It has been almost 20 years since the internet made a paradigm leap in transaction transport, and made simple payment gateways integration available to an exploding community of web developers.
Have Payment Gateways achieved parity with Processors?
Payment Gateways became the plug & pay solution for the tsunami of new web-based, card-not-present merchants – writes Cliff Gray, The Strawhecker Group.
Not these days. When it comes to Payment Gateways now, it’s a little bit Jackson Pollock, and a lot of competitive technology. This ain’t your daddy’s gateway. The old guard processors have all filled out their greater offering with gateway offerings, largely via purchases of third-party products, which led to separate APIs – not very omni-channel.
Many independent Payment Gateways have built or are building card present functionality – a process made even clumsier thanks to EMV – under their existing API. Omni-channel, but sometimes with less feature/functionality compared to the processors who have been doing retail for decades.
Documentation mirrors this trend; legacy processors still publish ungainly APIs, hundreds of pages long, but full of functionality. The new guard caters to developer communities, with concise, easy to implement APIs, but typically less feature/functionality.
The Payment Gateways have been busy, and are closing the feature/functionality gap quickly. Retail transaction support is a complex step for gateway players, but puts them on the same playing field as the big boys.
Many Payment Gateways have become full service payment switches; processors in their own right. Some have direct-network connectivity, while others maintain the advantage of one-to-many back-ends, for real Omni-channel product.
Payment Gateways are about more than just credit cards – the leading gateways are providing access to an array of payment brands such as PayPal, Bill Me Later, Bitcoin, closed-loop programs, and more. Automated invoicing, receipt pushes, EDI, account auto-updates, and other transaction mechanisms are rapidly increasing product depth and flexibility.
Mobile platforms are proving popular with merchants; with the right peripherals, they are reliable, cost effective POS systems. Many of the latest retail products employ mobile technology and infrastructure. Mobile platforms enjoy lots of support from the gateway community, SDKs for Android and iOS are standard among the leaders. When it comes to Apple Pay and Android Pay, gateways have been keeping pace, if not leading, that leg of the integration race.
On the downside, these mobile platforms don’t have the required security features to pass PCI PA regulations, so PIN debit, EMV and E2EE require separate hardware such as PIN pads, and encrypting readers and dongles. Sometimes a disadvantage against single-unit, secure countertop POS.
Sensitive account data continues to be pushed out of merchant environments. Virtually all POS products support encryption today, with many looking towards network-endorsed P2PE as a long-term solution. For the eCommerce market, tokenization and hosted-payment solutions have been very successful at ‘breach-proofing’ merchant networks.
Payment Gateways continue to influence pricing trends in eCommerce, SMB, and PayFac. Interchange+ remains the norm for merchants of any scale, but one-price-fits-all, pay-as-you-drink transactions, with simple, fast boarding continue to opportune healthy margins.
Cost of tokenization for the eCommerce verticals has just about reached bottom; merchants are expecting zero cost. Clearly, gateways have come into their own. Some think the term ‘gateway’ under-appreciates many platforms that have grown into full-service payment switches.
The leaders are competing head-to-head with traditional processors, who struggle to keep up with agile development shops run by these gateways. It remains to be seen where the Payment Gateways will go from here – rest assured, the ever-changing payments market will provide many opportunities.
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