When setting up your e-commerce store or SaaS application you need to select a payment gateway in order to collect payments. It is important to explore your options and find the one that will be the best fit for you, your customers, and your business. After you are up and running it can be expensive, and not to mention a pain to switch. With at least several dozen payment gateways available how do you choose the one that is right for you?

What Is A Payment Gateway?

A payment gateway is a service that processes credit card transactions for you. It is similar to the point of sale system or credit card terminal found in a traditional store. The payment gateway collects the credit card information from a customer, authorizes the transaction, and securely processes the payment. Then, in a couple of days the money is deposited into your bank account for you.

Some payment gateways will require you to have a merchant account. This is a special bank account that is for collecting credit card payments. It is more common these days to not need a merchant account. In this case the payment gateway aggregates all the payments that they collect from all of their customers and then distributes them out. This option is great because you don’t have to open up a merchant account which can take some time to get set up. If you use a payment gateway that requires you to set up a merchant account it could take a week or more before you can start accepting payments. Alternatively, if you go with a gateway that doesn’t require a merchant account you can usually start using your account the day you sign up.

There Are More Options Than PayPal

Everyone has heard of PayPal. They seem to be the option that a lot of people turn to when they are first getting started with e-commerce. However, PayPal usually isn’t the best option for most people. It is a common myth that PayPal is easier to get set up. In realty, many payment gateways are just as easy to setup as PayPal, and sometimes they are even easier.

PayPal is huge and has been around a long time. That longevity is really a double edged sword. There is less risk of them closing their doors, but with such a long history they have in some ways become a frankenstein. They offer many different account types and options. Each account type has a different fee structure, different features, and different capabilities. The documentation on the different account types can be confusing. Just because your e-commerce platform supports PayPal doesn’t mean it supports all account types. You need to read the fine print to really determine which account type will work with your platform.

The fee structures that PayPal offers tend to be some of the most confusing in the industry. A higher amount of transactions doesn’t always translate into lower fees. This is another area where you need to read the fine print in order to understand all the fees you will be charged.


PayPal may turn out to be the best option for you, but it is important to at least consider all of your options. You may find another payment gateway will be a better fit for the types of transactions or e-commerce platform that you are using.

Platform Support

Most e-commerce platforms have a limited number of payment gateways that it will work with out of the box. Sometimes it will support additional payment gateways if you buy a special add-on that is sometimes referred to as a module or plugin. If you are just starting out pick the e-commerce platform that will be the best fit for you. Then, find a payment gateway that is supported by your e-commerce platform. This will save you a lot of time.

If you already have a payment gateway that you have been using it might be better to select an e-commerce platform that will work with your existing gateway. That will save you from needing to switch payment gateways. If you can’t find an e-commerce platform that has the features you need it is possible to use multiple gateways, or have custom software built in order to make your existing gateway work with your e-commerce platform. However, these options require more work and are more expensive.

Feature Set

It is important to consider all of the features you will need in a payment gateway. Having a list of required and “nice to have” features will help you narrow down your options quickly. Most gateways support the standard online store where a customer places an order and makes a one time payment. However, payment gateways can differ quite a bit with other features.

Maybe you plan to offer a subscription service. Then, you need to be sure that the payment gateway will support subscriptions. For subscriptions you need a payment gateway that can store the credit card information and allow you to process charges against it on a recurring basis.

You can’t just store the credit card information in your database on a whim. The credit card industry has a set of rules called PCI DSS which is commonly referred to as PCI compliance. These rules are in place so that credit card information is stored and processed securely. There are a lot of rules you are required to follow if you store credit card information. If you are ever found to be in violation of those rules or if you are hacked you could face huge fines. It isn’t worth the hassle or risk for most companies. Let the payment gateways who are experts at PCI compliance take on the task and the risk of keeping the credit card data secure.

Do you have customers who prefer to pay by check? Then, ACH might be just the thing for you. ACH allows you to do electronic bank account transfers or “electronic checks.” Some payment gateways will support ACH while others do not. Handling credit card payments and ACH payments through the same payment processor can be really convenient.

Another feature that isn’t widely supported is a marketplace type of environment. If you are looking to do something similar to Etsy or E-bay where you have multiple sellers you will need a special setup to process a transaction where part of the payment goes to your seller and part of the payment goes to you.


Don’t forget to compare the rates that you will pay with different payment gateways. Every payment gateway does their own thing, but it is pretty common these days to pay a percentage of the transaction plus a flat fee. For example, at the time I’m writing this Stripe charges 2.9% + 30¢ for each transaction. Many other payment gateways are starting to offer similar fee structures. However, annual fees, one time setup fees, and various other fees fees based on the amount of sales you have in a month are common.

Future Needs

You’ll want to plan for the future when it comes to selecting a payment gateway. Think about your future goals for your site or service. Maybe you plan on opening up your platform to multiple sellers in the future. You might as well select a payment gateway that will support that now. That way you don’t have to switch down the road. Maybe you never actually open up to multiple sellers, but if you can support it the option is there for  you.

Identifying the features you need, doing a little research, and comparing your options will help you select the right payment gateway that will serve you well for years to come.

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About the author

Damon Schopen designs and develops web-based software. He specializes in e-commerce, interactive websites, integrating software to allow sharing of data across systems, and customizing existing software applications to meet your specific needs. For the past 10 years Damon has helped a variety of companies develop the web-based software they need to do business with their customers.

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