Which Payment Provider to Choose for Your Online Business

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In this article, you will discover 1) an introduction to payment providers, 2) the importance of selecting a payment provider for your online business, 3) a step-by-step process for selecting a payment provider for your business, and 4) payment providers comparison.


What is online payment?

An online payment is processed electronically over a computer network, usually the internet.

As a business owner who conducts business online, you would surely have felt the need to use a payment method that is secure and reassuring. Online payment is the perfect answer. Every day, more and more businesses are adding online payment as a viable option apart from traditional cash and check transactions.

Components of online payments

  • Payment Gateways: A payment gateway is an e-commerce service that accepts the various payment requests from your website and channels it to the payment processor for processing. Payment gateways bring in a lot of security features for your customers, like data encryption, and ensures that data is securely exchanged both between the customer and the merchant and between the merchant and the payment processor.
  • Payment Processors: As the name suggests, a payment processor validates customers’ bank accounts, credit or debit cards, checks to see if there is a sufficient balance, and authorizes the transactions. Once transactions are authorized, the funds are debited from the customer’s account and transferred back to the payment gateway.
  • Payment Service or Payment System: A payment service or a payment system is a service offered by payment providers that allows the customer to choose from different types of payment gateways. Credit cards have historically been the most preferred form of payment. However, other types of payment methods, such as smartcards, are gaining popularity.
  • Payment Provider: A payment provider (also known as a payment service provider) is a company that manages all the services related to online payment, like payment gateways and payment processors. A typical payment provider is simultaneously connected to several banks, cards and payment networks. Payment providers can be classified into three types:
    • Distributors: A distributor is a payment provider that supports multiple online payment methods via a single interface.
    • Collectors: A collector is similar in function to a distributor. However, collectors additionally collect payouts on your behalf without setting commission rates or fees.
    • Aggregators: An aggregator supports multiple online payment methods via a single interface, collects payouts and contracts with banks or financial institutions.
  • Merchant Account: A merchant account is a specialized account used to receive funds from online transactions via credit card or debit card. A merchant account often utilizes the services of payment processors, independent sales organizations and member service providers to perform transactions.

How online transactions work

Once you have decided to sell your goods online, you will first need to hook up with a merchant account, although services like PayPal negate their use. Next, you will need to set up an account with a payment service provider. The final step is to set up your web page and connect it to an online payment service by placing a button or a simple hyperlink that your customer can press/click on to initiate online payment. While some websites incorporate the payment form in their web pages, others redirect it to their service provider’s website.

Trusted online payment providers

There is an unending list of payment providers available. However, when you consider the most trusted ones, this list narrows down quite a bit. Below are some of the most widely-used online payment providers.

Authorize.Net: With a customer base of over 400,000 and growing, Authorize.Net is one of the world’s leading payment providers. This service allows you to receive payments in the form of electronic checks and credit cards. The Setup fee is a very nominal USD $49, with an additional USD $29 gateway fee chargeable every month.

PayPal: A venture of the famous Elon Musk, PayPal is a very popular payment provider. The service allows both credit card and debit card transactions. However, the best part is that PayPal is entirely free – there is no set-up charge, no gateway fee and no other monthly charges.

SecurePay.com: SecurePay.com accepts mobile payments, has an online shopping cart set up and offers electronic check services. Fees are charged per transaction.

Alipay: Alipay is a third party online payment provider founded by Jack Ma of Alibaba.com. Alipay does not charge any transaction fees and has the added advantage of an escrow service, which allows you to verify if your customers are actually happy with the product, before they release the payment.

BitPay: With an increasing global presence, BitPay is one of the largest Bitcoin-based payment providers. BitPay has, over the last couple of years, partnered with multinational giants like Microsoft, NewEgg, TigerDirect, and Warner Bros.


Why do you need a payment provider at all?

An online business is virtually impossible to conduct without the assistance of a payment provider. There are a few key reasons why you will need to use the services of a proficient payment provider.

