What is a Shopify Payment Gateway?
With the increase in ecommerce, Shopify has quickly become one of the most popular ways to start an online store. A Shopify storefront is easy to set up and run, but before setting it up, it’s important to know how the business is going to accept payments from customers.
Accepting payments from customers takes more than just setting up shop and calling it a day. There are several working parts put in place to allow a business to accept payments from customers safely and effectively.
A Shopify payment gateway is one of the working parts involved in the payment process. The payment gateway integrates into the Shopify store and takes payment information from customers. In other words, the payment gateway is what customers are seeing when they enter their information.
Payment gateways can accept debit cards, credit cards, and other forms of payment. Some gateways have the ability to be customized by the business while others direct customers to their own website to enter their payment information. Each has their own benefits, but first let’s talk about payment processing.
How a Shopify Payment Processing Works
In order to understand how the Shopify payment process works, it is essential to understand what all of the working parts are.
- Shopify Store. The storefront set up by the business on Shopify’s website
- Business. The business that sets up the storefront for operation
- Customer. The person or business purchasing from the Shopify store
- Customer Bank. The bank housing the customer’s money and the issuer of their debit/credit card
- Merchant Account. A special account set up with the payment processor that holds funds from customers before releasing to the business
- Business Bank. The bank housing the business’s money and accepts money from the merchant account
- Payment Processor. Works as a communicator between the customer bank, merchant account, and payment gateway; requests funds from customer bank
- Payment Gateway. What customers see when entering their payment information; accepts payment information
First, the customer clicks the checkout button in the shopping cart of the Shopify store. This brings up the payment gateway, either on the website or on the gateway provider’s website, for them to put their payment information in.
After the customer enters their payment information, the payment gateway will encrypt their information to keep it safe during the payment process. Once encrypted, the information is sent through to the payment processor.
The payment processor communicates with the customer bank to ensure there is enough money in the account to complete the purchase and verify that the card information is accurate. When verified, the payment processor communicates back to the payment gateway an approval or denial notice.
Next, the payment gateway notifies the customer of the approval or denial. If approved, the payment processor requests the funds from the customer bank and deposits the money into the merchant account. If denied, the customer must enter different payment information to start the process over again.
After a predetermined holding period, the merchant account will deposit the funds into the business’s bank account and complete the payment process.
Types of Payment Gateways for Shopify
There are two main types of payment gateways that can be used with Shopify. The two types are hosted gateway and non-hosted gateway. Each has their own benefits and drawbacks.
Hosted Payment Gateway
A hosted payment gateway is where the customers are redirected to the payment gateway provider’s website to enter their payment information. This type of payment gateway offers a very high level of security and will always be PCI compliant.
Hosted gateways are also incredibly user-friendly and easy for the business to set up. However, since the customers provide their information on the gateway provider’s website, the business has no control over the experience or the look of the gateway.
Hosted payment gateways also come with maintenance provided by the provider for no additional cost. This saves time and money for the business because they don’t have to do maintenance themselves.
Non-hosted Payment Gateway
A non-hosted payment gateway gives the business the ability to customize the payment page because the customers enter their payment information in the Shopify store instead of on the gateway provider’s website.
One major downside to a non-hosted payment gateway is the lack of maintenance provided. Businesses are completely responsible for maintenance of the payment gateway, or they can pay the provider to maintain the gateway.
However, a non-hosted gateways makes the payment process faster for the customer because they do not have to leave the Shopify store to pay.
Can Multiple Payment Gateways Be Used on Shopify?
There are many reasons to use more than one payment gateway on Shopify, and luckily it is possible. As a business on Shopify, there are so many different payment types to accept from customers. To provide them the best service, the business will want to accept as many of those payment types as possible.
Each payment gateway provider accepts different payment types, different currencies, charges different fees, and has different transaction limits. It can be hard to find everything a business needs from just one payment gateway, so using more than one payment gateway can be beneficial.
Factors to Consider When Shopping for a Shopify Payment Gateway
It is always important to complete efficient research, with the business needs in mind, before choosing a payment gateway (or gateways). When shopping for a payment gateway to use on Shopify, keep these factors in mind.
The most important factor to keep in mind while shopping for a payment gateway for Shopify is compatibility. The payment gateway needs to be able to integrate with Shopify in order to be used with Shopify. If it’s not, money and time are wasted by the business.
Always check to make sure Shopify is listed under the payment gateway’s integrations. Just because Shopify is so popular, it doesn’t mean every gateway will automatically integrate with Shopify.
Level of Security
Different payment gateways will offer different levels of security. Check into all of the security features offered by the payment gateway before choosing one. If the security features aren’t up to the standards of the business, keep shopping.
Just like everything else in a business, cost needs to be considered when shopping for a payment gateway for Shopify. Look at all the fees the business will need to pay before agreeing to sign up.
Some payment gateways will charge a setup fee, a per-transaction fee and a flat fee, while others charge a monthly fee and a per-transaction fee, and a flat fee. Knowing the fees and costs ensure the business is choosing something they can afford.
For example, a payment gateway might charge $50 for set up, 2.5% of the total transaction amount, plus a $0.10 flat fee per transaction. In other cases, they might charge $10 a month, 2.5% of the total transaction amount, and $0.10 flat fee per transaction.
Hosted or Non-hosted
Look into the full features of a hosted gateway and compare them to the features of a non-hosted gateway. This will give the business a solid understanding of which type will benefit them the most.
If the business does, or expects to do, international business, it is important that the payment gateway can accept multiple currencies. It may be difficult to find all of the currencies the business needs to accept in one payment gateway, which is where it can be beneficial to implement more than one.
If the business offers a subscription-based service or product, make sure the payment gateway chosen has this ability. Subscription payment gateways need to have extra security measures because they hold payment information for future use.
Benefits of Using a Payment Gateway on Shopify
There are many benefits a business will experience when using a payment gateway on Shopify. Some of these benefits include:
- Simple and quick payment process. Payment gateways help make the payment process easier and less confusing for customers
- Customer experience improved. With an easy payment process and multiple payment types accepted, customers will have a great experience with the business’s Shopify store
- Safe and secure checkout process. The payment gateway encrypts the customer’s information for maximum security and protection from fraud
- Convenience. Customers have the convenience of shopping online and paying with their preferred payment methods
- Customization. Non-hosted gateways give the business the ability to customize the customer’s checkout experience and align with the business’s needs
Use EMerchantBroker for Your Shopify Payment Gateway Needs!
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