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Choosing a Payment Gateway? Here’s What to Consider

By Jordan Dooley

When it comes to setting up shop online, merchants have a lot of questions to ask and answer about their payments process. What payment processor should I use? What e-commerce platform is best? What security protocols are necessary? What payment methods should I offer?

It’s overwhelming.

However, these are critical questions, and how to choose a payment gateway is right in the middle of them.

Merchants may wonder: Do I really need a payment gateway? Yes, you do. Gateways allow merchants to securely transfer payment information and improve the checkout experience, making payments seamless for you and your customers.

Why Payment Gateways Matter

Payment gateways are a crucial middleman in the payments process. When a customer makes a purchase on your site with a credit or debit card, a payment gateway encrypts and sends the data to your payment processor for authorization. Once approved, the gateway lets your ecommerce platform know, so the transfer of funds can take place.

Payment gateways are a turn-key solution for merchants that bring an extra layer of security while saving time and money. Gateways take the burden of software integration off a merchant’s plate and give peace of mind that customer data is safe throughout a transaction. They take on the responsibility for ensuring fast and secure transactions.

As a result, merchants and issuers are protected from lack of funds, expired cards, closed accounts, or cards over the credit limit.

Most importantly, with payment gateways in the equation, merchants and customers are protected from fraud and from hackers who attempt to intercept payment data. Whatever payment options you offer, gateways shoulder the potential fraud and credit risks, making life easier for you, the merchant, while ensuring that you get paid.

The end result should be a ‘smoooth’ and secure payment experience for customers.

What to Consider When Choosing a Payment Gateway

1. Security features

The first place to start is with security. The most secure payment gateways feature P2PE (point-to-point encryption), which fully protects data across a secure environment during each step of a transaction. P2PE thwarts outside threats, protecting a merchant’s e-commerce system from breaches and fraud that cut deep into the bottom line.

Second, look for a gateway with the ability to “tokenize” payment data. Although the core components of encryption and tokenization are similar, there are important distinctions.

Tokenization involves substituting sensitive card data and replacing it with a one-time code, known as a token. This “token” has no value, and cannot be traced back to the cardholder since it is only associated with one specific transaction. In the event of a breach, these tokens are meaningless because they can’t be decoded into real values. Encryption protects data by making it unreadable to those who access it without a secret decryption key.

By using both tokenization and encryption, merchants can meet compliance requirements while securing transaction data for customers.

2. Payment integration capabilities

Consumers today value choice — choice in how they shop online, how they navigate a merchant’s digital channels and how they pay online. Merchants can empower customer choice by choosing the right payment processing and payment gateway solutions for their company.

New payment methods pop up all the time. To keep up, you need a gateway solution provider that values flexibility and scalability.

Thanks to the rise of the API economy, merchants no longer need an entire team of developers to integrate new payment options or enhanced security features. The right payment gateway will quickly, easily and securely integrate necessary features into your existing system. No need for a major overhaul.

We’ve found that by helping merchants provide a personal checkout experience, conversions at check out increase by 20%. Customers can easily pay in their preferred way, whether that’s immediately by credit card, through instant financing options, or even deferred payments.

These are the key features to look for in a payment gateway:

  • Are the integration methods user-friendly?
  • Does the gateway provide flexible payment integrations so you can adapt as new payment products and solutions enter the market?
  • Does the gateway provide pre-configured toolkits and developer-built codes that are easily dropped in to your existing e-commerce platform?

A merchant-friendly gateway takes the guesswork out of the integration process, making it easier to accept diverse payment methods across multiple digital channels. Customers want choice — and you can provide it.

3. Payment gateway compliance requirements

Merchants that accept payments online need a payment gateway to fully protect their customers, their business, and to meet compliance requirements.

Enter the PCI DSS (Payment Card Industry Data Security Standard). PCI DSS is an industry-wide set of security standards for companies that accept, process, store or transmit credit card data. It was created by the major payment card brands to ensure companies are following procedures to maintain a secure card environment.

To make compliance less burdensome for merchants, payment gateway providers, like Klarna, take on the responsibility for making sure your credit offers are inline with local legislation. Merchants don’t have to worry about the complexity and costs of compliance on their own, the payment gateway handles that.

Choosing a Tier 1 PCI DSS compliant payment gateway provider checks another security concern off your list. Another step toward the smoooth payments process we’re all working toward.

Giving Customers a Secure and Seamless Payment Experience

Payment gateways are a valuable and central part of the overall e-commerce ecosystem. The right payment gateway protects transaction data and helps merchants stay compliant with demanding standards. They also play an important role in a business’ growth strategy, letting merchants integrate new payment methods to  meet customer demands.

For our team at Klarna, that’s our goal – to create win-win experiences for merchants and customers alike. Payments should be effortless and never hold you back. Investing in the right payment gateway solution can get you there, making your customer journey that much smooother, while boosting sales in the meantime.

To get an interactive look into the payments ecosystem, check out our our infographic: The Customer Journey Through the Payments Universe.