  • To meet and exceed customer expectations: Your customers are only human – they always favor buying things from a site that makes it easy for them to pay. An online payment option is vital in the sense that customers view it as one of the easiest and most comfortable modes of payment. A website with an online payment method is always seen as up-to-the-minute and customer-friendly.
  • To increase processing speed: It is undeniable that an online payment system significantly enhances payment processing speed. Online payments are far quicker than manual payment methods – you don’t have to wait for the check to turn up and then for it to clear at the bank. Adopting an online payment option will deliver the payment to your account in a matter of a few seconds, thus enhancing cash It also secures your transactions by sending immediate confirmation messages. In addition, having an online payment option lets you know immediately that the customer has a sufficient bank balance, unlike manual transactions where checks may bounce later on.
  • To simplify payment transactions: Online payment systems greatly simplify the transaction process. It doesn’t require you to go to your bank to deposit the check, nor does it require you to manually record all payment transactions. All online transactions are automatically processed and all transactions are recorded and available for perusal on demand. You are also not required to handle or store any information pertaining to your customers’ credit and debit cards.


Below, we describe in detail, the steps you need to take to select the payment provider that works best for your business.

Step 1: Understand what restrictions you have depending on what platform you use (is the payment gateway supported on your ecommerce platform?).

Since there are so many options in payment providers available, it becomes necessary to peruse and understand which ones are supported on your ecommerce platform. But it’s not enough that the payment system is supported on your platform – you will need to browse through various additional features, like plug-ins, to decide on what payment provider to finally settle.

Step 2: Select between Shopping Carts vs. Merchant Accounts.

There are a lot of things to consider and know about how your ecommerce platform is structured before you can really decide what credit card payment options you are able to offer your customers. However, it is safe to state here that a merchant account is absolutely necessary for you to accept online payments. Even though your website host is most likely to provide you some in-built shopping cart options, these alone aren’t enough for you to accept payments without a compatible merchant account.

Your best bet might be to consider an all-in-one payment system, e.g., PayPal. These systems allow you to have both a shopping cart and a merchant account as part of a comprehensive plan. This virtually eliminates the need to have separate accounts, and since you will be paying for all the options as a single package, it saves you money too.

Step 3: Understand the difference between payment gateways and merchant accounts, and define for your business whether you want to have payment gateways, merchant accounts or an all-in-one system.

As a start-up seller, ready to go online, you will need to understand the basics of ecommerce and use your knowledge to set up a shop. It is important to understand the differences between payment gateways, payment processors and merchant accounts. You can then use your acquired knowledge to analyze what works best for your business – payment gateways with merchant accounts, or an all-in-one system.

There are several options available on the market for payment gateways and payment processors – they offer different features and options and have varying monthly rates, transaction costs and other charges.

Step 4: Determine how you want your checkout to work.

At this stage, you will want to think of a checkout strategy that works with your type of business and especially, the kind of customer base you plan to target. It may be beneficial for you to have your customers enter their payment details directly on your website. In that case, you will have to follow the following steps:

  1. Provide a payment form on your site. This is possibly one of the simplest ways to accept payment. However, this is also one of the least secure payment methods. So, in order to safely use this system, you will need to put a lot of security measures in place, which will, of course, not be cost efficient over the long term.
  2. Use iFrame or redirect. A better and more secure way of using a checkout form on your website is to encase it in a secure iFrame within your payment webpage. Another secure way would be to redirect the customer to a securely hosted payment page.
  3. Use a secure payment gateway. A secure payment gateway allows you to still use your own payment form on your website, but it channels the payment details through a secure route to the payment gateway’s own server.

There are several types of payment gateways:

  • Type 1 – Hosted Payment Gateways
  • Type 2 – Pro / Self-Hosted Payment Gateways
  • Type 3 – API / Non-Hosted Payment Gateways – Payments at Merchant’s site
  • Type 4 – Local Bank Integration
  • Type 5 – Direct Payment Gateway
  • Type 6 – Platform-Based Payment Gateway Solutions

Step 5: Select the payment provider that supports specific payment methods you want to have for your business.

There are various criteria that can help you settle on a payment provider, but it is mostly for your customers, whose needs you have to consider before you make that decision. So, based on your customers’ preferences and more importantly, their geographical location, you would have to decide whether it would be better to go for niche payment methods or stick to conventional ones like Visa and MasterCard. It is important to understand your customers’ needs or you will end up losing valuable sales prospects. Some payment methods that you can incorporate into your ecommerce platform are:

  • Cash on Delivery
  • Checks
  • Credit Cards
  • Debit Cards
  • Direct Debits
  • E-Wallets
  • Gift / Loyalty Cards
  • Invoices
  • Mobile Carrier Billing
  • Prepaid Cards
  • Specials

Step 6: Select a payment provider based on what countries and in what currency (transaction and settlement currencies) your online business will be active.

