Online payment processing is the system that allows you to purchase goods or services on the internet without using cash. There are two main elements, the payment gateway and the payment processor. The gateway performs the first part of the transaction; this is usually encryption followed by an authorisation request which is validated by the user’s bank or another funding source. The processor then checks there are sufficient funds in the account before transferring them to the merchant, who will then dispatch the customer’s order. Basically, the Payment service provider (PSP) acts as the middleman between the customer and you, the seller. They allow transactions to be placed securely and also provide a record of any funds transferred between the two parties.
It’s a 3 step process. The online payment gateway authorises the customer’s payment details to ensure everything is legitimate and above board. The PSP will then either transfer funds between the customer’s account to the retailer’s account or hold the funds on their system before providing a report or record of the activity to both parties.
Most PSP’s provide some level of fraud checks before payment is taken,
if this step is not complete, the transaction can not continue, and both parties are made aware of the issue.
There are several different types of payment gateway providers available, and the right one for you will depend on your individual needs. The following list is certainly not exhaustive, but it does provide a basic overview of some of the most commonly used online payment gateway platforms that are available at the moment.
Typically used by established businesses, Sagepay is a stable and effective platform with a good reputation. Fees can vary depending on the number of transactions your business is expected to receive each month and packages start at £20.90 per month, which covers over 300 individual payments.
Accepts multiple types of payment
Very stable & reliable
Great for international sellers
Not the cheapest
Cancellation fees can be expensive
Barclays’ payment gateway enjoys the same kind of reputation as the global brand and is often favoured by retailers who want to create a professional first impression. Very secure and designed to work without glitches, though this isn’t the cheapest option, it is one of the most effective, especially for larger companies or established businesses.
Very easy to use and user-friendly
Internationally respected brand builds customer confidence
Secure and safe with excellent customer service
Not the cheapest on the market
Occasionally has some compatibility problems
Some users reported issues with international payments
Another popular choice amongst online retailers who process a high volume of transactions each month is Adyen, this slick and intuitive platform enjoys excellent reviews from most who have used it. Though it can be expensive for very small businesses, the quality of the customer service and the lack of any monthly or set up charges makes it a good option for those who want to make sure their payment processing is as smooth and effective as possible.
Free to set up and no monthly fees
Excellent customer service and feedback
Professional but user-friendly tools
Can be expensive for smaller businesses
Not ideal for international retailers in developing countries
Quite basic compared to others that are available
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Essentially you will need to be honest with yourself regarding what you need. Though an expensive, all singing, all dancing system like Barclays eDPQ can be perfect, if you don’t have the customer base and the funding to cover it, this kind of system could be a little bit too much when you are just starting out.
Be realistic about how many customers you deal with regularly and be specific about what your business actually needs. If a simple gateway is enough, you could end up wasting money by paying for something with a galaxy of features you will never use. Similarly, if you have a large customer base and frequently take payments from different sources or in different currencies, it could cost you more in the long run if your payment gateway is too simple and not up to the job. Inconvenience and time-consuming problems are one of the best ways to drive customers away. The main thing to remember is to choose a payment gateway that suits the business you have, not the business you want.