A payment gateway is a merchant service provided by an e-commerce application service provider that authorizes credit card or direct payments processing for e-businesses, online retailers, bricks and clicks, or traditional brick and mortar businesses. It is the equivalent of a physical point of sale terminal located in most retail outlets. It encrypts sensitive information, such as credit card numbers, to ensure that information pasessafely between the customer and the merchant. In addition, a payment gateway may provide additional security features such as fraud prevention and data encryption to further protect both the merchant and the customer.
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Data for today’s episode is provided by Mercator Advisory Group’s report – Crowded Payment Gateway Landscape Offers Much To Online Merchants, Part 2: U.S. Market Company Profiles
5 Considerations for Selecting a Payment Gateway:
- Transaction fee pricing should not be the main determinant. Fraud attempts, buyer disputes, and chargebacks play a substantial role in profitability.
- Scalability is necessary for merchant growth: payment types, ease of accepting cross-border transactions, processing volume, and transaction latency are key scalability areas.
- Ease of use with APIs and related tools provides smoother systems integration with merchant partners: enabling faster updates and connectivity.
- Integration with online marketplace platforms represents an important expansion of sales channels.
- Revenue optimization boosts sales and lowers costs: B2B invoicing for improved cash flow, sales data analytics that reveal buying patterns and identify the best customers, etc.
The good news for online merchants, large and small, is that they have a wide choice among payment gateway vendors in the U.S. market. This bodes well for businesses who gain negotiating power as they deal with many gateways competing to offer the best array of online payment services. A downside for merchants is that the gateways have a propensity to check the same boxes of online payment acceptance features in marketing their services. So, distinguishing among a list of gateway vendors can become a tedious exercise for many merchants. A new research report from Mercator Advisory Group, Crowded Payment Gateway Landscape Offers Much To Online Merchants, Part 2: U.S. Market Company Profiles, features U.S. market payment gateways and provides a process and decision making criteria for merchants to use in a payment gateway selection.
“The e-commerce sales channel has grown exponentially, and the number of payment gateways in the U.S. market has followed the demand. Many are fintechs that began in the last 10 years, while others are found within legacy merchant acquirers, processors, card networks, and issuers. Further, new entrants are coming into the market via the start-up route or from overseas competitors. Online merchants are winners in that they have never had such a large choice of vendors to choose from. But many merchants find the selection process among payment gateways to be daunting,” commented Raymond Pucci, Director, Merchant Services Practice at Mercator Advisory Group, the author of this report.