Wednesday, 13 February, 2019 UTC
Summary
Does your business involve making or receiving payments? Then, you need to integrate a payment system. Here are some thoughts on the matter.
Contents:
- What are payment gateways?
- What do you need to consider when you choose a mobile app payment gateway?
- Merchant account type
- Security
- Pricing
- Customer experience
- International acceptance
- Stripe vs PayPal vs Braintree
- Stripe
- PayPal
- Braintree
- Conclusion
eCommerce is a thriving market today, 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 is that part of your app that allows its 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, but as a mobile app development company, we feel more qualified to analyze the topic from the online commerce point of view.
The service acts as an intermediary of sorts, sending the transaction details to the processors of your credit cards (or your bank) and then sending back to you the reply about authorization (or non-authorisation if you’ve got not enough funds or some limits set on your credit card). You’ve probably seen it a thousand times in physical stores: when you swipe your credit card through the POS terminal and await the 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 the payment gateway.
What do you need to consider when you choose a mobile app payment gateway?
A number of things.
Merchant account type
There are two of them: dedicated and aggregate. Both have their pros and cons. Here’s a small comparison for you to see the difference.
| Dedicated merchant account | Aggregate merchant account |
|---|---|
| Is a personal account set up by the provider for the merchant’s business transactions | Is a joint account set up by the aggregator that is used by a number of merchants |
| The funds are deposited directly to your business’s bank account, you control the process fully | The 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 |
| The fees are custom-set separately for each account | The fees are fixed at the provider level and are the same for all merchants using the account |
| To set up one, 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 giving up little information |
| Takes time to set up (due to all the checks) | Setting up is quite fast |
| Transaction processing is fast, usually takes less than a day | Transaction processing can take up to 2–3 days |
| More expensive | Usually, cheaper |
The peculiarities are significant and the choice is to be made with care.
A dedicated account offers you, a business owner, complete control over everything, including the fees for transactions. This is convenient when your business is a big one — the aggregators’ fixed fees might get a bit expensive when you’ve got dozens of transactions every day.
Transaction processing — the time between your customer making a payment and the money being dropped to your bank account — is also a bit faster with a dedicated merchant account.
At the same time, if you are 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 aggregator requires way less time and personal and business information for setting up an account, 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 with some fraud scheme and have your account suspended or funds retained. Not a pleasant experience, is it? Aggregators are very conscious of possible frauds and might take preemptive measures sometimes, too.
However, there’s a way to avoid this: you can use a large aggregator service 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.
Security
With everything that involves money transfers, security is the first and the most important thing you should think about after you’ve made up your mind about the merchant account type. This includes, mainly, the safety of your customers' financial data, like full credit card number, expiration date, and CVC2/CVV2 codes (if they’re paying with a credit card). Everything should be encrypted and protected against possible fraud. All good payment systems for mobile apps are compliant with the PCI DSS (Payment Card Industry Data Security Standard).
Pricing
There’s a number of pricing models among services that provide mobile payment gateways, and the rates might differ quite significantly sometimes. Some companies take monthly fees in addition to per transaction ones, some don’t. Same as with most other industries, the cost depends on the features the service offers, the user experience, the range the company can reach, and many more.
There are also the fees for chargebacks and refunds in case of disputes. The amount may vary and not every company returns it if the dispute is ruled out in your favor.
So, before you make a final decision as to what to integrate first, check that your company can handle the prices for the service in the long run.
Customer experience
When you start thinking about how to integrate payment into your app, consider the service that will make the process the least cluttered. The customers who buy from online shops, especially when it’s a mobile app and not a website, are more likely to abandon the cart without finishing a purchase if they find the process too long and cumbersome. In fact, the “too long and complicated process” was among top three reasons for cart abandonment in 2017.
The last but not the least important customer experience-related feature: unless your customers are a narrow group of people who all use a certain payment option, it’s also important for the service to support as many of them as possible: a range of debit and credit cards, local payment methods for different countries, Android and iOS payment processing, direct deposit, bitcoin, and so on.
