What Should a Digital Business Owner Look for in a Payment Provider?
Choosing which payment provider to go with is an important decision for your digital business. Essentially, they become a partner in your business because they handle a very important function - making sure you get paid!
The field of online payments was relatively small just a few years ago, with really only a few big players, but the number of options has exploded along with growth of commerce online. Many of the providers you see look kind of similar on the surface, but you need to be aware of what to look for underneath.
Here is what digital business owners should look for in a payment provider:
Compatibility With Your Platform
Are you using a SaaS-based platform like Shopify or Cratejoy? Or are you self-hosted on a platform such as WordPress? Not all platforms support all payment providers so this needs to be a consideration.
In the case of using a self-hosted site on WordPress, Magento or similar, look out for plugins that work with the payment platform you’re looking at. We’d suggest that you check out any reviews and see if there are others with similar businesses to yours who are using it. Sometimes newer platforms may have issues with their plugins or may not work out as well for certain businesses.
Available In Your Location
Not all payment solutions are available to all locations, despite the worldwide nature of the internet. The companies tend to be limited by banks or payment solutions they partner with, or perhaps sanctions against certain countries so that they are compliant with anti money laundering laws.
Generally speaking, if the payment provider is available to you in your location, you are then able to process payments worldwide through them.
Check out these examples of commonly-used payment providers and where they can be used:
How Do You Want Customers to Pay?
Generally speaking, when it comes to encouraging customers to complete a transaction with you, the fewer steps they need to take and the more trustworthy your site appears, the better.
In studies of U.S. online shopping sites, Business Insider reports that 46.1% of abandonments happen at the payment stage.
“Four of the top five reasons users are bailing out of the checkout process stem from the logistics of entering information through desktop or mobile. Only one reason, the shipping costs, actually had to do with price.
This shows that e-commerce retailers are coming up short with regard to the checkout process. Lengthy or complicated checkout forms, such as entering shipping addresses or payment information, account for approximately 39% of U.S. cart abandonments.”
For digital business owners, this means that the logistics of the process that the payment provider allows are an important consideration when choosing a provider option.
For example, here are the usual four ways by which websites take payments:
- The buyer is redirected to a payment gateway page, as is often seen with Paypal. This can be confusing to some customers as of course the page looks nothing like the website they were just on. However, this is very secure in terms of protecting customer information.
- An iframe for the payment gateway is embedded on the payment page. This can be in place of a redirect and is also a very secure way of gathering payment details.
- You gather details on a form on your website, but these don’t go through your website server and are instead securely transmitted directly with a payment provider server. Stripe JS is an example of this.
- You gather details using a form on your site and these are transferred via your own server. This is usually out of reach for average digital businesses as you need costly security precautions in place. This is however, a more streamlined process for the customer.
Whichever of these methods you choose, you need to consider how intuitive the process is for the customer to get through. Obviously, you have little control over how the payment provider requires information to be entered (apart from having the choice over which security measures to include, such as with Stripe), so testing them out first can be a good idea.
You’re going to need to look at this from the point of view of your customers. If you target a certain region of the world, are some payment methods more popular than others? If you are not as targeted, then at the very least you want your payment provider to support the most popular methods such as Visa and Mastercard.
Entrepreneur posted a piece highlighting that almost half of shoppers surveyed who had abandoned a websie at payment did so because their preferred method was not supported, so this is important to consider. Check their article out for a quick run-down on preferred payment methods by region too.
Customers do tend to prefer to pay in their own currency. They like to know exactly how much they are spending! If you are likely to have customers using different currencies, check whether the payment provider allows them to pay in their own currency. This can make a difference between an abandoned cart or a completed sale.
Are Recurring Payments Required?
Simple really, if you are a SaaS, a membership site or any kind of subscription-based digital business, then you require a payment provider that supports recurring payments.
Beyond simply whether or not the provider supports recurring payments is how they do so. Some do allow recurring payments but are fairly inflexible with how they are set up. For example, you may have trouble if you ever need to change the recurring amount or the frequency of the payment.
Look for a provider who is flexible enough to meet the needs of your business with recurring payments.
All-In-One or Not?
The way online payment systems work is that you need to have a merchant account (a type of bank account that allows you to accept multiple types of payments, for example, credit cards), and you need a “payment gateway”. Payment gateways are simply the piece of technology that sits between your website and the payment networks through which money is moving.
Some payment providers have an all-in-one solution, where they offer the gateway and the merchant account. Solutions such as Stripe or Paypal offer this.
Other payment providers are merely providing you with the gateway technology and you are required to source your merchant account elsewhere and hook it up to your gateway.
What’s the difference? It usually comes down to fees and transaction volumes. Solutions such as Paypal charge a percentage fee on every transaction, whereas a merchant account from your bank may charge a flat annual or monthly fee. The fees on merchant accounts tend to not make sense for businesses with smaller transaction volumes, but if you do large numbers, you reach a point where that percentage fee costs more than the flat fee of a merchant account.
This is something you’ll need to assess for your business. Which option makes more sense?
As mentioned, many of the solutions available don’t charge a monthly fee but do charge you for the transactions you make. Often it’s a percentage fee charged on invoices, plus there may be fees for things like transferring money out to your bank account.
You should also check for any other fees they may charge, for example chargeback fees or fees for unsuccessful transactions.
Look at the options and, again, consider if your transaction volumes play a role in deciding which provider is best for you.
There are many solutions where you are not obligated to sign a contract, though in some circumstances signing one may get you a discount. Many businesses are not fond of the inflexibility of having a contract though; what happens if you find that you don’t like their service? Make sure that this is a question you ask.
A good payment provider is one that is compliant with international standards on data and account protection. Look for a provider who is PCI compliant so that you know you’re in safe hands.
Are You “High Risk”?
This is an interesting one for digital business owners. Did you know that if you sell ebooks or digital magazine subscriptions, you may be considered to be a “high risk” business?
High risk businesses might include:
- Adult Entertainment
- Ebooks and magazine subscriptions.
- Debt Collection
- Bitcoin or FOREX trading
- Dating services
- Credit repair
- Diet programs
If your business is considered to be high risk (you’ll soon find out if you ask a potential provider!), then you may need to go with a provider who is prepared to help you.
Should You Offer More Than One Option?
Depending on what you choose, you are not necessarily limited to one type of payment gateway. Websites are now often including more than one option so that they have a better chance of getting the conversion from the customer.
Paypal is often used as the back-up option, primarily because it is quite widespread throughout the world.
Over To You…
Choosing the right payment gateway for your business is an important decision. Your choice can impact on the experience your business has and that of your customers. For this reason it can directly affect how many sales you get.
Know what the needs of your business are and look for solutions that check all of your boxes. Also consider that there may be more than one option you can set up to maximize convenience for customers.
All the best! Have you seen the payment providers which Quaderno integrates with? Check them out here.
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