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How to choose a payment gateway for processing online?

Last time we examined the way in which to build an optimal payment page for maximum conversion. One of the most dominant parameters of this process is your processing partner, i.e. - your payment gateway or iPSP. Many businesses ask us how to choose a good payment partner or what criteria we should take into account when comparing several payment operators we are choosing from.

Thankfully, my good friend and colleague, Stuart Ballan, has published an excellent article dealing exactly with this issue!

See link to the full article that was originally published in Finance Magnates website:

In his article, Stuart relates to a model he published. It’s called the S-Factor Model. Let’s go over it:

  1. Security & Stability – the payment service provider is responsible for transferring the money that has been accumulated from the customers’ transactions, to your bank account. Therefore, it is crucial that this provider exhibits the highest security standards. In addition, you should check: how many years the iPSP has been in business, what its rating is in the market, what people write about it on Google, and its financial stability. You must verify that there is not any suspicious information that could cause future issues with your transaction processing or money transfers.

  2. Standards – check whether your payment processor has a processing license and under which regulation and standards it is subject to. Regulation is aimed at verifying that the merchants are working properly in front of their end customers. Payment processors that are licensed will examine your activity very carefully, by protecting the public from the less-desirable merchants. Regulated payment processors also protect all of their own merchants.

  3. Staff – who are the people that you are about to work with? How many people are on the team and where do they operate from, “People buy from people they like”. It is highly recommended to meet the sales manager face to face in order to learn about his experience and the history of the company. These people will take care of your money so any lack of information or suspicious information is a warning that should be taken seriously.

  4. Service – all of us understand the value of good service in our day to day lives. Whether it involves a waiter who gave us great service in a restaurant or a dreamy vacation in which all of our needs were met. Putting aside processing fees, along the way, we will experience many events in front of our iPSP, and the level of service will set our comfort zone. When there are open issues concerning money, fast and professional answers are of the utmost importance and what we seek. It is recommended to check the standard of SLA: is it phone, email or chat, what are the hours & languages, is it a general merchant call center or a dedicated account manager?

  5. System – what systems does the payment processor have in place, how complex is the technical integration, what is the downtime of the system and is it secure in the required security standards? In addition, make sure you get a BO system or portal to watch data and download your ongoing reports on all transactions.

  6. Settlement – how frequently does the payment processor transfer the funds from your merchant account to your bank account? In cases where the processor holds the funds for longer than a week, you must ask for an explanation. The processors earn from processing fees and not from interest over your funds. For a merchant in medium risk level or less, a week or less would be the market benchmark.

  7. Solutions – one of the obvious things is of course the diversity of payment solutions offered by the payment processor and whether these payment solutions support different markets around the globe. In addition, ask and check the added value features, such as customized payment page, dynamic descriptor, subscription etc. Do not settle for the marketing materials, ask and check deeply…

  8. Self Sufficient - How self sufficient is your payment processor? In other words, which third parties does it rely on to provide its payment products and services to you? In the event that these third parties stop working with your processor, what will the level of financial damage and risk be to you?

  9. Sanity – after checking all parameters above, perform a last “sanity” check. Talk with friends and colleagues who operate in the market and see their opinion and experience with the payment processor you have chosen.

Summary – selecting a payment processor is like choosing a marriage partner. It is best to check all details and choose correctly in order to avoid unpleasant separation in the future. As you can see, we didn’t discuss “pricing” and with reason; - if the lowest price is important to you, you’re going to have to give up most of the above, because excellence costs money ☺

Last but not least, an important bit of advice from us; - once your volume grows, you should connect with a few payment processors, as you will always have a backup in case of communication issues with one of them. It will also give you leverage in fee negotiation once there are a few processors that compete for your volume. The optimal number we recommend is 3 payment processors, no more no less.

Payments Optimization is a niche consulting company specializes in e-payments and risk management for ecommerce for all players in the payments arena: Acquirers, Payments Gateways, High risk merchants and startups.

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