How To Choose The Right Payment Gateway For Your Online Shop
Online shopping is all about convenience - with just a few clicks, you can pick your favourite products and proceed to payment instantly. As an online shop owner, establishing a smooth online shop payment process can perfect your customers' shopping experience. But after pressing the payment button, how does the money end up in your online shop’s account? In the following article, we will offer an overview of the operation process of payment gateways and how you can choose the right payment gateway to take your business to the next level!
What Is A Payment Gateway？
From a user's perspective, ordering and paying at an online shop may take as quickly as just a few seconds. However, the underlying e-payment process is definitely not simple, as it involves cooperation between multiple parties, including the bank of both buyer and the online shop, the credit card company, e-wallets, payment processors and the payment gateway, to transfer a payment from the buyer's bank account to the online shop's account1. Here's a breakdown of the process of an online shop payment:
Firstly, the customer submits an order to the online shop, which will then transmit the encrypted payment credit card information to its own acquiring bank via a Payment Gateway. The online shop's acquiring bank will then send the customer's credit card information to the issuing bank for information verification and credit card authentication. After confirmation, the payment will be transferred to the bank of the online shop and the customer will receive an invoice after completing the payment1.
Simply put, a payment gateway does not process the transaction directly. Instead, its primary role is to ensure that the credit card is valid before passing the order information to the payment processor, which is responsible for the communication between the online shop, the credit card company and the banks, in order for the online shop to receive payment from the buyer2.
How Do You Choose The Right Payment Gateway For Your Business?
Customer-serving ("B2C") online shops in Hong Kong usually accept four types of digital payment methods3. In the era of ever-changing and multifarious e-payment options, online shop owners may consider the following factors when choosing a payment gateway in order to provide consumers with a smoother and more convenient payment experience:
- Does it accept different payment methods?
Such as credit card/debit card payments, e-wallets or FPS, etc.
- Does it accept different credit card/debit card payments?
For instance, credit cards or debit cards issued by different institutions and banks.
- Can it handle cross-border payments and accept multiple currencies?
Some payment gateways offer global services, allowing you to complete the payment process in your preferred currency1. If your business’s target audience extends beyond Hong Kong, then this aspect needs to be considered1.
- Does it offer secure transactions and protect the rights of both the buyers and the online shops?
Apart from payment functions, payment gateways can also assist online shops with verifying credit card information, offering extra security services, e.g., fault detection, thereby ensuring the security of transactions and safeguarding the rights of both buyers and online shops2. Online shops with high transaction volumes may choose a payment gateway that integrates an escrow payment service, whereby a third-party platform first withholds the transaction amount until after the buyer receives the goods or service, then will the online shops receive their payment. Escrow payments may lower risks for the online shops, while offering protection for the consumers5.
- Does the payment model suit your business nature and your customers’ shopping habits4?
The fees of a payment gateway generally include a monthly subscription fee and a handling fee for each transaction. Some platforms may waive the monthly subscription fee as a gimmick, possibly in exchange for a higher per-transaction fee2. Online shops should choose the most cost-effective option that fits their business needs based on customers’ spending patterns4.
Are you establishing an efficient payment process for your online shop? Don’t forget the most important step: before any payment can happen, an online shop must open a business bank account to receive payment6.
The above information is only for your reference. For detailed information, please refer to the sources and seek professional advice if necessary.
Article published on 17 May, 2024
^Terms and conditions apply.
*** Account opening can be completed in as fast as 1 working day for Hong Kong-incorporated entities with all shareholder/director/sole proprietor/partner holding a Hong Kong Permanent Identity Card. For Hong Kong-incorporated entities with at least 1 shareholder/ director/ sole proprietor/ partner holding the People’s Republic of China Resident Identity Card, account opening can be completed in as fast as 5 working days. Subject to eligibility and conditions.
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