What are the biggest benefits of multiple payment gateways for businesses?
As the front-end technology responsible for sending customer data to the merchant's bank account, payment gateways play a key role in completing a sale, and they are an absolute must for every business. Without them, a company wouldn't be able to accept payments and process transactions, no matter if we are talking about online or brick-and-mortar stores.
In this article, we will talk about the benefits of multiple payment gateways, and why companies should consider having alternatives to their main payment gateway.
But before we dive right into them, let's take a look at what exactly a payment gateway is:
1. What is a payment gateway?
A payment gateway is a technology that enables merchants to accept debit or credit card purchases from their customers. This term doesn't apply strictly to physical card-reading devices in retail stores - it also refers to payment processing portals in online stores allowing merchants to accept payments on the Internet.
When it comes to online payments, payment gateways act as an intermediator between the merchant's website and the acquiring bank. They transfer the information associated with the purchase from the merchant to the bank, authorizing the credit card details and facilitating the transaction.
In other words, every time you fill out the checkout form on a website, providing the payment details of your card for the purchase, the payment gateway will take this information, process it, and transfer it to the acquiring bank.
In addition, gateways use encryption and tokenization to protect credit card data and ensure the secure exchange of information between all participants in the transaction.
Payment gateways work in the following way:
1.1. Creation of a payment order
At checkout, merchants will use the gateway to create a new payment order in the system. Once the order has been created, the gateway will return a payment link or a form where users can fill out their credit card details. This information is then encrypted under the requirements of PCI-DSS, and sent to the merchant's acquiring bank.
1.2. Data processing
The payment network receives the encrypted information, which is handled by the acquiring bank and then sent to the processing center.
1.3. Confirmation of payment details
At this step of the process, the processing center will check the payment details with the issuing bank to confirm that the transaction can move forward, providing a response to the gateway for approval or decline. If everything is correct with the payment information, the transaction will be approved.
However, transactions can also be declined - and there are multiple reasons why. You can check our article on credit card decline codes to learn more.
1.4. Transaction completion
The response of the transaction (whether approved or declined) will be sent to the payment gateway, which sends it back to the merchant's website, informing the customer whether the payment has been successful.
2. Multiple payment gateways: what does it mean?
Now that we've cleared out the concept of a payment gateway, let's take a look at what having multiple payment gateways mean exactly.
Multiple payment gateways mean that the merchant has implemented more than one payment gateway on their checkout page with the purpose of offering multiple alternatives to customers for completing their transaction.
This approach allows merchants to route the transactions to the gateway that offers the best support within a particular country or region, increasing the number of successful transactions across multiple markets.
Consequently, it leads to better user experience as customers are able to explore different options and select the one that gives them the best deal.
3. Benefits of multiple payment gateways
With all of this in mind, let's take a look at the biggest benefits of multiple payment gateways:
3.1. Offer better customer experience
As we just mentioned, one of the biggest benefits of multiple payment gateways is improved customer experience. No matter how advanced or powerful a payment gateway is, it's almost impossible to offer all features in all countries across the globe, and provide equally good support to all of them.
Different gateways offer their unique selection of features depending on the country. For example, some payment gateways don't accept specific brand cards - such as American Express and Discover, or the processing fees are too high which can result in poor customer experience.
Some gateways don't offer the possibility to accept recurring payments and manage monthly subscriptions, while others don't have risk management or anti-fraud tools to help merchants grow their business safely.
Additionally, others are limited to only one country or just a couple of countries, restricting customers coming from those ones that are not accepted.
Reasons for abandonments during checkout & benefits of multiple payment gateways. Source: Statista.com
In fact, according to a study conducted by Smart Insights, 8% of customers abandon their shopping carts because there weren't enough payment methods, or they didn't find the one that they needed.
Lack of features may lead to a decrease in conversion rates, especially if customers can't find the features that they are looking for.
However, if a merchant offers multiple payment gateways, users can get the flexibility that they need to complete their purchase order, which results in better customer experience as well.
3.2. Reduce shopping cart abandonment
Next on our list of benefits of multiple payment gateways is the decrease in shopping cart abandonment rates.
Shopping cart abandonment is one of the biggest issues that merchants face when selling online. According to Sleeknote, the average cart abandonment rate is about 70%, but some industries experience up rates of up to 81%.
Needless to say, this has a serious negative impact on merchants' revenue, so everything that can help them reduce these rates can improve their revenue in the long run.
As we just mentioned previously, the lack of sufficient payment methods is one of the main reasons why customers may abandon they purchase, and it amounts to 8% of all cart abandonments.
However, offering multiple payment gateways gives customers the flexibility to select the one that provides them with the best deal and the cheapest transaction. Which, consequently, can help to reduce shopping cart abandonment, increasing revenue for businesses.
