We recently completed work on the WeTranxact website – a company who specialises in merchant accounts and card processing in Birmingham. As we deal with ecommerce sites on a regular basis we asked them to write something for us about payment gateway and merchant accounts.
A start up business, whether its bricks and mortar or online relies on cash flow, so it is important to select the right payment gateway from the start.
Not to worry, I’m putting my experience to work for you. I’m going to cover what you need to know in order to select the best payment gateway for your online business: everything from application time frames to fees and fraud protection tools.
Please bear in mind that a payment gateway is different from a merchant account. A merchant account is a type of bank account that allows you to accept debit and credit card payments from your customers. A payment gateway helps with the secure transfer of information from your website or application to your merchant account.
You will need to have both a merchant account and a payment gateway to process your customers transactions. Many payment gateway providers offer a combination — both a merchant account and a payment gateway from the same company, which can save a lot of time and hassle.
Things to consider when choosing a payment gateway for your online business
Application process & time frames
At the start I mentioned that cash flow is vital for a business and more so for start-ups, so it is important to find out how long the application process with a new payment gateway will take. And once approved, how long will it take before you’re able to accept payments from your customers.
Some payment gateway providers will tie you into a contract, typically a one year contract. If you are tied into a contract then you’ll also want to find out if there is an early termination or cancellation fees you’ll have to pay if you’re unhappy with the service.
You’ll need to know how long it will take for you to receive your customers money. The last thing you need is a gap in cash flow when you have to pay your own suppliers and overhead costs! This is normally determined by your merchant account provider as the payment gateway will send a settlement file of all your customers transactions each and every day, normally between the times of 12am – 4am.
The merchant account provider will then usually settle the money in your account 3 days after but some merchant account providers can settle as quickly as same day, which has become very popular with certain businesses/industries that rely on cash flow.
Ideally, the payment gateway you select will have transparent pricing and no hidden fees. To avoid hidden fees, ask the payment gateway provider for all potential costs you could encounter while using them as your gateway.
Some specific fees to ask about:
- Setup fee
- Monthly fee
- Payment processing fee
- Transaction fee (successful and declined transactions)
- Refund fee
- Any free inclusive transactions
- Cancellation fees
It is perfectly normal for payment gateways to charge a small fee for every transaction you run through their system. It’s usually a flat fee per pence, which can be as low as 0.5 pence and/or a percentage of the transaction amount being processed. I would advise to negotiate this beforehand and the more volume you put through the better the rate/fee you will achieve.
Most payment gateways are linked to all the UK mainstream merchant acquiring banks. You will need to make sure that the merchant account you decide to use is integrated to the gateway you decide to go with and the same will apply with your website to ensure the ecommerce package is easy to connect to your payment gateway.
Fraud prevention tools
All payment gateways should offer these fraud prevention tools as standard:
- Card Verification Value (CVV). This is the 3 or 4 digit security number located on the credit card; only the cardholder should have this number.
- Address Verification System (AVS). This tool verifies the address of the person claiming to own the credit card.
- 3D Secure. This feature enables the shopper to confirm their identity with the card issuer. If accepted they then complete their order and when received by you, you will have much more confidence that the transaction is genuine.
Some payment gateways offer advanced fraud protection tools that go beyond CVV and AVS. For example, The AI gateway has Risknet, which is widely acknowledged as best in class and is used by thousands of merchants, PSP’s banks and acquirers.
A payment gateway going down can mean considerable lost revenue and your customers losing confidence in your business and ultimately go elsewhere – to one of your competitors. You may want to ask how much downtime they have incurred over the last 12 months. The main Payment gateway providers will normally advertise 99.9%, allowing for 8 hours downtime a year.
High risk products
What product or service is your business selling/providing? If your business has anything to do with e-cigarettes, drug paraphernalia, adult, alcohol, guns, gambling know that those are classified as high risk products. The major payment gateways do not support processing transactions related to high risk products.
If your business falls under this category, you’ll need to do some additional research to find payment gateways which specialize in high risk products.
As a business, it is important to factor in a variety of features to select the right payment gateway from the very beginning. Most payment gateways are very similar in service and will only differ when it comes to fees and charges.
To do that, make sure and to ask each payment gateway you’re considering about their:
- Application process & time frames
- Fraud prevention tools
Once you’re successfully setup with your merchant account and payment gateway, you can focus on growing your business!