Payment gateways are responsible for all transaction online. Without them, dropship e-commerce stores will be unable to accept payments online. With cashless economies becoming popular, secure and reliable payment gateways have become mandatory for all businesses.
If you have an ecommerce store or are in the process of starting an online store, it is important to understand the importance of a payment gateway, how it works and how you should decide on a payment gateway for your ecommerce store.
This article answers all your questions about payment gateways and gives you the top 6 payment gateways for your dropship store.
Table of Contents
- 1 What is a payment gateway?
- 2 How does a payment gateway work?
- 3 The importance of payment gateways for an e-commerce store
- 4 How do I choose the best payment gateway for my e-commerce store?
- 5 The best payment gateways for dropship e-commerce
- 6 Limitations of payment gateways
- 7 Why should you consider multiple payment options or stacking payment gateways?
- 8 Dropshipping payment gateway combos
- 9 Frequently Asked Questions (FAQs)
- 10 Final Thoughts
What is a payment gateway?
A payment gateway is an online payment service that acts as a third party between merchants and customers. It securely takes money from the customers and sends it to the merchants’ bank accounts.
Payment gateway analyze, transmit transaction data and authorize the transfer of funds between buyer and seller.
Transmission of transaction data is sharing relevant information, such as a credit card or debit card number that links to a bank account, to an issuing bank.
How does a payment gateway work?
A payment gateway functions by transferring the information between a payment portal and the front end processor or the acquiring bank.
Here is a detailed step by step guide to explain the working of a payment gateway –
- Customers who place their order on an e-commerce website do so by clicking the ‘Complete Purchase’ or an equivalent button.
- The customer’s web browser sends this purchase information to the webserver of the merchant. The dispatch of information is done in an encrypted form using an SSL (Secure Socket Layer) encryption.
- The transaction details are then forwarded to their payment gateway. The payment gateway, in turn, forwards the same information to the merchant’s acquiring bank via their payment processor. This transaction information is then sent to the concerned card association (Visa, Mastercard, etc.).
- The bank then receives the authorization request. The response of the bank is sent to the processor using a response code. The same is forwarded to the payment gateway and then to the cardholder and the merchant with the relevant information (whether the payment has been processed or declined).
- The merchant sends all the approved requests to his acquiring bank for settlement via the processor. These approved funds are deposited in the merchant’s account with the acquiring bank.
The importance of payment gateways for an e-commerce store
Payment gateways are very valuable tools for e-commerce businesses. They enable e-commerce sites to offer a single, integrated solution for the point of sale (POS) and payment processing. Payment gateways allow merchants to process credit, debit and other alternative online payments.
How do I choose the best payment gateway for my e-commerce store?
The selection of a suitable payment gateway solution for your business can often determine the success of your online business. The most important factors to determine the suitability of a payment gateway for your e-commerce site are security and services offered by the payment gateway provider.
“The selection of a suitable payment gateway solution for your business can often determine the success of your online business.”
Security is always a matter of utmost concern while selecting a payment gateway. Secure and PCI compliant stores are mandatory before you start accepting payments on you online. The payment gateway you choose for your e-commerce store must be secure to ensure there is no credit fraud.
There are many payment gateways to choose from, each offering a different set of service. Choose a payment gateway based on your target audience and their demands.
Find out the setup costs, transactional fees, monthly fees, the payment methods supported, popularity and international presence if you want to target international customers.
If you are starting a new e-commerce business, avoid signing up for a long term contract. A monthly rolling contract is the safest bet because it allows you to pull out of the contract if you’re not satisfied with the services.
The best payment gateways for dropship e-commerce
PayPal is popular in more than 200 countries. It accepts all popular credit cards like Visa, Mastercard, American Express, Citibank and more. To integrate PayPal with your dropship store, you will need a business account with PayPal.
It offers two sets of services to its customers.
PayPal Standard – The design of this subscription is such that the customers have to leave the purchase site to check out and sign in to their PayPal account. There they can pay via credit card or Visa without signing up.
PayPal Pro- It enables the dropship store owners to customize their checkout process. With this subscription, the customers do not have to leave the site. PayPal keeps the customers’ credit card details secure without sharing them with merchants.
