Choosing a payment provider for your online store: what to look for and which solutions to prefer

Finding the right payment provider for an online shop is a tricky task – the options are varied, and the differences in fees, technical integration and contract terms can be significant. Margus Eha, CEO of the software development company Opus, explains how to find your way through the maze.

According to Eha, the most important thing is the payment provider’s trustworthiness, because using an unfamiliar solution can scare customers away.

“It’s definitely worth looking at how the payment solution ends up working from the customer’s point of view,” he explained. “For example, some foreign providers send an online shop’s customers to pay in a third-party web view. That can frighten the customer off, and they abandon the purchase.”

You also need to assess whether the payment provider’s business is sustainable. “If the price on offer is too low, you should ask yourself where the low price comes from. There’s no such thing as a free lunch, and it always comes at the expense of something,” said Eha.

Make a plan in advance

Recently, for example, several articles have run in the media about how the Lithuanian payment provider Kevin has become insolvent. According to Eha, the problems with Kevin came as a surprise to many merchants, who found themselves using a service with a real risk of disappearing at some point.

“This clearly shows that a fallback plan should be put in place already during the development phase of the shop. Every online shop should have at least two payment solutions live, or at least in reserve,” he recommended.

Contrary to popular belief, integrating several payment providers doesn’t necessarily cost several times as much right away. Since most payment platforms don’t charge a contract fee and earn their profit from a per-purchase transaction fee, it may mean extra investment only in the form of a one-off development cost.

“If an online shop has, say, two payment providers integrated and tested, then for an experienced developer, switching on the fallback option is a few hours’ work,” Eha pointed out.

But if something happens to the provider and no fallback option has been integrated into the shop beforehand, setting up a new solution can take significantly longer. “For more complex custom solutions and large online shops, switching to another provider means at least a week of work. Negotiating contracts, development, testing – that is certainly not something you can do in a single day,” said the CEO of Opus. “And for the shop it means a noticeable drop in turnover, because customers can’t pay in the meantime.”

Read the contracts

If getting a new payment solution up and running quickly matters to the online merchant, then besides the technical nuances you have to allow for the time it takes to conclude contracts with payment providers. According to Eha, contracts that include the option of credit card payments usually take longer, because then foreign providers typically require a large amount of additional data.

Eha says that in addition to the contract terms, an online merchant should also evaluate the size of the provider’s fees, how payment for returned products is handled, and how easy the platform is to manage and change. “This makes up a large part of an online shop’s everyday work, and even small differences can end up growing very large,” he said.

If you don’t want to choose so-called ready-made off-the-shelf solutions, hand-integrated bank links are still popular in Estonian online shops. Eha named lower management costs and contracts that are generally concluded for a long term as the advantages of bank links.

“That way you don’t have to risk the payment provider suddenly raising its prices overnight,” he said. On the other hand, developing and integrating bank links takes longer than all-in-one solutions, and the initial investment, again in development costs, is also larger.

Whichever payment solution you end up choosing, the CEO of Opus says it all boils down to classic risk management. “If your company’s core business is online or makes up a large share of turnover, then having fallback plans is all the more important,” he concluded.