When dealing with global customers, it is important to understand that people prefer to pay in the currency of their country, and do not usually like to go through the hassles of having to convert to dollars or Euros, etc. when making a payment. It is always a big advantage if you are able to offer to your customers the option to pay in their own currencies. Also, it’s always better to have more than one payment option to offer your customers, especially if you are catering to a global audience.

There are two things to base your selection of a payment provider on, when dealing with global customers:

  • Base it on countries an online payment provider supports (Geographical Region Compatibility)
  • Base it on currencies an online payment provider supports (Currency Compatibility)
    • transaction currency – this is the ability of your payment provider to accept various currencies like USD, Euro, GBP, Yen, etc.
    • settlement currency – this refers to the setting up of bank accounts in all the countries where you intend to operate, so as to facilitate acceptance of multiple currencies. Making such efforts to set up various settlement currency options will allow you to receive payment from your payment provider and route it to the applicable bank accounts, so that there is no need for any currency conversion.

Step 7: Select your payment provider based on the fee system (fixed vs. variable) and given your budget.

Fee Structure: Fees can be of the following types:

  1. Monthly fee
  2. Fixed fee (per transaction)
  3. Variable fee (as a percentage of each transaction)
  4. Extra fee for chargebacks and international credit card transactions.

To understand in detail what fee structure works best for you, it would be best for you to do some research online.

Volume of Purchases (Volume Support): It is important to analyze beforehand what kind of purchase volumes you can expect for your ecommerce platform. Sales volumes are an essential factor in deciding what payment system would be best suited for your business. It is important to state here that in the case of most payment providers, the percentage fee charged decreases with an increase in the number of transactions.

Recurring Payment Support: While most payment providers support recurring payments, a few such as PayPal and Google Wallet do not support it. Also, most third-party software installed on your ecommerce platform aren’t likely to support recurring payments either. If your platform provides options such as automatic membership fees renewal, it is best to opt for a payment provider that provides recurring payment support.

Step 8: Research security, compliance and anti-fraud features.

It is imperative to add sound security features to your ecommerce platform so that fraudulent transactions are negated. A good, albeit underrated, feature would be to add 3D Secure to your website. It prevents fraudulent transactions from occurring and is a boon, especially when you have customers from the UK and Scandinavian countries.

Also, if you are in a high-risk business, it would be your best bet to research the market for payment providers that specialize in high-risk payment processing.

Last but not the least, you need to make sure that your payment provider is PCI compliant. A non-PCI compliant payment provider can be dangerous to your business.



  • How much does it cost? PayPal starts at 2.9% plus $0.30 per transaction.
  • How does it work? One of the most popular payment processors, PayPal offers perks, such as a free card reader to enable mobile devices to accept card payments. Plus, with increasing monthly sales volumes, PayPal reduces the percentage of per-transaction fees. PayPal also offers “Advanced” and “Pro” plans with added features to woo your customers.


  • How much does it cost? net has a $99 setup fee and costs you $20 per month plus $0.10 per transaction and $0.25 per settled batch.
  • How does it work? If yours is a high-volume business, then it would make sense to go for Authorize.net. The payment plan is standard for all customers. Authorize.net also offers a mobile app for receiving payments, but does not offer a card reader, unlike PayPal. The setup fee is one-time only and monthly fees are

Intuit GoPayment

  • How much does it cost? Intuit GoPayment starts at 2.75% per transaction. There is also a cheaper option of only $0.50 per transaction with zero monthly fees.
  • How does it work? Intuit GoPayment allows integration with QuickBooks to simplify accounting and transaction management. It offers cheaper options for customers who make high dollar transactions.

Comparison of Online Payment Gateways

Price: While payment gateways like BeanStream, Dwolla, SagePay, Stripe, WePay and PayPal (regular) do not charge any monthly fees at all, certain gateways with enhanced features like PayPal Pro, Chargify and Authorize.net do charge monthly fees.

Currency Support: PayPal supports up to 20 currency types, SagePay supports 19, while Stripe supports five.

Top Ecommerce Platforms and Shopping Cart Software

Some of the top ecommerce platforms and shopping carts are Shopify, Volusion, Bigcommerce, LemonStand, SquareSpace and 3DCart. Of these, Shopify is the most popular. Shopify offers a free trial, starts from only $14.00, is SEO-friendly, has an app store and offline store, and provides round-the-clock support.

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