3.3. Increase revenue
According to GetWeave, 16% of small businesses lose customers because they don't offer their preferred options, and 38% of them encountered a situation where they couldn’t make a purchase because their form of payment wasn’t accepted.
Some other disadvantages of not offering multiple payment options (which is one of the benefits of multiple payment gateways) include:
• Loss of customers, especially if they can't make the payment because their preferred method is lacking;
• There is a higher risk for late payments due to the lack of flexibility;
• As a business, you may lose opportunities for upsells;
• You may not be able to accept recurring payments depending on the gateway (you can do so with MYMOID!);
• You may not be able to collect payments on the go;
All of these disadvantages typically lead to decreased revenue, which will hurt businesses in the long run.
However, offering customers the flexibility to choose from multiple payment options is a great way to ensure that they will have a good experience on your website, and that they will be able to complete their transaction.
Additionally, you reduce the friction during checkout, ensuring that this won't be the reason why they may abandon their shopping cart.
3.4. Expand your reach
One of the biggest benefits of multiple payment gateways is that they allow businesses to expand their international reach. As we mentioned previously, there are limitations when it comes to accepting payments in different countries depending on the gateway. In addition, some payment gateways are only limited to a single country.
Other gateways, such as MYMOID, have a wide international scope which is ideal for companies that are looking to grow their business globally. With MYMOID, businesses can accept payments in more than 45 countries and 128 currencies.
Even though ecommerce websites don't have location restrictions, the difference in currencies can be an issue for merchants, and a single gateway may not be enough to process payments across the whole globe.
In this case, merchants might have to implement multiple payment gateways if they want to process transactions and accept payments from several countries.
3.5. Back up your operations
No matter how good a payment gateway is, downtime is bound to happen every once in a while - and when this happens, customers might experience troubles when trying to complete their purchase.
Poor checkout experience may cause them to abandon it altogether, and they may never come back to try again. In fact, according to a study conducted by Finance Magnates, online merchants lose the mind-blowing 62% of customers who experienced a failed transaction, and they will not return to the website to make another purchase intent.
The truth is, no gateway is immune towards technical failures. While online payment processing is designed to be operational 24/7 without any exceptions, many platforms experience downtime or need to be tweaked for maintenance.
For example, Stripe experienced a downtime of almost 2 whole hours in 2019, causing thousands of failed transactions for merchants that didn't offer different payment alternatives to their customers.
In other occasions, gateways might fail to process the payment as a result of sales overload. The point is, one way in which merchants can avoid these scenarios (which cause them to lose revenue) is to offer multiple payment gateways and have a back up plan for when their main gateway experiences technical failures.
3.6. Meet your customers' needs
Undoubtedly, one of the most important benefits of multiple payment gateways is that it allows merchants to meet the needs of their customers. As we already discussed, different gateways offer different features, and some of them may not even be accessible from all countries.
Finding all possible features in a single payment gateway is extremely hard, and conversion rates may decrease if customers can't find the feature that they are looking for.
By offering more flexibility to your customers, you ensure that their needs are met at any stage of the payment process, which contributes to better customer experience and more repeat purchases.
3.7. Get valuable insights
One of the most underestimated benefits of multiple payment gateways is that they allow merchants to collect a wide variety of data, and get valuable insights from multiple sources.
Not all gateways collect the same data, meaning that they can complement each other into providing a fuller picture of what's going on payment-wise on the merchant's website.
By taking full advantage of analytical data, companies can make well-informed decisions based on how people behave on their website and during checkout so they can continue improving and growing their business.
4. Disadvantages of multiple payment gateways
Now that we talked about the benefits of multiple payment gateways, it's important to keep in mind that it's not all roses, and there are certain disadvantages as well. Some of them include:
• Higher costs associated with the technical integration, which may bring tracking processing fees as well;
• Companies will have to dedicate more time, resources and effort into implementing each gateway;
• Because payments are distributed amongst different gateways, there may be no volume pricing advantage;
• Multiple payment gateways may also lead to operational challenges if business don't know how to coordinate them;
• Companies may need to allocate more IT development resources to ensure that they are maintaining all of them;
And of course, it's important to keep in mind that the failover logic becomes more complex as well. Businesses need to establish a solid payment logic to ensure that failed transactions are redirected properly without having negative impact on customer experience.
There is no doubt that there are plenty of benefits of multiple payment gateways. From providing a backup plan to ensuring better customer experience and getting an expanded international reach, many businesses may benefit highly from it in the long run.
There are certain disadvantages as well, and companies will have to evaluate very carefully whether they should stick to one payment gateway, or implement various at the same time.
As a powerful payment gateway with a wide variety of features that allow merchants to accept payments in different countries, MYMOID is a great option to start with. Get in touch with us for more information!
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