Does your business involve making or receiving payments? If so, you need to integrate a payment system. Here are some thoughts on the matter.
- What are payment gateways?
- What do you need to consider when you choose a mobile app payment gateway?
Ecommerce is a thriving market and if you’re to be a part of it with your mobile app, you need to choose a payment gateway.
What are payment gateways?
A payment gateway allows users to make payments quickly and safely. Payment gateways are used in physical, brick-and-mortar, and brick-and-click stores as well as in eCommerce. As a mobile app development company, we feel qualified to analyze the topic from the perspective of online commerce.
A service acts as an intermediary of sorts, sending transaction details to credit card processors or banks and then sending back authorization responses. You’ve probably seen it a thousand times in physical stores: you swipe your credit card through the POS terminal and wait for a response. That’s the gateway working.
So whatever your customer pays with — a credit or debit card, Bitcoin, or direct deposit — the transaction needs to pass through a payment gateway.
What do you need to consider when choosing a mobile app payment gateway?
When choosing a payment gateway, you should consider a number of things.
Merchant account type
There are two types of merchant accounts: dedicated and aggregate. Here’s a small comparison for you to see the difference.
|Dedicated merchant account||Aggregate merchant account|
|A personal account set up by the provider for the merchant’s business transactions||A joint account setup by the aggregator that’s used by a number of merchants|
|Funds are deposited directly to your business’s bank account, and you control the process fully||Funds go through the aggregator and are checked by it, after which, if no suspicious activity is found, the money is deposited to your bank account|
|Fees are set separately for each account||Fees are fixed at the provider level and are the same for all merchants using the account|
|To setup a dedicated merchant account, the business and its owner go through a full check of credit and financial history, liabilities, reputation, etc.||Fairly easy to set up and requires little verification information|
|Takes time to set up (due to all the checks)||Setting up an account is quite fast|
|Transaction processing is fast, usually taking less than a day||Transaction processing can take up to 2–3 days|
|More expensive||Usually cheaper|
The differences between these two types of accounts are significant and the choice should be made with care.
A dedicated account offers you, as the business owner, complete control over everything, including fees for transactions. This is convenient when your business is big — an aggregator’s fixed fees might get a bit expensive when you're processing dozens of transactions every day. Transaction processing time — the time between your customer making a payment and the money being deposited to your bank account — is also a bit faster with a dedicated merchant account.
At the same time, if you’re fairly new to eCommerce and your business is young, or if you have a couple of small blemishes on your credit history, setting up a dedicated account might be more trouble than it’s worth.
An aggregate account requires way less time and personal and business information to set up, which makes it possible to start receiving payments from your customers right away.
On the other hand, with an aggregator, since you have a joint account with who knows how many other merchants, you might get lumped up in some fraudulent scheme and have your account suspended or funds retained. Not a pleasant experience, is it? Aggregators are very conscious of possible fraud and may take preemptive measures.
However, there’s a way to avoid this: you can use a large aggregate account provider so that even an occasional criminal is not a big enough issue to close a whole account.
Also, it’s worth mentioning that among the payment systems for mobile apps, there are more reputable and trusted aggregators than dedicated account providers.
As with everything that involves money transfers, security is the first and most important thing you should think about after you’ve made up your mind about the type of merchant account. Security mainly involves the safety of your customers’ financial data, such as full credit card numbers, expiration dates, and CVC2/CVV2 codes (if customers pay with credit cards). Everything should be encrypted and protected against possible fraud. All good payment systems for mobile apps comply with the Payment Card Industry Data Security Standard (PCI DSS).
Read more about a mobile app payment security.
There are a number of pricing models among mobile payment gateways, and the rates can differ quite significantly. Some companies charge a monthly fee in addition to per transaction fees; some don’t. As in most other industries, the cost depends on the features the service offers, the user experience, the company’s geographic coverage, and more.
There are also fees for chargebacks and refunds in case of disputes. The amount may vary, and not every company returns funds if the dispute is ruled in the merchant's favor.
So before you make a final decision as to which payment gateway to integrate, check that your company can handle the prices for the service in the long run.
When you start thinking about how to integrate payments into your app, consider which service will make the process the simplest. Customers who buy from online shops, especially when they’re in the form of a mobile app and not a website, are likely to abandon their carts without finishing a purchase if they find the process too long and cumbersome. In fact, a “too long and complicated process” was among the top three reasons for cart abandonment in 2017.
The final important customer experience-related feature is the variety of payment options. Unless your customers are a narrow group of people who all use a certain payment option, it’s important for your payment service to support as many payment options as possible: debit and credit cards, local payment methods for different countries, Android Pay and Apple Pay, direct deposit, Bitcoin, and so on.
It’s possible that your business only deals with local customers or customers from a single country. However, if you’ve busied yourself with mobile app or website development, chances are you’re planning to expand abroad (or already have). In this case, you’ll need a payment gateway that accepts payments from multiple countries.
