If you are a small business owner, you may be wondering, what are the disadvantages of using a payment gateway. Despite the benefits, there are some disadvantages that you should keep in mind. Here are three reasons why:
Integrated payment gateways reduce conversion rates
Integrated payment gateways can improve the checkout process of your website. With fewer steps and less information required, you can increase the conversion rate of your website. You should also make the payment gateway process as convenient as possible, because conversion rates depend on it. This technology can also reduce your overhead costs. Depending on your business model, you can partner with global payment gateways to expand your reach. In addition, they can help you build relationships with other merchants who have complementary business models.
If you are planning to integrate a payment gateway, you should consider the features and benefits of each one. Payment gateways range in security, integration capabilities, currency choices, ease of setup, and transaction fees. Most of them offer volume-based discounts. You can seek the help of a developer if you need assistance. You can also check with your website developer for the best payment gateway. This will help you choose the best payment gateway for your business.
They can make routing decisions using merchant level pattern
The rise of payment gateways has transformed the B2B industry, but skepticism remains. According to an Ernst & Young webcast, the current payment ecosystem is facing a “pandemic.” While many merchants and consumers welcome these innovations, others worry that the influx of new technologies will increase the risk of fraud and data security.
Fortunately, smart routing is the answer to this conundrum. It relies on algorithmic tools and advanced data analytics to determine which payment gateways are most suitable for merchants’ needs. Smart routing techniques analyze various data points and identify which payment gateways have the highest transaction rates. These features can help merchants increase their conversion rates, and ultimately, increase their bottom line. Smart routing has the potential to make a big difference for merchants who want to make their transactions as quick as possible.
They charge merchants a penalty for chargebacks
The number of chargebacks a merchant experiences is a very important factor in determining whether or not they should switch payment gateways. Typically, a chargeback costs $15 to $25 per chargeback, which isn’t terrible if the number is a few a year. But if your chargeback rate is high, you can end up being charged high processing fees or even losing your account. To prevent this from happening to you, learn more about chargeback fees and penalties.
In most cases, chargeback fees are nonrefundable and collected by the payment gateways and acquirers when a dispute is filed. Because the fee is non-refundable, many acquirers make this fee non-refundable. However, if the chargeback is successful, merchants can get back the cost of the goods they sold. So it’s definitely worth looking into the details of this fee and its impact on your business.
They can’t handle spikes in transactions
As the number of people who use the internet to make purchases increases, more businesses are switching to subscription-based business models. Netflix and Spotify, for example, have replaced the need to purchase physical CDs or DVDs. This phenomenon is known as the subscription revolution. The subscription industry has grown more than 200% per year since 2011, with over 11 million U.S. subscribers. Subscription businesses must offer secure payment options to attract and retain customers, and the best global payment gateways can help them grow their business.
Payment gateways work by capturing payment data from the customer, transferring it securely to the acquirer, or returning the declined payment to the customer. The payment gateway also validates customer card details to ensure that the merchant’s bank account has sufficient funds to cover the purchase. The payment gateway makes sure that the customer’s credit card information is encrypted, ensuring a secure transmission of payment data. As a result, merchants and customers both benefit.