How to select the right payment gateway for your business?

10 November 2017

Accepting payments online is a foundation of any ecommerce business and finding the best payment services provider becomes crucial in this context. Customers want to feel comfortable when shopping on the Internet with the convenience of using payment options ensuring speed of transaction, quick access without additional registration process, flexible fee scheme, buyer protection policy and security of their personal data and money. An online business owner is, thus, facing an intricate challenge as there is definitely no such opportunity to have it all, but it is possible to decide in favor of the most optimal choice.

Payment gateway and payment service provider concepts

To successfully conduct a business online an ecommerce retailer needs a merchant account and a payment gateway. Merchant accounts are used for keeping the funds accepted for payment from a buyer before they are transferred to the bank account of a business owner. A payment gateway ensures secure processing of payments made on credit and debit cards while concurrently checking the availability of sufficient funds on the card account for completing the transaction.

A payment gateway concept relates to an entity that provides authorization to card payments initiated either online or at a brick-and-mortar store. The operational principle of a payment gateway resembles that of the point of sale terminal used by retailers and owners of businesses at a physical location. Payment gateways take customer’s card details and through secure connection send them to the merchant and from the merchant to the bank. If a payment is approved by the cardholder’s bank, it is deducted from the payment card of a buyer and transferred to the merchant’s account.

Payment service provider is a wider concept than a payment gateway as its services include both transaction processing provided by a payment gateway and merchant account maintenance. Payment service providers, thus, feature more comprehensive approach to online payments. They provide money collection and transaction management services to merchants.

Payment gateway

Geography matters

Place of incorporation has a significant impact on the range of features and options available with the payment gateway. Thus, a business established in the United States will automatically be linked to a payment gateway servicing US businesses, and as such processing transactions coming from US-based buyers. No other countries could be accessed, unless an ecommerce retailer decides to open a representation in other country, say in France. Many online merchants have access both to the US and European markets due to offices in both regions, enabling them to work with the US and European payment gateways.

There is also another nasty trick common for many payment gateways and payment service providers. They may offer an impressive list of supported currencies for accepting payments online, but at the same time deny service to a merchant located in one of the countries, where these currencies are deemed as national legal tender. In the simplest terms, say a payment service provider supports US and Canadian dollars, but its service area is limited to the United States only. It means that if a merchant is incorporated in Canada, this payment service provider will not be accessible for him/her.

Another important aspect, naturally arising from the foregoing, in the context of geographic possibilities of a given payment gateway is support of international payments. While merchants want to be available for as larger target audience as possible, which motivates them to seek global payment service providers, there is another trick about this aspect: fees. Multi-currency transactions may be costly.


Costs play a crucial role in the profit making scheme of any online retailer, therefore a fee structure should be in the agenda when choosing a payment gateway. A potential online business owner should understand that the scope of services, whereto the commissions are applied, may be quite hefty. Most payment gateways charge setup fee + monthly fee + registration fee + transaction processing fee (no matter successful or declined transactions) + refunding fee + chargeback fee + account management fee + other fees. Thus, for instance, in the UK on average payment gateways charge 15 p + 2% fee per transaction, while PayPal charges 2.9% + 30¢.

Technology efficiency

Payment gateways may be hosted and non-hosted. Hosted payment gateways redirect customers from the merchant’s website to their own payment page to complete the transaction process, while non-hosted payment gateways allow customers remain on the merchant’s page and complete the transaction right away on the online retailer’s website.

The key advantage for a hosted solution is that it ensures higher security of transactions, as merchants bear no risks associated with storing card details, which in turn ensures merchant’s PCI compliance. The big problem with this option is longer time of processing and concerns of customers who feel wary about third party pages they are redirected to from the shopping cart.

Consequently, the major convenience of non-hosted payment gateways is that customers may directly enter their card information without leaving the retailer’s website. A merchant in turn will need an SSL-certificate and PCI DSS certification.

Technology efficiency


Merchants are strongly advised to deal exceptionally with payment service providers, which are level 1 compliant with the PCI DSS standard, and providers using integrated security tools, including tokenization.

Standard package of security tools offered by most payment gateways include the following two instruments:

– Card Verification Value (CVV), a 4-digit code on the card of a customer. Thus, only a cardholder may enter this code.

– Address Verification System (AVS), a technology ensuring that an individual claiming to be the holder of a given card comes from the address specified.

Additional layer of security is ensured through solutions protecting merchant’s website against high-volume attacks. This is provided by special filters controlling the number of transactions to be processed in an hour and banning excessive volume of transactions made from a single source.

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