Not every mobile payment integration gateway works in every country, but you might not need that, either. Look for the countries you already do business with first, then the countries you would like to expand into. The more countries there are your gateway provider's list, the bigger your opportunities are.
Stripe vs PayPal vs Braintree
These three payment gateways are today’s top-tier services, mainly thanks to the high level of security they offer and the range of payment options they support. Basically, with any of these service providers you’ll be able to receive payments from Visa, Mastercard, American Express, JCB, and Discover credit cards and debit cards, a selection of local services (lists are provided on the websites), Apple Pay and Google Pay, and, of course, Bitcoin.
While there are a lot of similarities between Stripe, PayPal, and Braintree, there are also differences, which we’ll highlight below.
Comparing PayPal vs Stripe, as these two are probably the closest rivals on the market, the biggest feature Stripe has over PayPal is Stripe.js, a default script that allows your customers’ data to be sent directly to Stripe, bypassing your servers. This feature makes your mobile payment system integration automatically PCI-compliant and secure so that even if your servers are compromised, customer data is not there to be stolen.
Stripe was a game-changer in several ways. They’re setting new standards for API protocols and tools and are pushing their competitors to follow. Even PayPal had to create new REST APIs to keep up.
Then there’s the number of currencies Stripe supports. While for merchants, Stripe is available in only 26 countries, the company enables its clients to receive payments from more than 100 countries all over the world in over 135 currencies. This can be really important to your customers who can this way pay in their local currency without having to exchange it.
The fees Stripe charges are the same as Braintree: 2.9% plus $0.30 per transaction within the USA and an additional 1% for international transactions. But Stripe also offers slightly lower rates if StripeTeminal is used. In this case, you’ll pay 2.7% plus $0.05. The chargeback fee is $15.
Stripe was created mainly for developers, so the biggest challenge would probably be the actual integration — if you’re not tech-savvy, you won’t be able to use all Stripe has to offer. That is, unless you have a skilled team of developers working on your mobile app!
What no one has yet to take away from PayPal is the title of the most popular mobile payment gateway integration system. True, Stripe is snapping at PayPal’s heels, but they still have a long way to go. The reason is that PayPal has been on the market longer and is available in more than 200 countries. Furthermore, if you look around, many people all over the world (and many of your potential customers) already have and actively use PayPal accounts. They’re familiar with the system and find it easy to use.
At the same time, with PayPal, global coverage doesn’t mean great currency support. On this front, it’s losing to both Stripe and Braintree, despite the latter being a PayPal subsidiary. PayPal only supports 24 currencies. This may not be a big issue for some companies, but to non-US based customers and merchants it can be a deal breaker.
Then there’s the issue of fees. PayPal charges 2.9% plus a fixed fee based on currency per transaction within the country ($0.30 for the USA), but for international transactions, their fee is higher (4.4% plus a fixed fee) than what Stripe and Braintree charge.
The chargeback rate is also higher at $20. On the bright side, PayPal used to also have a monthly fee in addition to the per-transaction fee, but now it’s gone.
PayPal processes payments faster than Stripe most of the time. Although they both state that payments will be processed in 2 to 3 business days, in reality, the money paid by your customers via PayPal has every chance of appearing on your bank account the next day under normal circumstances while Stripe can, in fact, take a few days. In addition, PayPal offers the Instant Pay feature with which, if your card issuer allows it, for an additional fee of $0.25 you can have your money deposited faster, sometimes within half an hour.
Being a part of PayPal, Braintree is PayPal’s way of offering a middle ground of sorts. Braintree’s international fees, for example, are lower than those PayPal charges. In fact, they’re the same as Stripe’s: 1% in addition to the fixed 2.9% plus $0.30. The chargeback fees for Stripe and Braintree are also the same, at $15. If you pitch PayPal vs Braintree, on the pricing stage, Braintree will win.
Braintree also grinds PayPal into the ground when it comes to currency support, as it supports payments in more than 130 currencies and settlement in 44. This is fewer than Stripe but more than PayPal.
If we imagine a Braintree vs Stripe battle, however, it would most probably end in a draw, as both mobile payment gateways have an approximately equal number of advantages:
- The number of supported currencies is almost the same: 130+ for Braintree and 135+ for Stripe
- Both offer a decent marketplace
- Braintree is available for merchants in more countries than Stripe
- Stripe is more customizable, while Braintree mostly offers a selection of templates
- Payments with Stripe Terminal are processed at lower rates
- Braintree accepts payments with Venmo and has smooth integration with PayPal
As you can see, choosing a payment gateway for a mobile app can be a tricky business, with the differences so subtle they might seem insignificant at first glance. But those differences may be deal-breakers when you look deeper. Mobile app development with Mind Studios includes app payment system integration. We’ll offer insights from our previous projects and analysis and advice to help you find the gateway that fits your business and your app. If you have any questions, get in touch with our specialists.