If you’re offering paid goods or services online, you should be familiar with online payment services. Although the classic methods of online payment like debit and credit cards remain very important and can’t be forgotten, internet payment services are fast becoming a necessity in the modern world. And while these services usually come at a cost, they do offer two distinct ad­vant­ages over con­ven­tion­al payment methods: Firstly, online payment systems can be in­teg­rated quickly and easily into existing web projects. Secondly, they offer customers increased security thanks to their immediate con­firm­a­tion of payment and speedy payment transfers.  Customers trust online payment services, and having the option to pay through one when online shopping is in­creas­ingly becoming a decisive factor for many users. So who are the current providers and how do their services differ?

What are payment gateways exactly?

The basic principle of an online payment system is that the trans­ac­tion doesn’t take place directly between a buyer and a seller. Instead, payment goes through a third party company. In this way, security is increased: the buyer only pays after having received the ordered goods, while the seller isn’t left sitting on an unpaid bill after having shipped the goods. The user doesn’t pay anything extra either – payment gateways make their money by taking a small per­cent­age of the transfer received by the seller.

In most cases, the web shop or service provider has to start by opening an account with the cor­res­pond­ing payment gateway provider, in order to use their service. Re­gis­tra­tion can be done quickly, usually only requiring personal or business in­form­a­tion and bank account details. As far as the online payment pro­cessing goes, there are three different options at present:

  1. The payment gateway account functions as a virtual bank account, with the buyer uploading money into it. When a purchase is made, the payment provider withdraws the cor­res­pond­ing amount from the customer’s virtual account and transfers it to the seller’s account.
  2. The buyer enters bank account details into the gateway service, which are then verified by the provider. After this has been done, payments can be auto­mat­ic­ally and directly withdrawn from the buyer’s personal bank account by the online payment service, before trans­fer­ring the amount across to the seller.
  3. The payment gateway directs the buyer to their online banking service, where they can pay the re­spect­ive sum via a bank transfer. In the meantime, the seller receives a payment guarantee from the re­spect­ive bank.

It’s not just the pop­ular­ity of these al­tern­at­ive online payment options that means companies involved in e-commerce should take them seriously. Good payment gateway providers, like the ones listed below, are secure and flexible – earning the trust of customers. This trust is then reflected onto the online shops which feature them, in­creas­ing the re­spect­ab­il­ity of an online web presence. The following examples are three of the best-known and most trusted payment gateways available today.

PayPal

PayPal is the most famous example of an online payment service, with over 188 million customers worldwide. Ori­gin­ally developed as an exclusive concept for eBay, this payment gateway is widely available across America, as a payment option for giant online stores like Walmart, Best Buy, Sears, and countless more. In fact, PayPal’s own store directory has 1166 well-known featured stores to scroll through, with thousands more unlisted. PayPal has the option of acting as a virtual bank for users, allowing them to pay money into it in advance, as well as automatic with­draw­als from bank accounts. And thanks to its app optimised for iOS, Android, and Windows phones, payment can be made easily when you’re on the move. The following features demon­strate why PayPal is so popular for desktop and mobile payments:

  • Buyer and seller pro­tec­tion
  • SMS security key
  • Anonymous payments (seller has no access to buyer’s bank account details)
  • Data en­cryp­tion

For shopping customers, there are no ad­di­tion­al costs to using PayPal what­so­ever. Retailers pay a per­cent­age com­mis­sion, dependent on their monthly revenue, along with extra costs for overseas trans­ac­tions. Ad­vant­ages: the market leader; apps optimised for mobile devices; high security standards; worldwide brand re­cog­ni­tion

