Updated: Jan 11
Money could be exchanged for goods purchased, if you were running a traditional store. Cash payment, a card swipe or a QR code scan at the store is instant, and it leaves little scope for any fraud. Now, for the success of your eCommerce business, the transaction online has to be as convenient as this, or probably easier and more secure.
Let us imagine that you have prospective buyers who love what you are offering. They add items to the cart and want to go ahead and make a purchase. The interface that allows them to pay is called the Payment Gateway
A payment gateway is an entity that authorizes the transfer of funds between buyers and sellers. It enables the customer to choose their preferred mode, such as netbanking, credit card, debit card, gift card, UPI, or any online wallets.
How does it work?
Let us understand step-by-step how payment gateways for eCommerce websites work:
1. Shopper adds products to shopping cart, proceeds to checkout.
2. Confirms the order, fills in billing & shipping information.
3. Selects the payment gateway, clicks on ‘Pay Now’ button to submit order
4. Control is passed to selected payment gateway, shopper is redirected to payment gateway page.
5. Shoppers’ information & order details are passed on to the payment gateway in a secured & encrypted way (through SSL Encryption).
6. Shopper chooses from different payment modes: Credit Card, Debit Card, Netbanking, digital wallets, UPI etc.
7. Shopper provides necessary details to complete payment. This information is encrypted & is not accessible to anyone. Payment gateways follow strict data security & protection guidelines such as PCI DSS (Payment Card Industry Data Security Standard) compliance and more.
8. Payment gateway conveys encrypted transaction information to payment processor of acquiring a bank or wallet.
9. Processor sends this to shopper’s card association, bank or digital wallet.
10. Transaction is delivered to the bank/wallet.
11. Shopper’s bank receives a request, responds to payment processor indicating: approved or declined.
12. Response is transmitted from payment processor to payment gateway.
13. Payment gateway forwards response to your website
14. Your website interprets it, passes it on to you as the merchant and to the shopper who is checking out.
What are the different kinds of eCommerce payment gateways?
Primarily, there are three types: 1) Redirects: Example: PayPal, PayU, CC Avenue, Paytm When the gateway takes your customer to a PayPal payment page to handle the complete transaction (i.e., processing and paying), it becomes a Redirect. Ideal for: All Pros: Simplicity, convenience, and security. Cons: You have lesser control, and it is an added step for your customers. 2) Checkout on site, payment off-site: Example: Razorpay Under this kind, the front-end checkout occurs on your site, but the payment processing happens through Stripe's back end. Ideal for: Companies with a large volume of transactions. Pros: Simplicity Cons: You lack control over customers' experience through the payment gateway 3) On-site payments: In this case, the payments are completely handled on your servers, and the entire checkout and payment processing works through your system. Ideal for: Large-scale businesses Pros: You enjoy complete control. Cons: It's an added responsibility for you and you have to get your site PCI DSS compliant How to choose the best payment gateway? Your eCommerce payment gateway is the last and most critical step in the buying process. You must choose it after careful deliberation. Here's our rundown of some of the factors you must keep in mind while making a decision: Scalability: Check The one you choose from the payment gateway list should be scalable to meet the growing needs of your eCommerce website. It should offer the best technology to ensure the security of transactions and data. Multiple Payment Modes: Check When you give your shoppers an array of payment modes to choose from, they are delighted as they can comfortably purchase using their preferred method. Also, by providing all possible options, you reduce your cart abandonment rate. You must strive to offer the following payment modes: Debit, Credit and Prepaid Cards, NetBanking, UPI, Digital wallets, Pay Later, and Cardless EMI. Certification: Check Your eCommerce payment gateway provider needs to be certified for following information security standards like PCI-DSS. PCI Standard is mandated by the card brands but administered by the Payment Card Industry Security Standards Council. Quick Checkout: Check The checkout process should be quick and straightforward, devoid of the unwanted form fields. For added convenience, it should allow for 'guest' checkout. Swift Settlement Cycle: Check After your online shopper has made the payment, the money to reflect in your account could take some time. This period is called the Settlement duration and typically ranges from two to four working days. You must select the payment gateway offering the fastest settlement cycles, between T+1 to T+2 days at most. Supports different currencies: Check A great online payment gateway service provider allows the provision for multi-currency checkout and supports several credit cards and debit cards. Value-added services: Check It's a good idea to choose a payment gateway that gives additional services like electronic invoicing text/email reminders for customers, chargeback management, etc. Success Rate of Transactions: Check The success rate of transactions on the payment gateways is one of the most critical parameters for customer satisfaction and your business's growth. A declined transaction leads to revenue loss for the company and leaves your customers annoyed Supports recurring billing: Check A payment gateway that supports recurring billing (setting up an automatic billing cycle) is suitable for businesses with monthly payment plans/subscriptions. Supports mobile payments: Check Mobile payments through digital wallets like Google Pay, Apple Pay, and Samsung Pay should be supported by your payment gateway. It makes transactions as easy as pie. Customer support: Check If your payment gateway offers 24×7 customer support, you will have the advantage of resolving issues instantly and increasing conversions. Pricing and agreement alignment: Check Your payment gateway's fee and service agreement requirements must align with the type of transactions your business conducts (revenue consistency, transaction frequency, and the markets served). Most of them charge 2-3% per transaction. You can negotiate for the best possible rate with the payment gateway sales team.
So take stock of the current market scenario, consumers' pain points, and their demands before moving ahead. Your customer has shown confidence in you. They have added your products to their carts and are about to take the action you desire them to. At this crucial moment, when they hit the 'buy now' button, leave no stone unturned to deliver the best payment and checkout experience. Some tips will help you streamline your checkout payment process Make registrations optional It's a fast-paced world, and people indulge in things that work at godspeed. Compelling customers to register or create an account can put them off. So, allow your users to guest check-in. You can do your best to highlight the benefits of creating an account, and leave it up to your customers to decide. Simplify user flow Enhancing the navigation of your eCommerce website can lead to improved conversion rates (by 18.5 percent4). Some of the things you can do are: keep users on your website rather than redirecting them to an outside gateway; avoid confusing pop-ups or distracting ads; turn them back to your homepage after payment; keep the look and feel consistent all across. Guide them with simple directions Keep the process easy, aid your customers with clear calls to action at every stage of the checkout process. Incorporate information buttons to address any doubts that they might have. Discourage any second thoughts Dropping-off at any point is always a possibility. It would help if you offered zero-cost EMI, a prepayment discount, and other deals like pay later and a money-back guarantee. For example, when you associate with eCommerce platforms like Shoptimize, you enjoy the benefits of having 12+ payment gateway partners such as PayU money, Razorpay, PayTM, HDFC Bank, etc. They also give you the freedom to offer EMI offers and Pay later options to your customers. Take this opportunity to please Once the payment is made, thank your customers and make them feel great about the decision they have made. Send them a digital receipt via email. It can serve as a chance to upsell or cross-sell or offer a coupon to encourage a repeat purchase. After delivering a delightful user experience on your D2C eCommerce website arrives the golden moment when your visitors graduate to become buyers. At this pivotal point, you have to simplify the journey ahead - with an easy, frictionless, and streamlined payment process. If you critically compare the payment gateway options available and juxtapose them with your business goals and eCommerce website platform, your customers would willingly put their trust in you and make that payment.