big names in payment processing industry. Some of the advantages and drawbacks of using their services are outlined below.

Advantages

Easy and quick access:

Starting to work with 2Checkout is utterly instant. One is required to have a $49.97 one-time payment. This implies simplicity of their use of services. There are no application fees, monthly or even statement fees. The clients also have a 30-day money back guarantee. This offers some level of flexibility and thus favourable to new businesses.

2checkout also offers integration with shopping carts:

This payment processing gateway ensures their clients of quality services by having the latest shopping cart solutions. This guarantees optimized shopping activities. A shopping cart gives the shopper the ability to select the desired items and finally pay for them all at once. This hastens the speed of purchasing goods and services online thus high profits per unit time.

International credit card acceptance:

Users of 2checkout are given a wide variety of payment options given that payment is in dollars. In a nutshell, this implies that a user with a major card either a Visa. MasterCard or even PayPal can conveniently make payment to bought goods. This convenience greatly decreases the likelihood of abandoning an order due to unavailability of payment options.

User-friendly management control panel:

Merchants would find it easy to navigate and use the administration features in their accounts. The administration panel requires no extensive technical knowhow to manage the account transactions.

Effective fraud prevention:

In 2checkout, the processing system screens and flags suspicious orders and first verifies them before they are processed. In case a hacker tries to carry out illegal payments, the system would detect these attempts and carry out various measures.

Quick refunding:

They refund within 48 hours of any payment. One can get back his or her money without any charges in case a transaction is reversed within two days.

Disadvantages

Even though 2checkout has cheap setup costs, the processing system has a high processing fee of 5.5%+$0.45 per transaction. These charges always affect merchants who have a small profit margin. Therefore, a business’s return on income is limited.

Limitation in terms of geographical coverage:

Potential users from other continents other than Europe, Asia and America are not well catered for. 2checkout does not cover every country and this makes it difficult to carry out international money transfers without worrying about availability.

Poor technical proficiency:

In case of a server failure, some on-demand services may not be available. Their technical team is not well equipped to readily handle such hurdles. This brings unreliability to their services.

Recurring billing:

Through 2checkout, clients can be billed for payments that were already cleared in the past. This may consequently lead to double payment or loss of payment. As a result, many businesses do not fully trust the reliability of 2checkout’s payment processing gateway services.

4. MoneyBookers:

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Also known as Skrill, MoneyBookers has established itself as a reputable online payment gateway. It serves a large number of merchant accounts. Dealing with various geographical regions, MoneyBookers today transacts multi-currency payments. To get started, a user must first have an account. It is important to note that funds are uploaded from one’s bank account and no credit cards are accepted.

MoneyBookers has impacted both positively and negatively to the financial status of its users. Some of the main advantages and drawbacks of using MoneyBookers to process online payments are as outlined below.

Advantages

No credit card processing charges:

Since MoneyBookers does not accept credit cards, there are no charges for making payments through credit cards. Users can also avert credit card fraud.

Availability of their services in many countries:

Already adopted in over 35 countries, MoneyBookers is one of the world’s leading payment gateways. Unlike most payment gateways, Skrill has gone outside western countries to establish local bank relations in various continents. This has made MoneyBookers one of the most reliable payment gateway giants in the modern ecommerce world.

Convenient withdrawal:

Since MoneyBookers is linked with many local bank accounts, one can easily withdraw at any time to his or her bank account from MoneyBookers. Moreover, Skrill does not specify any account reserves. Therefore businesses find this attractive as it doesn’t eat into their profit margins.

Fewer restrictions:

Unlike other online payment gateway providers that use credit cards, MoneyBookers has limited restrictions in terms of security clearance. This makes transaction times to be short thus saving time in the long run.

Relatively better charges per transaction:

Compared to other giant online payment gateways like PayPal, MoneyBookers charges a maximum of $0.5 per transaction. New businesses find this attractive and it does not have bad impacts on return figures.

Disadvantages

Lack of Acceptance:

MoneyBookers is still not a major payment gateway in North America. This is a great drawback especially for those members interested in making overseas transactions.

Lack of financial backing:

MoneyBookers is not backed by any bank in terms of administration and financial support. This therefore does not give users the guarantee that their funds are safe with the company.

Conclusion

Even though there are a number of options in terms of online payment processing gateways, one should be careful to consider some key factors. Among the most significant considerations are setup fee, security of customer information and transactions, time taken to process payments, flexibility of currencies and various countries. Another important factor to consider is transaction rates. This includes withdrawal and transfer charges as well as exchange charges.

A good factor that should also be considered is the ease of use and accessibility of the payment gateway. Always make sure you do your due diligence on the gateway of interest. Always consult the experts and do your own research on the internet. Referrals are the only sure way as you will know the best payment gateway to invest in.