How to Choose the Right Magento Payment Gateway – Powersync

How do payment gateways work?

Online payment gateway software processes payments from customers so the funds can be released to merchants. A major function of payment gateways is encrypting sensitive credit card details to ensure security as they move between the customer, merchant and bank.

Think of a payment gateway as a virtual middleman.

1. When a customer hits the checkout button, they are redirected to a payment page;
2. After they input their payment information, the gateway securely moves it to the issuing bank for authorization;
3. Once confirmed, the gateway sends the approved transaction back to the merchant website;
4. At that point, the customer is informed that the purchase has been completed successfully.

While it may sound like a complex process, all steps are completed in a matter of seconds.

Should I offer more than one eCommerce payment gateway?

Online merchants are not limited to choosing one payment gateway. In fact, data shows that providing multiple options increases the perceived security of an eCommerce website. According to YouGov, 40% of online shoppers feel more comfortable buying from a store that offers a variety of payment gateways.

Another aspect to consider is the safety net multiple gateways offer. If you only use PayPal, for example, there is no alternative if the platform experiences technical issues (meaning lost sales).

While a merchant may be tempted to partner with a single payment gateway that offers the lowest processing rates, this strategy may compromise profits. Imagine a scenario where a shopper visits your website and fills their cart with your goods or services. During the checkout process, they realize your store is not compatible with their preferred payment method. Now what?

Chances are that would-have-been customer is taking their business elsewhere.

On the other hand, multiple software systems require more administrative time, so sticking to one eliminates that.
Additionally, some payment gateways offer bulk discounts after a certain number of transactions are made. The chances of your business meeting those quotas go down when customers have multiple gateway options to choose from.

There are many reasons customers become loyal to certain payment gateways. Your business may not be able to accommodate everyone, but you still want to be strategic. So, where do you begin?

Weighing the options: Key things to consider when choosing a Magento payment gateway

Whether you opt to use a single Magento payment gateway or multiple, it is important to consider how they differ.
Here are three important questions to ask regarding payment gateways.

1. What are the fees?

Every transaction that is completed through a Magento payment gateway will come with a cost. Does your business sell a low volume of high-cost items or a high volume of low-cost items? Does the software charge monthly or setup fees?

2. Who is your audience?

3. Do you sell subscription products and services?

Many eCommerce businesses operate on a subscription model. Even if yours doesn’t, is it something you may incorporate in the future? Keep in mind that not all payment gateways accommodate automatic recurring billing.

A look at 4 popular Magento payment gateway options

Payment card industry (PCI) compliance is something all online merchants are responsible for. The expectation of PCI compliance with online purchases is one reason brand names matter when it comes to payment gateways.
There are many well-known integrated payment gateway options available for Magento. With the above information considered, let’s take a look at four of the most common.

Stripe

• In the United States, Stripe charges a flat rate of 2.9% + 30 cents per successful charge for every transaction (as long as a business is doing less than $1 million in volume per year);
• Stripe offers volume discounts for merchants that do $80,000 in monthly transactions;
• Nonprofits can benefit from Stripe because it does not charge them fees for the first $15,000 processed;
• Stripe does not charge setup or monthly fees;
• An additional 1% is charged for international payments, with an additional 1% if currency conversion is required;
• Stripe accommodates automatic recurring billing, and recurring subscriptions and invoicing services are free for a merchant’s first $1 million in recurring charges. 

Authorize.Net

• Authorize.net charges merchants 2.9% + 30 cents per transaction;
• International transactions acquire an additional 1.5% fee;
• The platform charges a $49 setup fee and a monthly $25 charge;
• Automatic recurring billing is accommodated;
• Authorize.Net includes the Advanced Fraud Detection Suite, adding another layer of online security;
• The software can sync with QuickBooks, which simplifies accounting processes.

PayPal

• PayPal charges merchants 2.9% + 30 cents per transaction. There is also a fixed fee based on the currency;
• Merchants are charged 4.4 percent on international transactions, plus a fixed fee depending on currency;
• Charitable organizations are charged a reduced rate of 2.2% of the transaction amount plus a fixed fee based on currency;
• PayPal does not charge setup or monthly fees for its standard plan. PayPal Payments Pro costs $30 per month. One of the main differences between the two is that PayPal Standard moves customers away from your website to complete transactions. PayPal Payments Pro allows customers to pay without leaving your site;
• Automatic recurring billing is accommodated for a $10 monthly fee.

Braintree

• This gateway is owned by PayPal and also charges merchants 2.9% + $.30 per transaction;
• Verfied nonprofits receive discounted fees of 2.2% + $.30 per transaction.
• An additional 1% fee applies to non-USD currency transactions;
• Braintree offers volume discounts for merchants that do $80,000 in monthly transactions;
• Automatic recurring billing is accommodated.

What about mobile wallets?

The mobile wallet is the latest wave of digital payment options to take hold. Mobile wallets are also referred to as e-wallets and digital wallets.

As more online and brick-and-mortar businesses embrace mobile wallets, carrying around physical payment cards is becoming a thing of the past. Apple Pay and Google Pay are among the most well-known digital wallets. They are mobile apps that store payment information from a debit or credit card so shoppers can pay directly from their smartphones.

Modern eCommerce merchants should take mobile wallet capabilities into consideration when choosing a Magento payment gateway.

Stripe provides a UI element called the Payment Request Button to help merchants quickly add support for Apple Pay, Google Pay and Microsoft Pay.

Merchants who use Authorize.Net as their payment gateway will be able to accept Apple Pay, PayPal, Chase Pay and Visa Checkout.

Although PayPal only accepts PayPal, Venmo, PayPal Credit and major debit and credit cards, its Braintree service is equipped to take Apple Pay, Google Pay, Samsung Pay, Visa Checkout, Masterpass and AMEX Express Checkout.

Simplicity during checkout is what mobile shoppers care about, so incorporating instant purchase buttons is also a smart move for Magento merchants.

While the ability to route payments is another expense your business must account for, payment gateways offer many benefits. They eliminate risks associated with insecure payment processing and allow merchants to accept many different forms of payments.