Choosing a payment gateway provider is a critical step before launching your business. You might be ready to start doing business and pick a payment provider at random. After all, you can always migrate later to a another payment provider… right?
In theory, migrating to a different payment provider seems simple. But in reality, you don’t want to have to migrate later and risk disrupting your business. Migrating can be a challenge, especially if you don’t store the cards in a vendor-neutral vault (i.e., tokenize the credit cards with a provider other than your main payment processor).
We recommend you shop around before committing to a payment provider. Ask yourself the types of features your business will need one, two, or five years down the road.
Pricing is a key factor
Pricing is definitively one of the key factors to consider. Flat-free or tiered pricing can be appealing because of its simplicity.
However, pass-through pricing (where the exact costs from the networks are passed down to you) can be cheaper. These fees depend on your region, industry, and the type of cards you will process. (See Visa and MasterCard rates for more details.) Run the numbers with your projected sales and compare which model makes more sense to you.
What features do you need to have supported?
Beyond pricing, you need to make sure the gateway will actually support some advanced features that you might need:
- Account updater
- Level 2 and Level 3 processing
- CNP versus CP transactions
- Fraud detection
- Card verification features
- Type of cards
- Alternative payment methods
- Level of support
Account updater
If you are storing the credit cards with the vendor, make sure they support the ability to automatically update the information (number, expiration date, etc.). This is important because cards, of course, expire regularly, or get stolen. This is especially important to minimize churn if you are running a subscription service (like software-as-a-service, or SaaS).
Level 2 and Level 3 processing
When doing B2B transactions, you can lower your costs by sending extra information about the payment, namely, level 2 or level 3 data. Does the provider support passing this data to the networks?
Card Not Present transactions (CNP) versus Card Present (CP) transactions
Will you need to process both Card Not Present and Card Present transactions? If so, does the provider supports EMV? How about Apple Pay?
Fraud detection
What type of fraud detection system does the provider offer? Can you configure the thresholds to avoid false positives in certain markets?
Card verification features
Does the API support an Address Verification System (AVS) and Card Verification Value (CVV) code? Are 3-D Secure and SecureCode supported? (The latter is required for Maestro transactions, for example.)
Type of cards
Supporting Visa and MasterCard is a no brainer, but do you also need to support American Express, Diners Club International, or JCB (Japan Credit Bureau) cards? What about connecting to the dozens of banks in China issuing their own debit cards?
Alternative payment methods
In niche markets, do you need to support cash-based payment methods (for example, Boleto)? Does the provider support them?
Level of support
While technical support is essential, your account manager also needs to provide business support to help you maximize your acceptance rate. The account manager needs to understand the industry you’re in.
As you can see, there is a lot to think about before choosing a payment gateway. The list above is only the tip of the iceberg.
Eventually, it might even make sense to work with several payment providers and decide in real-time, on a per transaction basis, which provider to use to minimize your costs. Luckily, the space is over-crowded. Shop around, and if you need more guidance, contact us!
