I recently noticed some Google search traffic coming my Blog’s way with people looking for “payment gateways used by Flipkart and other e-commerce players in India”. So I thought I could talk about this topic for the benefit of folks trying to work with a gateway or researching a gateway to plug into their e-commerce website.
I did a tad bit of research while trying to identify which payment gateway is best for an e-commerce business when I was responsible for integrating them at Jabong.com. I used good old Google to find places seldom visited. I scoured blogs and forums where people discussed such topics. I was trying to understand who the players are, what they offer and finally, who is better. I shall talk about how you can understand these gateways better, what they do and how to evaluate them for your company. There is a lot more information to consider when picking a payment gateway, but I hope this information will be helpful for someone trying to pick and chose a payment gateway provider.
The following are the parameters that I think are very important in identifying a good payment gateway for your business. While the answers to some of these questions will not come directly from the payment gateway, there are industry sources (friends, competitors etc.) who can throw some light on it during your research.
- Transaction rate or processing rate or fee
- Yes, while I it isn’t the single reason for choosing a gateway, it is a fairly important parameter to look at. You don’t want to end up paying a significant portion of your sales to a 3rd party processor especially in a low-margin e-commerce business.
- the lowest I have seen is 1.5% (there is no point mentioning who offers this as all rates are on a per-case basis in this muddled business). The highest I have seen is 3%. Like fine-print, there are some hidden assumptions around what card (Visa vs Amex) or bank (Citi vs HDFC) we are talking about when the rates are being offered.
- Gateway unannounced down-time
- While gateways that frequently announce down-time cannot be spared either, unannounced down-times kill an e-commerce business irrespective of the lame but valid reason as to why it happened – bank server down, maintenance issues, connectivity with bank lost but it’s not our fault etc.
- While gateways always give a rosy picture on this front (obviously!), it is good to check from friends or contacts in other places who have used the different gateways. CCavenue has been accused of not doing a great job here while none of the other aggregators are exemplary either.
- Transaction success rate (%)
- The success rate of transactions that were transferred from the merchant website to the gateway is an indication of how effective the gateway is in completing the sale for the merchant. Low rates here are indicative of the poor quality of the payment gateway.
- This is also an elusive data to get directly from the payment gateway. CCavenue and Tpsl bear the brunt of negative reviews with their success rate somewhere between 60-65%. However, claims made by other gateways that they are better and around 75-80% has also been refuted by companies that have used them. EBS and PayU seem to be relatively better in this area, but overall the best way to measure this sometimes is to unfortunately integrate and test the gateway out.
- Another variation of this parameter is to look at how many customers have dropped while they are transferred from a website to a payment gateway to begin with. Surprisingly enough, there is a drop off rate even at this stage before the transaction reaches the gateway. The problem is that this loss is in no man’s land as the gateway does not consider this in their success/failure rate calculations and neither can they. As a result, the e-commerce merchant should devise a way to capture such failures and re-invite the customer to transact again by saving their cart or session. A smart team member of mine was able to identify this loss and come up with a simple and clean solution to invite customers to transact again on the website.
- Retry option for failed payments (works better in a redirect option)
- Transactions at a payment gateway fail for various reasons. In some cases it is prudent to allow the customer to retry the transaction rather than make them exit the checkout experience. This feature can be provided either by the e-commerce merchant (on the website when checkout fails) or by the payment gateway on their page (in a non-API integration scenario or if better even with API integration).
- PayU and EBS are capable of providing the retry option to customers when such an issue occurs during payment. A retry option in itself does not guarantee a successful transaction as the payment may fail again. But, at least providing that option can capture a small percentage of the previously failed transaction.
- T+1 or T+2 or T+n days for transfer of funds
- Payments gateways take a little time before they transfer captured funds to the merchant’s bank account. This may or may nor matter depending on the number of transactions you generate as a merchant.
- ICICI can process payments in T+1 days whereas most other aggregators do it in T+2 days.
- Real-time fraud detection
- Real-time fraud detection is very important to the success of an e-commerce business. Suspicious transactions have to be flagged immediately by a payment gateway so that necessary action can be taken to prevent an order from being shipped out or being unrecoverable.
- While an e-commerce business can invest in its own fraud detection mechanism either through internally developed features or a separate 3rd party integration, a start-up firm cannot afford the high cost of setting up a robust fraud handling mechanism. Manual review of fraud issues is necessary to take meaningful decisions and this in turn means additional costs for the company.
- Payment gateways like EBS provide the best available fraud detection and alert mechanisms by leveraging the benefits offered by its standalone RMS (Risk Management System) that uses velocity checks, device fingerprinting, Nexus network, blacklist database and so on to trap fraudulent or suspect transactions. They also do it in near real-time. Most other gateways mostly offer only velocity checks or limited set of fraud detection capabilities. CCavenue and ICICI don’t have real-time capabilities although they do get back to the customer in a 6hr to 48 hr window.
- Reports or dashboards for viewing payment success/failure analytics
- While all payment gateways have a dashboard for general maintenance of transactions, very few offer some good reports or charts that depict where transactions are failing or at what point the customer is lost while completing a transaction. This is tremendously valuable information to help an e-commerce merchant determine where the leakage is in and how it can be plugged to not lose customers.
- EBS and PayU offer such capabilities while most other gateways don’t have this information (never collected) or cannot share this information (no way to present or share).
- Netbanking banks offered
- Surprisingly, not all payment gateways offer the same number or list of banks as part of the netbanking option. Netbanking can represent about 20-30% of prepaid sales for an e-commerce business as the payment transaction is within a bank’s four walls (online banking) and hence deemed safe and convenient by some customers.
- CCavenue and Billdesk have the most banks (about 40-50 or so) while EBS, PayU are catching up. ICICI offers netbanking exclusively through Citrus payments but the number of banks is not high enough. However, having a high number of banks isn’t a deal breaker as SBI, ICICI, HDFC, Citibank, Standard Chartered and Axis bank are offered by most and probably cover about 90% of all netbanking transactions.
- Add-on benefits like EMI (monthly installments) or other packaged offerings provided by the payment gateway + Support
- ICICI offers the largest suite of EMI option with multiple banks (outside of a 3rd party player Innoviti that seems to be exclusively the best option for all EMI under a single roof). The rest of the payment gateways offer one or more banks as EMI options plugged into a single gateway offering.
- Most aggregators have a good support infrastructure for handling issues although things may vary on a case-case basis based on complexity of issue and solution provided. EBS, PayU, BillDesk are all good on the support front.
There is a lot more to the payment gateways business in India and to the selection of the optimum gateway. But, a balanced decision can be made if all these parameters are also evaluated to arrive at the best choice. I’ve seen some well-heeled and well-educated (IIM/IIT pedigree) salesmen from payment gateways draw a rosy picture of what they offer compared to the competition. Going prepared for meetings with the gateway representatives is highly necessary to understand and identify the real stuff from the bluff.
Many Indian e-commerce companies prefer to go with multiple payment gateways primarily due to the confusion and dissatisfaction that each option provides. Many companies use industry references like the IRCTC database to build an in-house payment gateway algorithm that switches between multiple gateways based on payment type (netbanking vs card payments), payment transaction costs (transaction % rate) and payment gateway performance (success rate with a certain card-type, downtime etc.). With PCI certification in place, an e-commerce merchant will all the more see less use for an aggregator (or at least more than one aggregator) integrated with the website.