Payment Gateways: Standard Features

on May17

The purpose of this article is to discuss standard features to be considered during payment gateway selection.

If this is the first time you are reading our “Selecting a Payment Gateway” mini-series, please, start with the Introduction to improve your understanding of this post.

While people tend to look at a credit card as an ordinary peace of plastic with a magnetic stripe on it, cards can be of different types and there are many different features about cards. Based on what current and future needs are, a merchant might want to choose a processor offering payment gateway software capable of supporting these features.

Card processing levels

When cards are processed they can qualify for one of the three different levels (for more information check this article ). Consequently, if a business needs, for instance, level III processing, it is necessary to ensure that it chooses a payment gateway supporting that particular feature.

Industry-specific features

Some merchants operate within a specific industry with its special requirements or regulations when it comes to credit card processing. Examples of such industries with respective specific features include restaurants (tips), lodging (incremental authorization), healthcare (support for HSA/FSA accounts). Naturally, these merchants should deal with a processor/payment gateway specializing in their industry and providing support for the required features.

Card present vs card-not-present

All transactions can be viewed as card-present (retail) or card-not-present (CNP) (direct marketing\e-commerce). While many payment gateways support both, it is common for payment gateways and processors to specialize in one of these two types. Therefore, it is important to analyse the needs of a business with respect to transaction types that it has to support.

A business should keep in mind that the following types of transactions are only possible within card-present environment:

  • PIN-debit,
  • electronic benefits transfer (EBT),
  • EMV (Europay/MasterCard/Visa standard for integrated circuit or “chipped” cards).

On the card-not-present side it is appropriate to mention such features as

  • PIN-less debit,
  • 3D secure,
  • online fraud prevention.

Gift cards and loyalty cards support

Other categories of cards that a business might consider supporting are gift cards and loyalty cards. Both types of cards are rapidly gaining popularity, especially in the US, and that is why they should also be taken into account. If a business might require (now or later) support for either gift cards or loyalty cards, the decision-makers should keep that in mind while making a choice.

Merchant’s perspective

In the initial article of this mini-series a health club has been chosen as a merchant example, because it requires support of a variety of credit cards and features for its operations. Due to high competitiveness of the business, a fitness club might need to be able to quickly adopt to the new industry trends, such as, for example, gift and loyalty cards.

Example

To enhance customer experience and to improve member retention, a health club wishes to introduce a gift card program (a loyalty program). The program will enable people to get free personal trainings after a certain period of club membership or after they accumulate a certain number of points through purchases.
If the payment gateway the club is dealing with supports this feature, then the club’s tasks, as well as the whole reconciliation process, are considerably simplified. Otherwise, the club might need to deal with a separate processor (the one that supports gift cards) and reconciliation would involve two different companies.

Conclusion

It is desirable for a merchant to choose a payment gateway, supporting the broadest spectrum of cards and features, currently or potentially required by the business.

Reseller perspective

If a business’s goal is to resell merchant services, the rule is as follows. The more flexible and wide the spectrum of services is, the easier it is to offer and resell these services. Moreover, the ability to offer additional services, beside standard features supported by all other resellers, may provide a competitive advantage for a reseller.

Example

Having conducted a research, a fitness software company realizes that a considerable number of purchases are made online. Consequently, there is a need for a brandable mobile payment application that the software company could use to enable its customers to accept online payments. Partnership with a payment gateway, featuring the built-in support for mobile payments, allows the fitness software company to
grant the service to the clients without any complications, as well as consolidate all types of transactions under a single account and greatly simplify the reconciliation process for the company and its respective merchants.

Conclusion

The more features are supported by the payment gateway, the easier the service sales process will be, and the more money can be charged for standard features (retail, e-commerce), because beside them, additional ones (gift card support etc) will be available.

Our next post will cover fraud protection support as a payment gateway selection criterion.

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