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12Jun

Choosing a Payment Gateway for Your Shopify Store: 5 Essential Tips

How to choose a payment gateway for a Shopify store

A perfect design, cutting-edge features, and excellent user experience are all important characteristics of an e-commerce solution, a Shopify store in particular. When it comes to online shopping, though, nothing beats the checkout page in its significance.

How easily and quickly your customers can pay for their purchases has a serious impact on the conversion rate and, thus, your bottom line. Apart from the UX of the checkout page itself, the quality, security, and speed of the underlying payment gateway play a vital role in establishing the reputation of a reliable and trustworthy Internet seller.

If you’re just starting out on your Shopify journey, one of the first things on your mind should be picking the right payment service provider (PSP). While the vendor offers numerous options for online merchants to accept money from customers, some of those may prove to be unsuitable for your particular niche or type of merchandise.

There are other essential things to consider as well. In this post, we would like to give you some advice related to selecting an optimal payment gateway or gateways for your Shopify store. Let’s get into it.

A Bit of Theory

What is a payment gateway?

We’ll begin by explaining what a payment gateway (PG) is in case this is a new term for you. A PG is a software solution whose primary function is to ensure that the money a customer pays on a Shopify store or another e-commerce site through a credit card securely lands in the site owner’s account.

In essence, a PG acts as an intermediary between an online seller and consumer. The Internet is a virtual space where merchants themselves have no viable means to check the authenticity of the number, expiration date, and other data related to a customer’s credit card.

Just imagine what problems you would have to face if you conducted financial operations with no PG between yourself and your customers. You would have to be on your own against a plethora of cybercriminals who might simply steal someone else’s financial data and enter it on your site. A PG is your primary weapon to avoid these brand-damaging and money-losing incidents. It encrypts all data and checks customers’ identities for you.

There are a lot of PGs out there. All of them have some unique features that distinguish them from their counterparts. That said, the flow they all follow is identical. The image below illustrates the main points along the way that money makes when migrating from a customer’s to a merchant’s account.

How a payment gateway worksNow, let us give you some advice concerning the choice of payment gateway.

Practical Tips

1. Consider the Default Option

Consider the default option

Why make the extra effort and use third-party tools? The vendor provides its own payment gateway to everyone who has started business on the platform. The name of this solution is Shopify Payments.

It takes just a little time to get Shopify Payments up and running. Then, you can easily manage all your payments and other financial matters from a centralized location. Watch this video to learn how you can enable Shopify Payments (from approximately 0:41).

How much do you have to pay for this service? It largely depends on your current Shopify subscription. However, the good news is that you don’t have to pay transaction fees. This is not the case with many external PSPs.

You might ask, “If the default payment gateway is so great, why doesn’t every Shopify merchant use it?” There are several reasons. First of all, there’s a clearly defined list of jurisdictions where this PG can be used. Merchants from other parts of the world have to search for alternatives.

Even if you qualify as a Shopify Payments user, though, you may discover that you can’t accept payments through it due to the nature of your business. For example, if you live in the United Kingdom and are in the gambling industry, you are not allowed to conduct transactions via Shopify Payments. Visit the corresponding help center page (the “Prohibited businesses” section) to know if you can receive money for selling your products or services.

2. Find Out How Much a Payment Gateway Charges for Its Services and if It Is Flexible in Its Pricing Policy

Make sure what fees you'll have to pay

Certainly, no PG is going to work at a loss. This is why you should reserve a part of the budget for all sorts of commissions for processing your transactions.The exact amounts and types of commissions vary from provider to provider. For example, PayPal charges merchants for currency conversions, chargebacks, mass payments, refunds, records requests, and other activities.

In addition, many PSPs require that their customers buy monthly, semi-annual, or annual subscriptions. We advise you to do a thorough research to make sure that a PG doesn’t impose commissions on operations that you don’t really conduct. The worst thing is that you may not even know about those fees until you’re presented with the bill.

