Ecommerce Business partners: Payment Gateways

 "A payment gateway is an e-commerce application service provider service that authorizes credit card payments for e-businesses, online retailers, bricks and clicks, or traditional brick and mortar." - from Wikipedia.
Payment gateway is prerequisite component or business partner for launching your website. It is the way to collect the money from the customer. Once you have made tie ups with suppliers and listed the products on your website payment integration needs to be done to complete a transaction.

Choosing the Best fit

Initially choose the payment gateway which suits you. Evaluates all the possibilities and finalize good start up pack. Generally start up pack have less  sign up fees but more transaction fees. You can choose that and once you have sufficient sales you can slowly migrate to higher pack by paying higher sign up fees and and lower transaction charges payment gateway. The decision factors are:  sign up fees, transaction charges, customer support, currencies supported and method of getting paid. Some of well knows payment gateways are PayPal,  Amazon Payments,  Google Checkout,  Dwolla,  Authorize.Net,  Stripe,  2Checkout. We will cover more on this in our next post.

 

Building your own payment gateway - the migration

This steps make sense after few years, when you are well funded and have good number of transactions. The first question come to your mind is why to have a payment gateway of your own? The answer is simple - to save money. The E-commerce business runs on very small margin and you cannot sustain on long run if your margins are eating up by payment gateway charges. So the question is how to migrate? The best strategy is to pick up the  highest number of transaction bank, and build API for that and slowly add more banks.

Example: Your 30% of transactions are on American Express credit card then first write code of American express credit card API. Then slowly direct all the transactions of American Express locally and rest to the payment gateway. After it is stabilized the look for the next migration of credit card.  Suppose Citi  bank card has 20% of your total transactions then it make sense to have API for that card locally. In other words, 90% of revenue is generated from only three banks credit card, then by having your own API's of those three banks, you can save 2-5% transaction fees on 90% of revenue.

After few months you will have your own payment gateway for all credit cards. At the end, after few years  you have all the code and infrastructure to leverage on your existing framework and be a payment gateway and monetize on that.


Reference:
Wikipedia payment gateways
how-do-payment-gateways-work-and-integrate-with-your-ecommerce-site
Tutsplus article