Payment gateways are the first step in the online payment process, and they have been crucial in helping e-commerce companies more easily accept online transactions.
These gateways serve as the online version of a payment terminal and front-end processor for online and mobile sellers. They often sell bundled services that include payment acceptance, data reporting, and fraud management.
BI Intelligence, Business Insider's premium research service, expects the U.S. online processing market (from which gateways pull a chunk of their revenue), will be worth approximately $10.7 billion in 2016 and will grow to $17.5 billion in 2020, thanks in large part to a surge in online shopping.
Furthermore, merchants and consumers are both shifting to digital, which is giving gateways more influence. BI Intelligence forecasts that US consumers will spend $385 billion through online and mobile channels in 2016. By 2020, e-commerce sales will reach $632 billion, 45% of which will derive from mobile.
Given these projections, it's understandable that more gateways will want to get a piece of the pie. But as more companies pour into this space, it will create difficult decisions for merchants. Which payments gateway provider should you use? What are the inherent advantages and disadvantage of each?
Below, we've compiled a list of the industry's leading companies to help you decide. Keep in mind that no one company or gateway has an overwhelming share of the market, and competition among these companies remains strong.
- Worldpay: UK-based Worldpay is one of the longest-tenured online payment platforms. The company provides several payment services for both online and in-store channels. As of August 2016, the company had 400,000 merchant clients. In 2015, it handled 13 billion transactions valued at more than $526 billion. Worldpay has increased volume mainly because of early-mover advantages that have allowed it to build scale. It also offers many different services across channels, which diversifies its revenue streams.
- PayPal: PayPal provides merchants with its own gateway for online payments. Best known as an online processor, the company handled nearly $300 billion in 2015, which made it the 10th-largest merchant acquirer in the world. PayPal's major advantage is its merchant and customer bases. As of August 2016, the company claimed more than 14 million merchants and 184 million customers, which gives it a much wider network than its competitors. Furthermore, PayPal placed an early bet on e-commerce, which also gave it an early-mover advantage. And finally, it processes payments on eBay's marketplace, which has historically exposed the platform to massive payment volumes.
- Amazon Payments: Amazon's proprietary payment processor supports payments on its parent's website, which gives it instantaneous access to high payment volume. Furthermore, it has expanded by offering its platform to other merchant sites. This is an attractive proposition for third-party merchants because Amazon had 250 million customers with saved payment information as of August 2016, and these shoppers may be more likely to complete a checkout. One disadvantage, though, is that the gateway helps Amazon strengthen its brand, which many e-commerce merchants must compete against. Amazon Payments' processing volume soared 150% year-over-year in 2015.(BI Intelligence)
- Braintree: This PayPal-owned gateway supports payments for mobile-centric merchants, and it benefits from its access to PayPal's 14 million sellers. Braintree has secured the business of some of the world's largest digital merchants, such as Uber and Airbnb. Braintree providers developers with an SDK with multiple features. The firm had 219 million cards on file worldwide in Q4 2015, up 111% from Q4 2014. It handled over $50 billion in payments in 2015, and much of that success stems from its strategic focus on mobile, a high-growth commerce channel.
- Stripe: Stripe provides an API that merchants and web developers can use to integrate payment processing into their websites. The company charges a flat rate of 2.9% plus a 30-cent fee per successful charge for companies that have less than $1 million in volume each year. It also offers several free services (such as refunds) for which PayPal charges fees. And finally, Stripe makes it easy for merchants to update their payment platforms using just a few lines of code. However, merchants must wait two business days for their payments to deposit to an account, and some in higher-risk industries must wait seven business days.
- Vantiv: Vantiv has found success in its nearly error-free purchases, authorizations, and captures. In May 2015, the processor successfully completed 95% of these transactions, which beat out peers such as Worldpay, PayPal, and Braintree. The company also has a tremendous speed advantage, as it often processes payments data in less than a second.
- Adyen: Adyen offers e-commerce companies a payment platform that includes gateway, risk management, and front-end processing services. Much like Braintree, Adyen is a full-stack gateway and counts prominent merchants like Facebook and Spotify as clients. The company has attracted merchants with a single platform that can support payments in any channel across 100 different payment methods and 200 countries. The firm processed $50 billion in 2015, up 100% from $25 billion in 2014. It earned $350 million in revenue in 2015, and expects to break $500 million in 2016.
- Payline: Payline's biggest strength is its competitive pricing that it offers through two separate plans. However, its monthly fee is slightly above average relative to its competitors. Payline offers a simple and easy-to-use application and installation that merchants can often have up and running inside of a day. And finally, it offers 24/7 customer service by phone and live chat.
- Dharma Merchant Services: Dharma charges a $15 monthly fee, which is slightly greater than the market average. But the company makes up for it by not requiring a monthly min mum nor a PCI-compliance fee. And while Dharma offers solid customer service, it does not give merchants a dedicated account representative, as its competitors often do.
- Flagship Merchant Services: Flagship offers a great deal of flexibility to its clients, who do not need to sign long-term deals with the company. It also offers competitive pricing with multiple tiers and has no cancellation fee should you decide to terminate your agreement. Flagship offers next-day initial setup for accounts and typically deposits funds within two business days.
More to Learn
Payment gateway providers are just one small piece of the broader payments ecosystem, which continues to evolve and become more complex with each passing day.
That's why BI Intelligence spent months creating the best and most exhaustive guide on the world of payments entitled The Payments Ecosystem Report: Everything You Need to Know About The Next Era of Payment Processing.
To get your copy of this invaluable guide to the payments industry, choose one of these options:
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The choice is yours. But however you decide to acquire this report, you’ve given yourself a powerful advantage in your understanding of the fast-moving world of the payments ecosystem.
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