Mobile payments have witnessed a surge recently and their popularity continues to climb. According to Fortune Business Insights, the mobile payment market is anticipated to spike from $1.97 trillion in 2021 to $11.83 trillion in 2028, progressing at a compound annual growth rate (CAGR) of 29.1% during the forested period.
The key drivers are increased smartphone penetration and the need to deliver an omni-channel shopping experience. The COVID-19 pandemic contributed to the rising demand for mobile payments. Forced to stay at home, people used mobile applications to make purchases. As this way of shopping is simple and convenient, this trend is expected to stay even after the end of coronavirus.
By integrating a payment gateway, companies can provide their users with numerous payment methods, from credit and debit cards to electronic wallets. So when you are thinking about enabling digital transactions in an iOS, Android, or cross-platform app, it is important to learn about payment gateway providers.
In this article, software experts at Surf will describe the top payment gateway services and offer recommendations on how to choose a solution that will meet your business requirements. But before we start, let’s quickly recap what a gateway system is and how it works.
What is a payment gateway?
While end users have their payments performed in seconds, the payment process itself comprises multiple prods. Acting as intermediaries between customers and merchants, banks are responsible for data privacy and carrying out transactions.
However, to enable mobile payments, both sellers and banking institutions have to verify the necessary data (like payment details) and examine numerous cases, for example, the availability of funds on user accounts, card expiration date, and others.
Furthermore, organizations need to provide safe data storage for safeguarding sensitive information. On top of that, companies have to ensure compliance with various industry regulations like Payment Card Industry Data Security Standards (PCI DSS), which may take months. Therefore, activating mobile payments is a time- and resource-consuming process.
A payment gateway technology allows vendors to easily set up mobile payments while bypassing the burden associated with licensing. To authorize transactions, gateway solutions like Stripe and PayPal read and transfer payment details from a buyer to a vendor’s bank account. Gateways protect sellers from a range of issues, involving insufficient account balance, exceeded credit limits, and expired credit or debit cards.
Representing an analog of a virtual terminal, payment gateway services ensure the security of money remittances. Trustworthy gateways are also compliant with standards such as PCI DSS.
Through the payment API integration, companies can connect a variety of payment methods, from electronic wallets to bank redirects. Since payment gateway providers offer application programming interfaces (APIs), businesses do not have to develop this functionality from scratch, this way reducing expenses and time to market.
How does a payment gateway service work?
A payment gateway enables merchants to facilitate transactions by sending data between a payment portal and an acquiring bank to the payment processor.
Basically, the process of carrying out transactions through a mobile payment gateway includes the following steps:
- A consumer makes a payment, for example, by filling out the required information and clicking on the “Buy now” button in a mobile application.
- The data is sent to the payment gateway service that checks the availability of funds, card expiration date, and other factors. An integrated payment solution transfers encrypted data to the payment processor utilized by the seller’s acquiring bank.
- The bank’s payment processor routes this data to the card association (for instance, VISA or Mastercard) that accesses a customer credit reputation and analyzes transaction terms.
- After receiving the authorization request, the card issuing bank identifies whether to approve or decline the transaction. Then, the bank transfers a response code to the payment processor.
- The code is forwarded to the gateway and then — to the vendor. If the transaction is approved, the funds are withdrawn from the buyer’s account. In case the transaction cannot be performed, the code will contain the reason for failure.
Thanks to the payment API integration, the time for the process described above takes 2–3 seconds.
Although there is a widespread belief that a gateway is the same as a payment processor, these notions have different meanings. In short, the processor receives consumer information from the gateway and sends it to the online payment system.
Top payment gateway providers for mobile apps
Introduced in 1998, PayPal is among the world’s most popular payment gateway providers. Operating as a digital payment system for online vendors, PayPal perfectly fits e-commerce, e-learning, food delivery, and other kinds of apps that support cross border money transfers.
PayPal allows for carrying out transactions via:
- Credit and debit cards. By integrating the PayPal payment gateway API, businesses let buyers purchase goods and services with Visa, Mastercard, Discover, and Amex.
- Bank account. In this case, user funds are withdrawn from their bank accounts directly.
- PayPal balance. Customers can choose this payment option after registering their PayPal Cash or PayPal Cash Plus accounts.
- PayPal Credit. With PayPal, users have a half of a year to pay bills for purchases of minimum $99.
- Rewards. PayPal enables shoppers to receive points, cash back, and other rewards to buy from merchants.
In order to protect customers against fraud, PayPal utilizes machine learning to analyze massive arrays of data (such as transactions, user accounts) and instantly identify suspicious activities. Allowing sellers to accept payments in 25 currencies, PayPal is available in over 200 countries and regions.
In terms of pricing, PayPal does not impose transaction fees if there is no currency conversion. Otherwise, the system generally charges a commission of 3% or 4% depending on the case. The amount of merchant fees varies based on factors like currency and transaction type.
To further enforce security, the payment gateway service implements data encryption. With the view to enhance information safety, PayPal also has the PayPal Security Key—a one-tie PIN—which is unique for every sign in. Additionally, PayPal supports Card Verification Code (CVC) and Address Verification Code (AVC).
What’s more, PayPal meets all the necessary industry regulations, for example, PCI DSS. On top of that, the payment gateway provider has certifications under multiple security programs that involve the Visa Cardholder Information Security Program and Mastercard Site Data Protection Program.
