Accepting credit card payments is critical for ecommerce merchants. A payment provider should support a merchant’s payment needs, charge low fees, and scale as the business grows. Even though these requirements appear straightforward, it is not easy to choose a provider from the hundreds of options.
To get started with payments, a retailer needs to set up a merchant account, which is similar to a bank account and helps with the management of credit and debit card funds. There are different types of merchant accounts depending on if a retailer accepts credit and debit cards online, in physical stores, or both.
To get started with payments, a retailer needs to set up a merchant account, which is similar to a bank account and helps with the management of credit and debit card funds.
The process to get approved for an account can take several weeks. It typically requires detailed documentation from the merchant. Not every retailer gets approved. A retailer can skip this step by working with a payment provider that aggregates multiple retailers into a single merchant account. By doing this, the provider is taking on additional risk, as all merchants using the provider will be represented by a single account. But it makes the initial setup easier and also makes the fee structure simpler, based on transaction volume versus merchant account fees. PayPal and Amazon are two examples of payment providers that use an aggregator merchant account.
Another option is for the payment provider to apply for a merchant account on behalf of the retailer. This is a model that Stripe uses, for example. This option makes the initial setup process simpler for the retailer.
After a retailer has a merchant account, it needs to locate a payment gateway provider to link the retailer’s shopping cart to the merchant account. In many cases, a merchant account provider will also provide payment gateway services. But that is not always the case.
The key payment gateway features to evaluate are ease of use, ability to integrate with the commerce platform without custom programming, and fees. Authorize.Net is a leading payment gateway. Chase Paymentech and Heartland Payment Systems, as examples, offer both payment gateway and merchant account services. PayPal and Stripe also come with their own gateways.
10 Questions to Ask Potential Payment Providers
The following questions help a merchant select an appropriate payment provider.
- How long has the provider been in business? This is important as a new provider introduces additional risk in the retailer’s environment. The lure of low fees should not impact the quality of service a retailer intends to offer to its shoppers. If the provider has been in business for less than 2 years, be careful.
- Does the provider work with the existing commerce infrastructure? Most payment providers offer plugins for many different commerce platforms, such as Miva Merchant, Shopify, Magento, and many others. It is important to ensure that payments work with the retailer’s shopping cart and will not require expensive, custom integration.
- Can the provider guarantee availability and performance? A payments platform that is not available means shoppers will not be able to complete the purchase. And a slow payment process can increase the cart abandonment rate. Make sure either scenario will not likely occur with a new payment provider
- Is the payment platform secure and compliant with PCI and other standards? Without security, both the retailer and its customers could lose money. Any payments platform should support security features like authentication, authorization, and SSL. The provider must also be compliant with PCI and other industry standards, such as HIPAA for health care.
- Does the provider offer built-in fraud management? Getting another provider for fraud management and integrating with the main payments provider can be complex. Built-in fraud management reduces the number of moving parts.
- Does the provider’s platform process chargebacks seamlessly? Chargebacks are a reality of the retail business. The provider should process them, in most cases, for a small fee — versus the retailer doing it manually.
- Does the platform offer reporting for analyzing customer activity? Basic activity reports should be a part of the payment platform to analyze, for example, frequently purchased products, and products that are purchased together. These standard reports should minimize the creation of custom ones.
- Does the provider operate internationally? If the retailer has customers or operations internationally, the payment provider will need to process credit and debit cards internationally, too.
- Does the provider offer 24/7 support? This is important for most retailers, so that payment glitches can be resolved quickly. Some providers offer different tiers of support — not necessarily 24/7 support.
- Can the provider provide references, from actual customers? Talk to a few existing customers to verify that the provider does, in fact, offer the quality of service it promises.
There are certainly other questions related to choosing a payment provider that I did not address. Please offer your suggestions in the comments section below.