It can sometimes feel as though shopping was simpler in the past. There were goods; there was cash; and – voilà! – a transaction. Now, with myriad ways to pay for something – from your smartphone to your smartwatch – having more choice can seem complicated.
And it’s not just shoppers who feel bemused. According to the Office for National Statistics, online sales hit a record high of 38% of all retail spending last January, up from 20% in January 2020 before the first pandemic-related lockdowns. So it’s no surprise that businesses are thinking about payment systems – and how to make the process smoother.
All businesses accepting electronic payments online, no matter how small, require the virtual equivalent of a credit and debit card reader to make that happen – a one-stop solution to handling virtual transactions, from online grocery shopping to selling a round in a pub via an app. In other words, they need what’s known as a payment gateway.
As consumers who increasingly shop online, we’re mostly blissfully ignorant of the technology that makes this possible. However, for businesses it’s crucial to understand the importance of what’s going on behind the scenes of each transaction. “People don’t actually take much interest in the technology behind what’s happening,” says Jackie Allen, director of gateway product management at Barclaycard Business. “In the simplest terms, payment gateways are the technology that captures payment data from the cardholder and authorises that payment through the acquirer to the issuer. It all happens in milliseconds.”
In essence, a payment gateway authorises credit card or direct payments processing for businesses, and ensures enough funds are available for the retailer to get paid.
“As cardholders, we’re looking for convenience,” says Allen. “Payment gateways are important to [the retailer] because they have to make it easy for the cardholder to pay: whether that’s on a mobile phone, getting in and out of a taxi, shopping online or going into a store. Having a payment gateway enables merchants to provide a unified experience.”
Research by Barclaycard shows that 44% of UK consumers will abandon a purchase if their preferred payment method isn’t available, and 58% say they would stop a purchase altogether if the checkout process is complicated.
“If merchants [retailers] haven’t got a gateway or a webpage that is seamless to the consumer, you get cart abandonment – when a customer puts everything in their shopping basket and then goes: ‘I’ll go back to that later’,” says Allen. “Then you have a merchant that was expecting to sell goods and doesn’t.”
Luckily, a range of associated products in the Barclaycard commerce platform can help merchants get a better handle on these problems, and can provide them with data that tells them what percentage of people abandon their online shopping carts.
Sometimes, Allen says, merchants can be too cautious when it comes to fraud, which risks them losing business. “If the merchant has overly stringent fraud rules, we could give them the analysis that shows that this is resulting in declining genuine purchasers unnecessarily.”
Transact, a product in the Barclaycard commerce platform, can help merchants fine tune their payments and filter out the fraud. It helps to confirm someone is who they say they are when inputting their card details, and can conduct a risk analysis to check if the shopper can pay. If the risk level is low, the transaction will skip strong customer authentication (SCA) checks, which can require customers to take extra steps to confirm their identity, and authorise the purchase. This can help to create a frictionless payment journey and reduce the risk of the shopping cart being abandoned. In March, retailers will have to implement SCA for card-based e-commerce transactions under rules from the Financial Conduct Authority.
Tools like this are essential to merchants – but ultimately you need a payment gateway in order to benefit from them.
Now that people aren’t just buying goods but are also buying “experiences”, payment gateways are more important than ever, says Allen. “If you go to the pub, you can order at the table with an app. That’s changing the online shopping experience. Paying with a stored card makes it easier and quicker to get your drinks served. It can potentially drive more loyalty to [the establishment] as well.”
For both merchant and shopper, payment gateways really are as simple as opening your wallet to pay for something. “A merchant’s day job is selling goods,” says Allen. “They shouldn’t be worried about fraud or compliance or regulations. Payment gateways take a lot of pain away from the merchant.”
To find out more about how payment gateways can create a frictionless experience for your customers, click here