As of December 2021, PayPal has 426 million active user accounts globally. Now 72% of US online consumers have a PayPal account. A majority of vendors that employ PayPal are small businesses (74%), followed by medium-sized enterprises (19%) and large organizations (6%).
Many famous companies have already integrated PayPal into their processes, including Walmart, eBay, Zendesk, JVZoo, Lewis, and e-Junkie.
Based in the US, Stripe is another well-known payment gateway provider that serves enterprises of all sizes, from startups to Fortune 500 companies.
At the moment, Stripe supports a range of payment methods:
- Cards. Stripe lets consumers buy from merchants using Mastercard, Visa, Discover, Amex, JCB, China UnionPay, and Diners Club.
- Electronic wallets. By integrating the Stripe payment gateway API into a mobile app, businesses can enable mobile payments via Apple Pay, Google Pay, Alipay, WeChat Pay, and other wallets.
- Bank redirects. Stripe offers the possibility to purchase from vendors using various local payment options that involve SOFORT, iDEAL, EPS, FPX, Bancontact, Przelewy24 (p24), and Giropay.
- Buy now, pay later. Stripe supports services such as Klarna, Afterpay, and Clearpay.
Being available to merchants in 46 countries, Stripe allows sellers to accept payments in more than 135 currencies.
With Stripe Dashboard, organizations can easily activate the required payment methods. By incorporating Stripe, it is possible to speed up multiple operations, for instance, fund management and refund handling.
Like other trustworthy payment gateway services, Stripe takes care of safeguarding sensitive data. The company has Stripe Radar that utilizes machine learning models to identify and stop fraudulent activities, as well as assign risk scores to each transaction and block high-risk payments.
Furthermore, Stripe contains valuable features that include 3D Secure, device fingerprinting, and two-factor authentication. In addition, the payment gateway provider implements CVC and AVC. By employing Stripe, businesses achieve compliance with PCI DSS, as Stripe is a certified PCI Level 1 Service Provider, which is the most strict level.
To date, 90% of American adults have made purchases via Stripe. A lot of well-known companies use Stripe for carrying out transactions, involving Amazon, Shopify, Instacart, DoorDash, Lyft, Slack, Zoom, and Booking.com.
Founded in 2007, Braintree is a provider of integrated payment solutions to a variety of sectors like e-commerce, food service, and hospitality. Headquartered in Chicago, Braintree allows businesses to connect numerous capture methods through payment API integration into mobile applications.
With Braintree, it is possible to activate payments via:
- Credit and debit cards. Buyers can make purchases using Visa, Mastercard, UnionPay, Discover, and Amex.
- PayPal. Braintree lets merchants carry out transactions via PayPal, this way reaching out to 426 million active users worldwide.
- Digital wallets. Users can employ Apple Pay, Google Pay, Samsung Pay, and Secure Remote Commerce when shopping.
- Venmo. This is a popular mobile wallet app, which is available in the US.
- Direct banking. Consumers can pay via ACH Direct.
- Bank directs. The Braintree payment gateway integration enables shoppers to buy through local online payment options that involve Bancontact, BLIK, MyBank, iDeal, Giropay, P24, SOFORT, EPS, and Trustly.
In order to ensure security, Braintree monitors customer, merchant, and employee behavior for unusual and unauthorized activities. Thanks to this, users are protected against fraud. What’s more, the organization performs automated vulnerability scanning on a regular basis.
To protect sensitive information, Braintree delivers features such as data encryption, 3D Secure 2, CVV, and AVS. Like other trusted payment gateway providers, Braintree is compliant with industry standards and requirements, including PCI DSS.
Using Braintree, businesses can accept payments in over 130 currencies. Currently, Braintree is available in more than 45 countries and regions.
How do you choose a payment gateway service?
When choosing a payment gateway, it is crucial to answer the following questions to choose a right payment gateway for your solution:
- Is a gateway solution available in your country?
- Is it possible to use a gateway in countries and regions the target audience lives in?
- Does a third-party gateway support the necessary currencies?
- Does a payment gateway provider offer payment methods demanded by consumers?
- What fees are imposed by gateway system suppliers?
- What features does the gateway API have for enabling the security of sensitive data (examples are data encryption, 3D Secure, AI-based monitoring for suspicious activities)?
- Is the gateway compliant with industry standards like PCI DSS?
- Does the payment gateway service deliver the required functionality (such as invoicing, hosted payment page, customizable interfaces)?
By incorporating the gateway that meets your business-specific needs, you can save costs and attract more customers.
If you aim to build a mobile app, the payment API integration will allow you to improve time to market and cut expenditures. A trustworthy gateway solution allows you to automate digital transactions, ensure data security and protect against fraud, as well as achieve compliance with various industry regulations.
When choosing a payment gateway, you should take into account factors like the features it includes and countries the system is available in. It is also reasonable to check out how many users employ the gateway and what globally recognized organizations have already incorporated it into their workflows. Taking these aspects into account, you will be able to assess the level of the payment gateway provider credibility.
In case you are looking to build a mobile application that accepts online payments or integrate a gateway API into existing software, you are welcome to drop us a message. We will soon contact you back and help address all issues. If you are wondering how much it costs to build a smartphone solution, read our article on the topic.