You will need to decide how customers can check out and pay for your online shop. Most people are used to the ability to pay online for goods or services with a credit card, debit card, or a bank draft. Your payment information is transmitted to a payment gateway that connects you with a payment processor. 

From a consumer’s perspective, the process of paying with a credit card, debit card, or bank draft might seem easy. However, if you are a store owner, the experience may be very different.

There are many payment options available, with different features and fees. There are two options: a separate payment gateway, a separate processor, or a payment aggregator. These terms are often used interchangeably, especially when they refer to the payment gateway or payment processor. However, they serve different purposes.

Let’s first look at the differences between processors and gateways before we start looking for individual providers.

What is a payment portal?

Payment gateways can be compared to credit card readers in brick-and-mortar stores, but they are designed for online transactions. They securely transmit transaction data from the online shop to the payment processor. The processor then sends the information to the customer’s issuing bank to validate.

The authorization status (approved/declined) is sent back to the payment gateway, which then communicates the result to the website. This process can be completed in less than a second. 

What is a payment processor?

The data is received by the payment processor who then relays it between the merchant’s bank or the customer’s bank. The payment processor can also help with disputes between buyers and sellers, refund customers, and negotiate rates for major credit card companies such as Visa and Mastercard. To use a payment processor, merchants will need to open merchant accounts.

You can negotiate directly with banks for the best rates if you have high sales volumes. You’re also less likely to experience holds because funds are usually deposited immediately in your bank account.

Shop owners are more likely to choose an aggregator than a payment processor because of the complexity involved in setting up a payment processor.

What is a Payment Aggregator?

A few companies offer both a gateway and a processor for complete payment solutions. These providers are known as payment aggregators. The aggregator acts as the merchant account and negotiates payment terms on behalf of store owners. Stripe and PayPal are two of the most used payment aggregators. Both have WooCommerce integrations.

A payment aggregator has many advantages

Easy setup and implementation

A merchant account can be complicated to set up. It may take several weeks for approval depending on your business. Payment aggregators are usually set up in a matter of minutes and can be implemented quickly.

Less complex management and accounting

Instead of having to manage separate accounts with the payment gateway and processor you will only need one. It will make your accounting and bookkeeping easier.

Lower sales volumes

You may have to pay fees to both your payment processor and the payment gateway you use. Standalone gateways such as Authorize.net typically charge a monthly fee in addition to a per-sale transaction cost. Not only do payment processors charge for each transaction but they also charge for PCI compliance and early termination. This can cause a drop in profits if your store has a low sales volume.

Payment aggregators typically charge a per-transaction fee, which covers gateway and processing costs. This is usually more affordable for smaller stores.

Flexibility

Merchant accounts may require contracts, while payment aggregators don’t. You may be charged a large fee if you cancel your contract too early. Payment aggregators do not require contracts. You can also switch payment options whenever you want.

WooCommerce Payments: The best of both the worlds

There are many great payment options available. However, there is only one specifically designed for WooCommerce.

WooCommerce payments allow store owners to see transaction and deposit details, resolve disputes, track recurring revenue, and keep track of their WooCommerce dashboard. You don’t need to log in to third-party websites or create merchant accounts.

WooCommerce Payments allows instant deposits at a modest additional fee of 1.5%. While most payment providers keep funds for at least two days before depositing them in your bank account, WooCommerce Payments does not. You can request a deposit 24/7, including weekends and holidays, to get your funds in 30 minutes. This allows you to have your cash whenever you need it.

This is the perfect solution if you value simplicity and efficiency.

Choose the right solution for your store

The WooCommerce Marketplace has official extensions from top partners and is a great alternative to WooCommerce Payments. Consider the following when choosing the right fit for you and your customers.

Compatibility With WooCommerce

Some payment solutions might not be supported or may require custom integration by a developer. To check if there is an integration, you can always refer to the WooCommerce Extensions Library and the WordPress.org repositories.

Support in countries where you do your business

You should ensure that the payment option you select supports both payments from the country you plan to sell to and the country where your store is located. You may be unable to find one provider. Consider using multiple solutions to accept payment.

Hosted or integrated

Hosted solutions allow you to go off-site to make a purchase, while integrated solutions enable customers to stay on your site throughout the entire process. Hosted solutions are hosted by the provider and you assume responsibility for data transmission. However, you could lose sales if customers don’t know how to use the hosted solution.

An integrated solution allows customers to pay directly from your website. This is a seamless experience that increases conversion rates.

Recurring payments support

You should ensure that your payment system supports automatic billing if you plan to offer subscriptions. Customers will need to renew their subscriptions manually if they don’t want to be charged. This could impact customer retention and make it difficult for you to manage your business.

Affordability

Different payment gateways have different fees. While most payment gateways charge similar transaction fees (usually 2.9% + $0.30 per transfer), some offer discounts to nonprofits, set caps on transaction volumes, or charge extra fees for currency conversion and disputes.

You will need to look at more complicated fee structures if you use a gateway with a merchant account. You can negotiate volume-based price breaks and transaction fees with multiple financial institutions through an independent processor relationship.

Another reason WooCommerce payments are popular with new stores is because of this. Most merchants based in the United States will only need to pay the standard fee of 2.9% + $0.30 for each transaction.

Comparison of payment solutions

Below is a comparison of fees and features for the most popular WooCommerce payment solutions. All rates are calculated using merchant accounts in the United States.

Payments simplified

WooCommerce understands that payment solutions were not something you thought about when you first dreamed of opening your shop. It is crucial to choose the right payment solution for your business.

WooCommerce Payments was created to simplify what can be a complex process. Although it may not be right for all stores, merchants based in the US can use WooCommerce Payments to simplify their store management and increase conversion rates through an easy-to-use on-site checkout. Stripe’s trusted infrastructure and low fees will make it easy to manage your store.