How to Pick the Best Payment Processor for Your E-Commerce Store

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How to Pick the Best Payment Processor for Your E-Commerce Store

Just like all other businesses, one of the most exciting aspects of starting an e-commerce store is watching the money flow in! Almost everyone remembers that first payment! But how are these payments processed? In majority of cases, it is a reliable payment processor that makes it all happen.

Generally, when payment processors are discussed, people perceive them to be quite simple in their operation. They think that all that these processors do is simply take the payment from the customers and then deposit it into the merchant’s bank account. Seems easy, right?!

It is this apparent simplicity only which makes the selection of payment processors a difficult affair. Before making the selection decision, you need to weigh the advantages and disadvantages of one payment processor against the others. And that is exactly what we’ll help you with here in this article. But, first let’s get the basic facts right.

Payment processors vs. payment gateways vs. merchant accounts

It’s very important that you understand what each one of these mean and what they constitute. When talking about payment processing business on the whole, there are 3 entities involved – payment gateways, payment processors and merchant accounts.

Many people who’re new to the e-commerce industry confuse payment gateways with payment processors. Payment gateways do nothing more than decline or approve the different payment methods provided by the customers (based on their authenticity).

Payment processors on the other hand are responsible for transferring the data/money from the customer’s bank into yours. Normally, all payment processors nowadays feature a merchant account that holds the money collected before transferring it to your bank account.

For a long time until recently, vendors used to get merchant accounts and payment gateways from different entities, and then connect them together.

But since the past few years, all-in-one payment platforms like PayPal, Stripe or Braintree have been commonly in use. These make an ideal option for any business owner who’d like to start small and doesn’t have the funds to bear the initial setup costs of separate gateways, processors and merchant accounts.

unsure young woman scratching her headHow to go about picking a payment processor?

Your decision to invest in a particular payment processor should be based on 3 important criteria – the costs involved, ease of usage and data security. Let’s look over each one of them separately.

The costs involved

As there are plenty of options available in payment processors, I won’t be able to give you the exact cost breakup of every service separately. However, following are some important parameters that you should consider when weighing different payment processors based on their costs:

  1. The registration and set-up charges – These charges vary from vendor to vendor, and will depend on whether you opt for only payment processing or an all-in-one solution. On a tight budget? Go for the service that has lower setup costs. However, be prepared to pay higher transaction fee. You can opt for the cheaper variant for now and aspire to upgrade once your business picks up.
  1. Recurring fee – Broadly speaking, there are two types of recurring fee: the transaction fees and the monthly fees. The former includes different categories like the authorization fee, AVS (address verification) fee, gateway fee etc. The monthly charges are usually towards the payment gateways.
  1. Hidden charges – Well, these require no introduction! One of the most popular means of extracting some extra dough, hidden fees can be applied under different garbs like order cancellation fee, bounce payment fee etc.! It’s important that you tread cautiously when a prospective provider offers you very cheap payment processing plans, as he may bombard you with all sorts of hidden fees at a later date. Lookout for those tiny asterisks, especially when the footnotes corresponding to them are hidden somewhere on a remote page.

Ease of usageEase of Use Green Road Sign with Dramatic Clouds and Sky.

This is the aspect wherein different service providers will differ greatly. However, when considering ease of usage, you must stick to the following basics to make your selection:

  1. Compatibility
    First and foremost, make sure that the payment processor is compatible with at least 3 or 4 big credit card brands, apart from the major debit cards. Also look out for one which supports payments via PayPal. A large number of businesses as well as customers nowadays make online transactions using their PayPal account balance. Hence, having a payment processor that doesn’t accommodate these people can be quite harmful for your online business.
  2. Multicurrency processing
    If your e-commerce store will be catering to customers throughout the world, you’ll have to opt for a payment processor that features multicurrency processing. Check its fees carefully as several providers charge hidden fees, normally referred to as currency conversion fee or the cross-border fee when processing such foreign transactions. All in all, carefully base your decision on the services and their corresponding costs.
  3. Good international support
    Furthermore, if you’re situated out of the United States or plan to operate internationally, you’ll have to look for a service provider that offers good international support at an attractive price. Please keep in mind that finding an efficient payment processor outside of Western countries may a pretty challenging affair as a large majority of them are still having a hard time adapting to globalization.
  4. creditcard mobile payment hand holding tablet flat designOn-site processing
    Check if the service provider has on-site processing feature or not. On-site payment processors normally stick a simple payment form inside a small window on the e-commerce website. On the other hand, the offsite processors make the buyer visit an altogether different website by following a link, to make the payment.Unless you’re in the service industry, having an off-site payment processor may not be a very good idea. A good majority of e-commerce portals that rely heavily on impulsive purchases by visitors, have efficient on-site payment processors. This is to avoid the possibility of customers getting ample time to rethink their purchase when following the payment link to another website. Although the timeframe may be negligible, it may be long enough for impulsive buyers to change their mind.
  5. Customer data and analytics
    Find out whether payment processor you have in mind provides integrated services like data and analytics related to the customers. Anyone serious about growing his/her business and thinking long-term would want to go with a payment processor that provides all such data.
  6. Payment processing speed
    The speed with which payments are processed is another important criteria that needs consideration. But unless you’re so stiff about the finances that you require every penny in your account as soon as possible, this shouldn’t be a major issue. If a prospective payment processor offers you all the features you’re looking for, at an attractive price, it may not be a good idea to let go of it just because it lags behind slightly in terms of its processing speed.
  7. Customer service
    Last but not the least, comes the very important aspect of customer service. Check if the service provider offers a 24/7 customer service support. If yes, which all mediums of support are available – email, phone, chat? How well-trained are its representatives? Although this may seem unimportant, companies that take their customer service operations lightly may not just damage your feelings during glitches, but the business too.Imagine your payment processor being down when you’ve just launched a product and there’s a beeline of customers waiting to buy. There’s a good chance they may hop over to your competitor’s website to make their purchase/s. Carry out some research on Google and find out what other customers have to say about the particular payment processor you have in mind.

SecurityClosed padlock over a stack of money and cards

Well, who doesn’t want enough layers of security as can be accommodated inside his/her budget?!

When thinking about the security aspect of your payment processor there are certain basic minimums you cannot afford to do without. First is the data encryption. Going a step further, you can look for features like PCI compliance, implying that the provider conforms to some basic safety regulations set out by the PCI (Payment Card Industry) standard of data security.

Additional important security related features you can look out for are VeriSign SSL certificates, billing address confirmation, CVV2 verification and more. On the whole, when it’s about the security of data provided by customers, don’t hesitate in going out of the way and over your budget too, if needed. Even if it means making the buying process slightly more complicated, do it. Both you and your customers will appreciate it in the end.

Final word

Payment processing industry does over $ 70 billion worth of business every year. Hence, considering the moolah involved, you can expect the service providers to be engaged in cutthroat competition. They’ll try to outdo each other and will go out of their way to persuade you with different promotions and attractive offers. Don’t fall for all such gimmicks. Do your own due diligence before making the final selection.

As complex as the payment processor selection process may seem, the above detailed guidelines will help you in weighing all the options more effectively and make an informed investment in the end. All the best!


Hi, I’m Mark! I’ve been an online entrepreneur, writer, website flipper and more for over 8 years now. Having faced the highs and lows of the online marketplace first-hand, I’ve learned quite a few things along the way. I’d love to share all those learnings with you here on this blog! Buying/selling websites can be great fun, provided you’re aware of the right tactics and know how to implement them correctly. My posts will help you do just that!

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