We also recommend finding a PG with flexible payment options, depending on your revenue or number of transactions on your Shopify store within a specific period of time. For instance, Stripe offers its users standard and customized pricing plans. If you have a unique business model, you can take advantage of the latter. It provides country-specific rates, volume discounts, interchange pricing, and more.

3. Make Sure That Your Funds Are Securely Protected from Cybercriminals

Probably the most important function of a payment gateway is ensuring that a transaction is conducted in a secure manner between a REAL online merchant and a REAL customer.

Make sure that the PSP you decide to use follows the internationally accepted standards of security and protection against unauthorized access, meaning it’s PCI (Payment Card Industry) compliant. Take Skrill, for example. It is a fully PCI compliant PG. Read this post for more on PCI requirements and rules.

Skrill is a PCI compliant payment system

It goes without saying that a payment gateway must encode all data traveling across the wires using the Secure Socket Layer protocol. Nowadays, however, this is such a common practice that you will hardly find a system that ignores this requirement.

Another crucial feature of a PG to look out for is the availability of a default system that can identify and prevent suspicious and illegal transactions. Without a system like that, your business is exposed to great risk. Any PSP worthy of its name, such as PayPal, has this kind of software in place.

4. Consider Your Target Audience’s Payment Preferences

Consider your customers' payment preferences

For new Shopify stores, selling products or services within the borders of the countries where they’re located is probably wiser than trying to “invade” the global market right off the bat. However, the time comes when this step becomes necessary for business growth.

This factor determines the choice of a PG as well. With all the technological advances and globalization, you might think that internationally accepted cards like Visa can be used for online purchases in every corner of the world. We must disappoint you here.

There are lots of places, in developing and underdeveloped countries in particular, where paper banknotes still reign supreme. Elsewhere, cards issued to local residents may not be valid for transactions on worldwide e-commerce sites. Hence, if you’re going to extend your business to another country or continent, make sure that your Shopify store has a payment gateway that local customers favor.

Study the list of payment options for the country of your choice on the Shopify official site and Google the most popular of those. For example, according to Statista, the most widespread online payment method in Italy in recent years was PayPal.

If your ambitions drive you toward entering a number of countries or regions, you might have to integrate several PGs into your Shopify store. It will cost more, but will ensure the maximum audience coverage and customer satisfaction.

Apart from the geographical distinctions, consider different age groups among your customers. The younger generation, for example, is more inclined to pay via various online systems such as Skrill. By contrast, those in their forties, fifties, or older would probably opt for payment methods popular earlier such as bank transfer or credit cards

5. Find Out How Fast a Payment Gateway Can Transfer Money from a Customer’s Account to Your Merchant Account

Our last piece of advice for you is to make sure you choose a PG that can process your transactions not only in a secure manner but also fast. This is beneficial both for you and your customers. No one wants to wait a week for their payment to be accepted or for money to arrive in their account.

For example, tying a PayPal account to a debit or credit card allows the PG’s users to expect a transaction to go through in as little as half an hour. The faster money travels, the higher the customer satisfaction level is.

Things to keep in mind

Final Words

Choosing a reliable, fast, and versatile payment gateway for a Shopify store is not a trivial matter. In this post, we have only covered some aspects of this process. There are many more details you should take into account.

Even with such a huge number of payment gateways available to Shopify store owners out of the box, you may still fail to find a solution specific to your business model, your type of merchandise, or your region.

The vendor understands this and has allowed Shopify developers to build and add ‘handmade’ PGs to their online stores. A custom PG allows Shopify entrepreneurs to save money on commissions while meeting their unique business needs.

The PSD2HTML Shopify development team has a wide experience integrating various payment gateways into Shopify stores. We will help you select the best fit for your niche, geography, or demographics. We can also enhance your custom payment gateway to make it faster, more secure, and feature-rich. Contact us with your ideas or problems. We’ll be glad to solve them for you.

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