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Secure Payment Gateways for Ecommerce: Protecting Transactions & Customers

Payment gateways online have never been so convenient.

They’ve also never been such an important target for hackers and scammers.

Companies relying on online payment processors may get hit the hardest.

A 2018 Thales Data Security Report revealed that 75% of U.S. retailers have suffered at least one cybersecurity failure with their online stores.

In fact, Shape Security reported in 2018 that some 90% of total login attempts to online retailers’ websites were illegitimate hacking attempts.

That’s the highest percentage for any sector.

That’s why it’s important to understand that the quality of your ecommerce payment gateways helps you fend off these attacks in real-time, providing a buffer of encryption between buyer and seller.

High-quality payment gateways also help you reduce load time.

Additionally, abandonment surveys report that some of the top reasons for abandoning a shopping cart can be addressed in the quality of your gateway:

15% abandon the shopping cart for a better in-store experience.
6% abandon due to a lack of payment options.
4% abandon due to technical issues.

With all this in mind, maybe you’re wondering: how do you select a payment gateway that will maximize convenience, minimize risk, and ensure the security of your customers’ information?

Follow up question: what’s important to know about payment gateways so that you can ensure the best and most secure payments for your customers?

Let’s get into those answers and more.

What is A Payment Gateway?

A payment gateway as a merchant service that processes credit card payments for ecommerce sites and traditional brick and mortar stores. Popular payment gateways include PayPal/Braintree, Stripe, and Square.

Think of the gateway as the metaphorical cash register in an electronic transaction.

Like any cash register, it needs to be both secure and convenient to use.

Most payment gateways accomplish that in a few seconds with these steps:

Encryption: Between the user’s browser and the server of the retailer, a payment gateway will encrypt (encode for private use) data for exclusive use between seller and buyer.
Request: The authorization request occurs when a payment processor gets approval from a credit card company or financial institution to proceed with the transaction.
Fulfillment: When the payment gateway has the authorization, it allows the website and interface to proceed to the next action.

The payment gateway also serves a few other functions including screening orders, calculating tax costs, and using geolocation for location-specific actions.

Payment Gateways vs. Payment Processors: What’s the Difference?

You may hear payment “gateways” and “processors” used interchangeably.

But there are some important distinctions:

A payment processor analyzes and transmits transaction data. That includes transmitting relevant information to an issuing bank, such as the credit card or debit card number that links to a bank account.

This is distinct from the payment gateway, which does the work listed above but also authorizes the transfer of funds between buyer and seller.

The difference can seem subtle at first but think of the gateway as the overall system at the point of purchase: the metaphorical cash register.

The processor is the step in the process that “swipes” the card and runs the information by the issuing bank.

Like a payment gateway, a processor can include both a digital and hardware component — or it can handle the processing solely through software.

3 Types of Payment Gateways

There are generally three types of payment gateways:

1. Redirects

Redirects might include an option for a PayPal payment, for example.

When the gateway takes a customer to a PayPal payment page to handle the complete transaction (i.e. processing and paying) it becomes a “Redirect.”

This has the advantage of simplicity for the retailer. A small business can use a Redirect gateway to incorporate the convenience and security of a major platform like PayPal, but the process also means less control for the merchant — and a second step for customers.

2. Checkout on site, payment off-site.

Consider Stripe’s payment gateway: the front-end checkout will occur on your site, but the payment processing happens through Stripe’s back end.

Like redirected payment gateways, there are some advantages to handling your payments this way, including simplicity.

But as is the case above, you won’t be able to control the user’s entire experience through the payment gateway.

You’ll be at the mercy of the quality of the offsite gateway and its quirks.

3. On-site payments.

Large-scale businesses tend to use on-site payments completely handled on their own servers. The checkout and payment processing on behalf of the customer all work through your system.

Now the advantages are flipped: you’ll have more control, but also more responsibility.

If you handle payments on-site, every variable counts.

Because retail has a cart abandonment rate of about 75%, any improvement you can make to the shopping experience can create dramatic changes in your bottom line.

This is especially true for any retailer working with a high volume of sales. When you handle your payments on-site, it’s essential that you understand your options as well as your responsibilities.

Examples of Top Payment Gateways

If you’re curious about some of the more common payment gateway service providers to consider, here are seven of the most frequently used options.

PayPal.

PayPal is popular as a redirect payment gateway because so many customers trust it — and there are multiple options to consider around it.

PayPal’s Payflow gateway includes two options: a $0/month checkout payment gateway hosted by PayPal, or a $25/month option with more checkout customization features.

With both services, PayPal adds fraud protection security without an additional charge.

This gives you additional assurance that your payment gateway is safe — or at least capable of handling threats as they arise.

PayPal’s processing fees are currently 2.9% with an additional $0.30 per transaction.

Square.

Square is a credit card processor and payment gateway provider famous for physical credit card swipers that attach to your phone.

Square is popular enough that it posted nearly $23 billion in gross payment volume in the fourth quarter of 2018.

Square’s solutions tend to be for small businesses that need a method of credit card processing, particularly for in-person transactions. They also charge a premium for transactions you enter manually:

Square’s processing fees are currently 2.75% for swiped transactions and 3.5% + $0.15 per manually-entered transactions.

Stripe.

Stripe is a popular payment gateway provider with a broad focus on mobile ecommerce, SaaS, non-profits, and platform-based payments.

Stripe is also capable of handling companies with a large volume of transactions.

Lyft, for example, uses Stripe to power its mobile fleet of over 700,000 drivers.

Stripe’s processing fees are currently 2.9% and $0.30 per transaction.

Apple Pay.

Apple’s payment gateway solution is aimed at a mobile payment structure, enabling merchants to handle payments with customers using Face ID and Touch ID.

Much of its focus is on consumers who want to maintain an electronic “wallet” to handle their payments.

As with PayPal, many other of the payment gateways on this list allow retailers to accept Apple Pay payments.

With these services, retailers can accept payments from some 383 million iPhones worldwide, with an estimated 43% of all iPhone users utilizing Apple Pay.

Apple Pay’s processing fees default at 3% with no additional fees for merchant accounts.

Amazon Pay.

We’ve detailed companies that struck it big with using Amazon payments. Amazon’s 300+ million customer accounts worldwide make it very attractive as a payment gateway option.

Amazon Pay comes with a number of plugins, including some for use with BigCommerce.

Amazon Pay currently charges 2.9% on domestic transactions with an additional $0.30 per transaction. International fees escalate to 3.9%.

Authorize.net.

Authorize.net makes it possible to accept payments through a wide variety of processors, which in turn gives retailers the ability to accept PayPal payments, Apple Pay, and most major credit cards.

Authorize.netcurrently charges 2.9% on transactions with an additional $0.30 per transaction for their “all-in-one” payment provider option.