Driving traffic to a website has been the prime goal of all start-ups, but converting those “visits” into actual sales leads remains a challenge. Some industry observers estimate that the average abandonment rate of an online shopping cart stands at a significant 63%. Needless to say, choosing the right payment gateway and models would go a long way in retaining customers and promoting repeat purchase.
Having an efficient, secure and user-friendly payment solution is vital in the survival of online businesses. The first and most crucial element to understand before assessing your payment options is your business model and how you envision users to pay online.
Understand what steps a user must take to pay or get paid for a product or service being offered on your platform. This will determine what payment solutions best suit your business and how you can optimise the payment experience for your users.
WHAT TO CONSIDER
Below is a checklist of things to be aware of when researching for a suitable payment gateway for your business:
- Ask whether the payment gateway accepts transactions with entities outside of the United States or the European Union. Most gateways do accept international payments, but don’t specify that they only work with companies registered in the US or Europe, which is obviously counterproductive for Middle East-based firms. Make sure to clarify this with the online payment service provider before proceeding as this will save you a lot of time and effort.
- Check that the gateway does not have any geographic restrictions on cross-border transactions. For example, a US trade embargo on Cuba has forced US payment service provider PayPal and its subsidiary eBay in 2011 to ask German online shops to remove Cuban products from their inventory or run the risk of their accounts being blocked. Safeguard your business by always reading the fine print of a contract.
- Know your customers. If you are basing everything on online sales, understand the markets you are operating in. Are people willing to pay online and what is the credit card penetration rate in those markets? Once you have this information on hand, it will be easier for you to assess your payment options and help you to even find alternative solutions like cash on delivery.
- Negotiate a start-up rate for your business. Payment solutions providers usually offer an all-in-one merchant account and payment gateway for a negotiated rate plan based on a company’s expected volume of transactions per month or per year. It would be worth checking this out before signing any deal.
OTHER POINTS TO PONDER
In addition to the above, ask yourself the following before subscribing to a particular payment system:
- What business model do you have and how do you plan to monetise it. Do you operate a subscription model, are you a marketplace or do you offer a virtual store front? Understanding where you can best make a sale that makes sense for your users is the first question to answer.
- After determining which model works best for you, the next step is to define your needs. Quick tip: many gateways have not perfected their SEO. They assume people are searching for specific payment terms, which is often very industry related. Try to research the right terms and look into the ecommerce lingo to save time. For example, look into recurring payments, i.e. if you have a subscription business model, and check out platforms such as zuora.com. Research other platforms under this category and compare their various offerings and how they may serve your business.
If you have a store front and are selling a product or service, you will find many payment options. The main thing to consider is whether you would be able to accept payment in local currency as well as the exchange rates companies offer. There are many platforms that deal with this. One example is www.2checkout.com, which offers payment in multiple currencies (including those in the Middle East). Although they are a little more expensive, they have minimal set-up fees. Also Dubai-based Telr, which launched in 2013, has optimised the local currency payment experience for the Middle East consumers.
If you have an eBay model – where you are a marketplace and need to both accept payment and payout to your suppliers – you may need to have a pay in option as well as a mass payout option (or paying many users at once). There are a few players in the game, but understand your needs first before you automate on a large scale.
These tips and questions will help save a lot of time and effort. We learned this the hard way when researching solutions for our educational marketplace. We need to be able to accept payments from students and parents, as well as payout to our tutors and teachers, who offer live lessons on our platform. We needed worldwide coverage more than just a local experience, as well as multiple currencies, payment support and more.
Each company must understand how vital payment is to their business and strive to find the best solutions that will support their growth plan.
Thea Myhrvold is the founder and managing director of Teach Me Now, an online marketplace where anyone can teach and learn online.
© ZAWYA 2020