Authorize.net helps dropship businesses to accept payments through a wide variety of processors. It enables the affiliated ecommerce sites to let their customers store their credit card details for future purchases. Authorize.net is popular in more than 33 countries.
Stripe is a US-based payment gateway used in more than 25 countries. It accepts all the major credit cards. Stripe is popular in the United Kingdom, Canada and Australia too.
Skrill is a UK based payment gateway designed for both businesses as well as consumers. It is available in 40 countries. Skrill is simple to connect to any bank account globally and takes good care of the security of your payment data. It also is an economical choice.
PlugnPay is an easy-to-integrate payment gateway. It supports both domestic and international usage. PlugnPay allows merchants to accept and manage payments in a secure environment.
6. Apple Pay
Apple Pay is designed for Apple devices. It enables merchants to accept payments with customers using Touch ID and Face ID. Apple Pay supports all popular credit and debit cards.
Using Apple Pay, dropship store owners can accept payments from millions of Apple users worldwide. It is a secure gateway as it does not save the transaction information or card numbers on its servers.
Limitations of payment gateways
1. May not accept all cards or payment methods
Most payment gateway providers highlight their acceptance of all cards and payment methods, they do not mention what they don’t accept.
As a dropship store owner, you need a payment gateway that accepts all payment options, especially those that are widely used by your target audience.
Read through the fine print and be in the know of which payment methods are not supported.
2. International shoppers may not be covered
As we’ve mentioned before, the popularity of payment gateways in different countries is quite varied.
“Your payment gateways must be capable of offering a localized checkout process and accept various currencies.”
3. Security concerns
Payment gateways deal with highly sensitive financial information and while most quality payment gateways will be secure, there are some risks attached.
For payments through mobile phones, you can secure the transaction but can’t control who has access to the customer’s mobile phone.
Then there’s the risk of Malware that reads passwords and infiltrates the user’s account.
“27% of customers report abandoning a cart due to a lack of visible security.”
Why should you consider multiple payment options or stacking payment gateways?
1. Makes it easy for your customer
The checkout process needs to be as convenient as possible for your customer. Statistically, 8% of the people abandon their shopping carts at the time of checkout due to the lack of a preferred payment method.
Multiple payment methods make it easier for your customers to complete their purchase.
2. Gives the customer a second option
Having more than one payment gateways give customers a chance to choose their preferred payment method. While one customer would want to use a particular credit card to build up points, the other one would like to have an easy mobile payment method.
The availability of payment choices draws more customers to your ecommerce site ad complete their purchase.
3. Backup for one when one gateway crashes
Multiple payment gateways act as each other’s back up at the time of a technical glitch faced by any of the payment options.
4. Helps in customer retention
A good purchase experience brings back the customers to your site. Offering more than one payment gateways to your customers helps them in completing their purchase without any hassles and makes them come back in the future.
Dropshipping payment gateway combos
Here are some payment gateways that work well together
- Stripe and PayPal
- 2Checkout and PayPal
- 2Checkout and Stripe
- PayPal and Skrill
- 2Checkout and Skrill
Frequently Asked Questions (FAQs)
1. Do VARStreet ecommerce stores support multiple payment gateways?
Yes, VARStreet supports and integrates with multiple gateways like Authorize.net, PlugnPay, Diamond Mind, etc. You can accept all major credit cards like AMEX, Master, Visa, Diners, etc. on your VARStreet ecommerce store.
Our PayPal integration helps you sell in minutes after you set up your store.
2. How secure are VARStreet stores?
All VARStreet stores are PCI compliant. We also have frequent security audits on our e-commerce platform. VARStreet has been one of the early users of the SaaS model since 1999. We have successfully supported several hundreds of clients with consistent reliability and security.
3. Which are the popular payment gateways in the US?
- BluePay Processing LLC
The growth of e-commerce became possible due to payment gateways – the services that make online purchases quick, secure and convenient.
The payment gateway you offer is a part of your branding. Therefore, a good choice of payment option is a wise investment towards the growth of your business.