The payment gateway is as important a part of international ecommerce as it is of your domestic operations. To succeed in your multi-national endeavor, it is crucial to understand the role the payment gateway plays by learning about some of the most common myths about this essential payment technology.
What are payment gateways?
Think of a payment gateway as the virtual equivalent of a point of sale (POS) system in a physical store. This third-party software authorizes and processes credit card transactions made by your customers by sending securely encrypted information to the acquiring banks and credit card companies. Word of the payment’s declination or acceptance is sent back to the gateway and then relayed to you. All in a matter of mere seconds.
Now you know what payment gateways do. However, you may still harbor some mistaken ideas about them. There is no time like the present to dispel some of the major misunderstandings.
Myth: Payment gateways are repositories for your customers’ money.
In reality, the gateway’s role is to gather and securely store the payment data when it is provided by the customer. It then immediately forwards the payment request to the bank, which in turn sends the encrypted details on to the customer’s financial institution for verification and confirmation. At no point during the verification, confirmation, or notification process does the gateway have access to the customer’s funds.
Myth: Payment gateways are really just banks.
Actually, payment gateways aren’t banks at all. They are more like intermediaries that link the merchants to processing banks. They can’t authorize or complete transactions. They are simply secure conduits for the secure transmission of sensitive payment information.
Myth: Payment gateways bear no responsibility for data security.
If you consider payment gateways to be nothing more than middlemen, it stands to reason that you might also think that they play no role in protecting merchants from data security breaches. This could not be further from the truth. In fact, they are responsible for adhering to the Payment Card Industry Data Security Standards (PCI DSS). In doing so, they help to protect the security, integrity, and confidentiality of all customer details as they flow back and forth between the various players involved in the payment process.
Myth: All payment gateways are created equal.
In reality, there are a wide array of gateway options designed to meet the needs of a diverse variety of domestic and international businesses. Therefore, you need to look for one that is compatible with your individual business model when it comes to customer loyalty programs, compatible ecommerce solutions, multi-currency conversion, cash advances, and so forth.
Myth: You should always choose the gateway provider with the lowest price.
The truth is that cheaper is not always better. That’s true when it comes to picking your gateway partner. While one company might offer you a low processing rate, you also need to bear other crucial factors like quality customer service, state-of-the-art hardware and software, compatibility with existing systems, and funding times just to name a few. Compromising on any of these just to get a rock-bottom price will likely cause you to regret your decision. Sometimes you actually do get what you pay for.
Larger payment gateway companies are always better.
There is something to be said for working with a gateway provider who has demonstrated their longevity and credibility. However, that does not necessarily mean that you should avoid smaller vendors without giving them a closer look. In the end, you might find that a lesser-known firm can give you the security, pricing, and personalized customer care and technical support that you’re looking for.
Myth: International payment gateways are always expensive.
In reality, the competition in the international payment gateway market is extremely cutthroat, a fact that you can turn to your advantage as a merchant. Because of these intense rivalries, you are often able to negotiate international transaction pricing that is only slightly higher than what you would pay for domestic transactions. Just be aware that other factors also influence what you will pay, including sales volume, maximum ticket size, your personal credit score, and the level of risk your industry represents.
Myth: International payment gateways are not safe.
The truth is that some are and some are not. Just as you would do when vetting any other contractor, you should do careful research before choosing an international provider. Gather information such as the age of the company, the countries they are registered in, transaction fees charged, payout, and overall reputation. In the end, you’ll want to partner with a PCI-compliant gateway that can provide certified, point-to-point encryption, along with the very latest in tokenization.
Myth: You will lose money with an international gateway.
Again, this comes down to doing your homework and choosing a reputable vendor. If possible, get your gateway through a domestic payments technology company to allay your fears. Once you have chosen a provider, start by only processing a small volume of sales until you are sure you have made a good choice. If you regret your decision, don’t assume that you are locked into a contract. In some cases, you can opt out or renegotiate terms.
Myth: International gateways are limited to accept only credit cards
The truth is that you have options in addition to just accepting international customers’ credit cards. As you do your international gateway research, ask your potential gateway partners if they will allow you to also take echeck/ACH payments.
Expanding your ecommerce business to allow for multiple currencies and international customers requires a big leap of faith. However, as long as you plan carefully and keep track of all the moving parts, taking this step can bring huge dividends to your brand, not to mention your annual profits statement. Choose a gateway that integrates with your other systems and company goals. Then, leverage it to provide secure, reliable payments to customers in all the countries you serve!