A payment service provider is a company that, as the name implies, acts as the layer through which payments are handled. A payment service provider has already made the connections to different payment methods and generally has a plugin available for Magento. This means that by installing the payment service provider's Magento plugin, you have access to all of the payment methods the payment service provider is connected to! This can help a great deal in serving all of the right payment methods applicable to your country and market. A payment service provider automates as much as possible, so using one ensures you will not have the same manual workload as you would with most of Magento's default payment methods.
An important distinction between payment service providers is whether they are collecting or processing. A collecting payment service provider will transfer the funds they captured for you once per period, while a processing gateway will immediately transfer the funds to your account. Per transaction, a collecting payment service provider is usually cheaper.
Usually the payment flow using a payment service provider works like this:
- Your customer goes through your checkout and chooses to pay through a payment method that is handled by your payment gateway. Let's take a credit card as an example.
- After pressing the Place Order button your customer is taken to the website of the payment service provider and enters his/her credit card credentials there.
- The payment service provider communicates with the credit card processor and captures the payment.
- The customer is sent back to your store and the payment service provider lets Magento know the payment has been fully handled.
The same would be valid for other payment methods as well: the payment service provider will notify Magento about the status of the payment handling of your customer's orders. Besides offering a multitude of payment methods, a payment service provider can also help you arrange the necessary contracts for accepting certain payment methods, such as credit cards, and is able to provide detailed reports about the transactions that have been performed for your store, which can be a huge administrative hassle otherwise.
Selecting the proper payment service provider can be difficult, especially without prior experience with them. It's advised to consult somebody with knowledge of your market and payment gateways. The most important questions that should be answered are as follows:
- Which payment methods does the payment service provider offer? Do they suit your website fully? Also, check if the available payment methods match your future plans, for instance, if you want to expand to other countries.
- What are the costs? Is there a starting rate? What is the monthly fee? What is the fee per transaction? The rates are often tiered, meaning they differ based on the number of transactions you have going through your store. It's best to calculate these costs with a longer time-frame in mind, so also to try to include the expected costs based on the number of transactions in six months to a year, especially if you have a starting store. Some payment gateways offer very low monthly fees but have higher transactional costs, which can suddenly become expensive when your volumes increase.
- Is a good Magento module available? What is and what is not included in this module? Are all the payment methods you need from the PSP available through the Magento module?
The last point warrants special attention as the PSP will be useless for you if you cannot integrate your Magento installation with the PSP. Judging the quality of a Magento module is best done by somebody with knowledge of the technical aspects of Magento extensions. These are the things to look out for, at a minimum:
- With which Magento version(s) is the payment module compatible? Is it compatible with your shop's Magento version?
- Can you include extra text or instructions for the different payment methods offered by the module?
- Are the payment settings able to be changed per website or store view in Magento? This is useful, for instance, to only show certain payment methods at certain domain names (such as only showing purchase orders on your business-to-business website).
- Is the payment module secure and is it properly maintained? In general, the more releases and the more information available per release, the better.
Most of these checks are useful for any Magento module you may wish to install! A good way to find out more about the quality of a payment gateway's Magento integration is to google the keyword "Magento" combined with the name of the payment gateway. If the module is available on MagentoConnect, browsing through the release history and reviews for that module is also a good idea.
As an example of working with a payment service provider that is not included by default in Magento, we'll install the ICEPAY payment module. ICEPAY (www.icepay.com) is a payment service provider that is especially strong in Europe. Their Magento module is available on MagentoConnect at http://www.magentocommerce.com/magento-connect/icepay-advanced-8489.html. The big advantage of situations like these is that you can take a look at their payment extension before deciding to do business with them. Ask the PSP you are considering if you can take a look at their extension beforehand as well!