Stripe

Stripe is a relative newcomer to the online payment system scene, starting life in 2010 under the name /dev/payments. It became a big success very quickly, receiving mul­ti­mil­lion dollar in­vest­ments from many sources, including three original co-founders of PayPal. But unlike PayPal, Stripe is an in­teg­rated system, pre­dom­in­antly designed with pro­gram­mers in mind. Web de­velopers can add this online payment pro­cessing into their website coding without having to create and manage a Stripe account, meaning less external main­ten­ance. As a result, Stripe has focused on making its software as quick and easy as possible to integrate. The features section of their website offers an instant in­stall­a­tion test example for de­velopers working with scripting languages curl, Ruby, Python, PHP, Java, Node, or Go. To further simplify life for web designers, Stripe has an at­tract­ive checkout design built in. It’s easy to use, is visually striking, and means that coders don’t need to spend time creating their own checkout function. Stripe focuses on global payments and has excellent storage functions for saving customer details like card numbers, making it perfect for sub­scrip­tion pro­cessing and other types of recurring payment. Here are Stripe’s features in summary:

  • ‘Clean, com­pos­able, complete’ APIs
  • Designed for de­velopers with easy in­teg­ra­tion
  • Simple but stylish built-in checkout design
  • Scalable for busi­nesses of all sizes
  • Sub­scrip­tion APIs for recurring billing
  • Global payments
  • PCI Service Provider Level 1 cer­ti­fic­a­tion for security

Stripe is designed to control your whole payment system, handling credit card and debit card payments as well as ACH and Bitcoin transfers. Its standard pricing structure takes a per­cent­age cut of 2.9% per suc­cess­ful debit or credit card charge, plus an ad­di­tion­al 30 cents. Fees are reported in real time, and big business en­ter­prises can contact Stripe directly to negotiate better rates. Ad­vant­ages: designed for de­velopers; handles all types of trans­ac­tion; very secure; easy to integrate

Authorize.Net

Authorize.Net is a much more tra­di­tion­al payment gateway. Unlike Stripe, it functions over the internet using websites and IP addresses. This means there’s no software to install: the entire system relies on hosting through a browser. Authorize.Net has also been around a lot longer: founded in 1996, the online payment system was bought by Cy­ber­Source in 2007 for 565m USD. Cy­ber­Source was then taken over by Visa in 2010, making Authorize.Net a sub­si­di­ary of the globally re­cog­nised digital payment company. Authorize.Net features a Merchant Interface website login, where companies can manage all their trans­ac­tions, reports, settings, and other accounts. It offers automated recurring billing as standard, along with its Advanced Fraud Detection Suite (AFDS) to help busi­nesses feel secure while handling online trans­ac­tions. The payment gateway has also recently announced a part­ner­ship with Apple Pay, allowing users to process any in-app payments directly when using iOS 8 apps. Authorize.Net pre­dom­in­antly aims its product at small merchants. In the SMB Trust Index for the second quarter of 2016, Authorize.Net re­gistered an NPS score of 45, placing it fourth on the ranking of most trusted tools for small to medium sized busi­nesses, behind household names like WordPress, MailChimp, and Google. Here are some of its features:

  • Browser-based hosting payment gateway
  • No in­stall­a­tion necessary
  • Handling of all major and some al­tern­at­ive payment methods
  • Free mobile app
  • Free Verified Merchant Seal to build user con­fid­ence
  • Advanced Fraud Detection System for heightened security
  • Automated recurring billing

Authorize.Net offers a classic pricing structure for online payment services, operating at the same ‘per­cent­age cut plus fee’ pricing level as Stripe. But they also have an ad­di­tion­al one-time setup fee of 49 USD and a monthly gateway charge of 25 dollars. Ad­vant­ages: trusted brand; AFDS security; browser-operated with no in­stall­a­tion

Online payment services - summary

PayPal is un­doubtedly the market leader when it comes to internet payment gateways, making it essential to integrate it into your web project. But there are other al­tern­at­ives, like the two listed above, that can be equally useful for e-commerce busi­nesses. While some come with setup costs, others are also free – so it makes sense to trial them as an addition to your payment options. The most important thing to remember is that your customers trust these well-known online payment systems, so having one or two on board can really improve your chances of making con­ver­sions.

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