Popular Payment Gateways with Pros and Cons
Payment gateways play a crucial role in online transactions, by authorising and enabling the transfer of money between the buyer and retailer. An online retailer, be it local or international that accepts payments via the internet needs a payment gateway. For cross-border buying, international payment gateways such as PayPal and Stripe are quite popular.
Since more and more consumers have their purchase preferences online and rely heavily on e-commerce purchases, merchants need to ensure a convenient and seamless shopping experience for their customers. One of the main and most vital aspects of setting up an e-commerce platform is choosing the most appropriate online payment gateway for your audience.
Understanding a payment gateway
A payment gateway is a way for retailers to accept cards and other forms of online payments from their customers. If it enables international payments, it becomes an international payment gateway. A payment gateway primarily plays the role of a middleman between the buyer and the retailers’ payment processors.
To understand payment gateways, let’s examine the stages involved in an online payment:
- In order to complete a purchase, the customer needs to make a payment at online checkout. The payment gateways provide security at this stage by encrypting the buyer’s credit card details or other payment details before securely transferring the payment information to the payment processor.
- The payment processor checks if the payment is valid from the issuing bank.
- Once the payment gateway gets the authorisation from the payment processor that the money can cover the charge, it transmits this information to the website to complete and confirm the purchase.
This entire process takes place in a matter of seconds while ensuring encryption and the transfer of funds to make the payment.
The two popular types of payment gateways are hosted and integrated.
- Hosted payment gateways such as PayPal redirect the buyer from the checkout portal to conclude a payment. This is beneficial for the retailers as the gateway takes responsibility for the transaction security and the customer’s data safety. However, since the customer is redirected to a different site, the conversion could be dropped due to a lack of trust and unfamiliarity.
- Integrated payment gateways are integrated with the merchant’s website through API and are a part of the website’s checkout process. In this scenario, customers are not redirected to complete the payment transaction. The advantage of this is higher conversion rates, but the onus of transaction security and protecting the customer data falls on the merchant.
Pros and Cons of the popular payment gateways
According to research done by Statista in 2021, PayPal is used by over 400 million active accounts globally making it an online payments leader across the world.
- It is an accepted payment gateway for both local and international payments in Singapore. It is a fully functional and reliable local as well as an international payment gateway for both sellers and buyers.
- These payment gateways admit a range of credit as well as debit cards such as American Express, Visa, Mastercard while ensuring secure transactions.
- It further strengthens security, monitors fraud 24*7, offers seller protection, and has an in-built two-factor authentication.
- It’s a great international payment gateway option for merchants who are targeting an international audience as it accepts 25 currencies across over 200 countries.
- It restructures operations through its reporting and analytics tools and dispute resolution.
- The main drawback of PayPal is its high transaction fees. It charges 3.9% plus SG$0.50 for local sales and for international sales, it charges 4.4% plus a fixed fee. The high transaction fees may not make it economically viable for many, especially high value cross-border B2B transactions.
DBS PayLah is one of Singapore’s most popular local payment gateways, which is excellent to reach out to local customers. This payment gateway debits money straight away from the customer’s DBS account and enables speedy and seamless payments.
- It is a comprehensive system that accepts omnichannel payments and services.
- IT is easy to integrate with merchants’ payment gateway APIs and offers all-inclusive support to implement DBS PayLah!
- It offers exclusivity and convenience to consumers who transact via DBS PayLah with features such as as express checkout and faster payment processing.
- It is not a cheap payment option, especially for e-commerce merchants who are just starting out. DBS PayLah has a one-time setup fee of SG$800. In addition to that, there is an annual fee of SG$1,000, and an extra 3% fee on debit and credit card transactions.
- It is not a popular international payment gateway.
Businesses across the world use Stripe to handle their online businesses, regardless of whether they are well established with huge turnovers or fall in the MSME categories. Stripe is becoming one of the fastest-growing payment gateways globally. It focuses broadly on SaaS, non-profits, mobile e-commerce, and platform-based choices.
- Stripe integration entails a developer-friendly format that enables the merchant to customize their checkout in accordance with the customer buying experience.
- It accepts payments through major debit and credit cards such as American Express, Mastercard, Visa, Maestro and also accepts mobile payment options.
- It enables easy payment processing by supporting recurrent payments and instantaneous pay-outs.
- Through its financial reporting, it simplifies and facilitates the process of transaction settlement and reconciliation
- It offers more payment options as compared to PayPal, including Android Pay and Apple Pay.
- Stripe has a transaction-based fee structure of 3.4% + SGD $0.50 for credit and debit cards. For digital wallets, the fee is 2.2% + SGD$0.35 and a fee of 3.3% for payment options like Google Pay, Apple Pay, and Grab Pay. Though these rates are lower as compared to PayPal, for high volume cross-border transactions, it still may add up to a significant amount.
- Though Stripe offers the feature of cross-border payments, it can only be used by buyers in the United States. It is therefore not a preferred B2B international payment gateway and is more conducive for B2C payments.
While international payment gateways may be the preferred choice for local transactions, B2C or small value international buying, Escrow providers such as Tazapay are preferred for cross-border B2B trade.
- Tazapay offers an extra layer of protection and creates trust with the buyers and sellers when it comes to high-value international B2B transactions.
- It has a simple user interface and is accepted in 80 countries.
- It protects both the buyer and the seller in a high-value transaction. As a reliable third party, Tazapay holds the buyer's funds till the seller fulfills their end of the contractual obligations. Once the seller has provided proof of shipment which has been verified by Tazapay, the funds are released to the seller.
- Tazapay’s transaction fee is a nominal 1.8% of the transaction value which is capped at a certain amount, making it an affordable option as the value of trade increases.
- Tazapay offers other support too like verification checks of trade partners to ensure you are trading with reliable partners globally.
- This payment method is preferred for B2B large value transactions. It is not an optimized payment solution for local, B2C and small value transactions.
Popular Payment Gateways with Pros and Cons
The past decade has seen a slow but steady shift in the B2B payment landscape. The various entities are leaning towards digitising the entire landscape, ensuring it becomes cashless, contactless, and convenient. In the year 2020, the B2B market size was value at $6.69 trillion in digital transactions which are meant to touch around $20.9 trillion by 2027 . How can companies steer the B2B payments landscape? The majority of the online payment solutions are built keeping B2C use cases at the f
Payment gateways play a crucial role in online transactions, by authorising and enabling the transfer of money between the buyer and retailer. An online retailer, be it local or international that accepts payments via the internet needs a payment gateway. For cross-border buying, international payment gateways [https://tazapay.com/] such as PayPal and Stripe are quite popular. Since more and more consumers have their purchase preferences online and rely heavily on e-commerce purchases, merchant
The past ten years have seen a gradual shift in the B2B payments sector – there has been a steady need to digitise this sphere, making it contactless and cashless. The year 2020 valued the B2B market size at $6.69 trillion in digital transactions and this was further expected to reach $20.9 trillion by 2027. [https://www.globenewswire.com/fr/news-release/2020/09/24/2098493/28124/en/Global-20-9-Trillion-Business-To-Business-B2B-E-Commerce-Markets-Size-Share-Trends-Analysis-Forecasts-2016-2019-202