Before you’re up and running you’ll need to have decided upon a marketplace payment solution. Some are better known than others such as Apple Pay, Amazon Pay and Stripe, but you’ll need to look at your options to work out which is the best payment gateway for your marketplace.
It’s important that you have an effective, secure and simple-to-manage system in place. Research suggests that an astonishing 88% of online shopping orders are abandoned so a simple and convenient checkout and payment process that results in a positive user experience could make a significant difference to your bottom line.
What is a payment gateway?
A payment gateway is essentially software that connects your marketplace with your customer’s choice of payment, be it credit or debit card. To ensure the process is secure and user-friendly, a marketplace payment gateway uses the following process:
1. Encryption
All data between the seller and buyer is encrypted to help protect the confidentiality of the private information being shared.
2. Authorisation request
The transaction only goes ahead once the customer’s choice of payment (e.g. credit card company) approves the request.
3. Fulfilment
Once authorised, the payment gateway lets the eCommerce site (i.e. your marketplace) proceed with the payment so the order can be completed.
There are two terms that you may have heard of, payment gateway and payment processor. Although they are sometimes used to refer to the same thing, there is, in fact, a significant difference between the two.
A marketplace payment gateway is the whole secure process of analysing, transmitting, and authorising payment information between the buyer and seller.
Payment processor refers to the transaction part of the process between payment card and the acquiring bank (e.g. the online equivalent of tap and pay).
The different types of payment gateways
Now let’s look at the different types of marketplace payment gateways available.
1. Redirects
As the name suggests, redirect payment gateways give customers the option of completing their purchase by being redirected to a secure payment page such as Paypal. This is a simple – and popular – option for many small to medium-sized businesses.
Although it adds another step to the buying process, the payment gateway doesn’t have to be integrated into the site, and the buyer benefits from the security and ease-of-use of the redirect payment gateway, and is probably a method they are already familiar with and therefore comfortable with.
2. On-site checkout
Here the buyer will begin the front-end checkout process on your marketplace before proceeding to a back-end online payment system to complete payment. To ensure the connection between your site and the payment gateway is secure, we recommend using SSL (Secure Sockets Layer).
This is an easy and quick option for handling payments although it does take the payment process out of your hands, which is why, if you go down this route, you should only connect with a trusted payment gateway, for example, Stripe.
3. On-site payments
This is the preferred choice for larger marketplaces. Your servers would process all the checkout and payment steps, giving you more control over – and responsibility for – each transaction. In other words, the entire user experience of making a purchase is in your hands.
Now you know what payment gateways are, we’ll run through some marketplace payment provider options.
Apple Pay
The number of customers using Apple Pay is rising. In 2020, iPhone users that activated Apple Pay grew by more than 65 million people and in 2019 the payment gateway processed a huge 10 billion transactions.
As Apple Pay is mobile-based, this electronic ‘wallet’ solution allows transactions to take place using Touch ID and Face ID. With 1.65 billion active iPhones globally, the potential customer base for Apple Pay is massive.
Amazon Pay
Amazon Pay makes things REALLY simple! The online payment gateway allows customers to pay by entering their email address and Amazon password without leaving your site. There’s no need to enter credit card information as it simply uses the payment details saved to your Amazon account.
Although relatively new in this arena, Amazon is a brand people already trust. Research suggests that 89% of buyers agree that they are more likely to buy products from Amazon than other online retailers.
Stripe
What makes Stripe a great contender is that it offers its payment gateways in a variety of API’s. What that means for your marketplace payment platform is that its on-site checkout can be customised to integrate with the design and branding of your site. It’s our particular favourite!
Able to cope with a large volume of transactions, the payment gateway can be integrated into shopping carts, analytics tools, marketplace and more. In addition, to help businesses accept any payment method in the world with a single integration, the Stripe payment gateway is actively adding new payment methods.
Paypal
In 2019, Paypal processed 12.4 billion transactions from its 305 million users. So it’s no surprise that it’s one of the most trusted redirect payment gateways. According to their website, merchants experience 88.7% online conversion on average with Paypal. That’s a pretty high conversion rate!
As well as integrating seamlessly with both mobile and marketplace, PayPal offers fraud protection security and is completely transparent about its processing fees.
Braintree
Acquired by Paypal in 2013, Braintree operates independently of it. If you have some programming know-how, Braintree is highly customisable and, according to its website, is the only marketplace payment provider that delivers ‘PayPal, Venmo (in the US), credit and debit cards, and popular digital wallets like Apple Pay and Google Pay in a single, seamless integration.
ShieldPay
Easy to set up, smooth and efficient to use, this is a good option for multi vendor marketplace websites. With a focus on working to reduce fraud, ShieldPay uses escrow (where a third party receives and disburses the money for the buyer and seller) to safeguard funds until both customer and vendor are happy to proceed.
Depending on the needs of your particular marketplace, ShieldPay can act as a redirect payment gateway, partial redirect, or fully integrate with your current marketplace payment process.
Need help choosing a payment solution for your marketplace?
There’s one more thing to consider and that’s if you envisage your marketplace will need to process international transactions. If so, you will need to integrate with an international payment gateway. Fortunately, there are many options available, some better suited to particular regions than others. For that reason, once you know the countries you’re most likely to be authorising payments with, check if your chosen online payment gateway covers those places.
And finally, we can’t emphasise enough how important it is to be familiar with your customers’ and potential customers’ shopping habits when selecting a payment gateway to ensure they are confident with the experience you are offering and more likely to complete their transaction rather than abandoning their baskets.