International acceptance
Well, it is possible that your business only deals with local customers or customers from a single country only. However, if you’ve busied yourself with mobile app or website development, chances are, you’re planning to expand abroad (or you already have). In this case, you’ll need a payment gateway that allows payments from other countries.
Not every mobile payment integration system works with every country in the world but you might not need that, too. Look for the countries you already trade with first, then the countries you would like to expand into. The more countries there are on the list, the bigger your opportunities are.
Stripe vs PayPal vs Braintree
These three payment gateway systems are today’s top tier services, mainly thanks to the high level of security they offer as well as the range of payment options they support. Basically, with any of these service providers, you will be able to receive payments from Visa, MasterCard, American Express, JCB, Discover credit cards, debit cards, a selection of local services (the lists provided on the websites), ApplePay and GPay, and, of course, bitcoin.
While there are a lot of similarities between the three, there are also differences, and this is what we’ll highlight below.
Stripe
Comparing PayPal vs Stripe, for example, as the two are probably the closest rivals on the market of payment processors, we must say that the biggest feature Stripe has over PayPal is the 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, the customer data is not there for stealing.
Stripe was a game-changer in several ways. They’re setting new standards for API protocols and tools as well and they push their competitors to follow, too. Even PayPal had to create their 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 withholds are the same as Braintree: 2.9% + $0.30 per transaction within the USA and an additional 1% if it’s an international transaction. Ah, but Stripe also offers slightly lower rates if StripeTeminal is used. In this case, you’ll have to pay 2.7% + $0.05. The chargeback 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! A tech-savvy person will have no troubles whatsoever with how to integrate a payment system into a mobile app the best way.
PayPal
What anyone is yet to win from PayPal is the title of the most popular mobile payment integration system. True, Stripe is snapping at PayPal’s heels, but they still have a long way to go. The reason for that being the fact 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 (your potential customers) already have and actively use PayPal accounts. They are familiar with the system and find it easy to use.
At the same time, with PayPal, coverage does not mean currency support. On this front, it’s losing to both Stripe and Braintree, despite the latter being their subsidiary: 24 currencies. It’s hardly a big issue but to non-US based customers and merchants, it can be important.
Then, there’s an issue of fees. PayPal charges 2.9% + a fixed fee based on currency per transaction within the country ($0.30 for the USA) but for international transactions, their fee is higher than the one Stripe and Braintree charge: 4.4% + a fixed fee.
The chargeback rates are also higher — $20. On the bright side, PayPal used to also have a monthly fee in addition to the per-transaction one and now it’s gone.
PayPal processes payments faster than Stripe, most of the times. Although they both have it set out to be 2 to 3 business days, in reality, the money paid by your customers via PayPal have all the chances of appearing on your bank account the next day under normal circumstances while Stripe can, in fact, take those couple of days. Besides, PayPal offers the Instant Pay feature, where, if your card issuer allows it, at an additional fee of $0.25, you can have your money deposited faster, sometimes within half an hour.
Braintree
Being a part of PayPal, Braintree is their way of offering a middle ground of sorts. Braintree international fees, for example, are lower than those from PayPal. In fact, they are the same as Stripe asks for, 1% in addition to the fixed 2.9% + $0.30 of inside transaction rate. The chargebacks are also the same $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 the payment is possible in more than 130 currencies and settlement in 44. Fewer than Stripe but more than with PayPal.
If we imagine a Braintree vs Stripe battle, it will most probably end in a draw, both mobile payment gateways have an approximately equal number of pros over each other:
- The number of supported currencies is almost the same, 130+ at Braintree and 135+ at Stripe
- Both offer a decent marketplace
But
- Braintree is available for merchants in more countries than Stripe
- Stripe is more flexible in customization 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 the payment gateway for mobile apps can be a tricky business sometimes, with the differences so subtle they might seem insignificant at first glance. But those differences may be deal breakers when looked into with more knowledge. Mobile app development with Mind Studios includes the app payment systems integration, you will receive the insights from our previous projects as well as analysis and advice created to fit your business and your app specifically, with a dedicated focus. If you have any questions still, get in touch with our specialists.