Table of contents:

1. Overview

2. Objectives of the case of study

3. What are payments gateways

4. What are payments gateways for

5. How do payments gateways work

6. Types of payment gateways

7. Top factors to consider about Payment Gateways

8. Comparing Panama's top payment gateways

Overview

The Internet has forever changed the way we used to shop, enabling businesses to sell their products and services online

Based on the trends on how now people can pay for things online just by clicking and entering their credit card information, how they can receive money from almost anywhere in the world, and can even transfer that money from the internet, we have decided to conduct a case study about one the main components, if no the most important one: Payment gateways.

Our idea is to deepen with this case study about payment gateways that operate in Panama, what technologies the top payments gateways companies are using, and conduct a deep comparison between all of them, allowing you as a customer or business owner to identify the best option.

Objectives of the case of study

Show the importance of payment getaways and how they have influenced the way we receive and send money. Review of the main features/attributes of the different payment gateways

Make an extensive comparison between the main payment gateways in Panama and showcase the difference among them.

What are payment Gateways

The term “payment gateway” is extremely common in the e-commerce world, as it is a service that helps to make online shopping possible.

Is a merchant service that is usually provided by an e-commerce platform or application that allows payment processes to successful at any moment. A payment gateway facilitates a payment transaction by the transfer of information between a payment portal (such as a website, mobile phone or interactive voice response service) and the front end processor or acquiring bank.

What are payments gateways for?

According to a study made by statista, 42% of global online shoppers prefer paying with credit cards, meanwhile, an outstanding 39% would rather pay via electronic payment, such as PayPal, for example.

When you look at the numbers and realize over 2,5 billion people in the world are not currently using formal banking platforms to process their payments, you realize the importance of payment gateways, since it offers online solutions to every one of them.

payment

How do payment gateways work?

The gateways perform three main task: They deliver the information, wait for a response from the bank, and deliver the response to the customer or buyer.

Let’s put this process into context for a moment, shall we?

Imagine you are a customer buying for wedding dresses on an online retailer. You liked one dress, you put it on your shopping cart, go to checkout and select a payment method.

Once you do select a payment method, the platform instantly asks you for your credit card information (assuming you chose this method, of course). Once you enter this information is when the payment gateway’s job actually begins.

You see, the system takes away your information and encrypts this data, sending it directly to the acquiring bank, performing so the very first step to begin the transaction.

Once this is done, the financial platform on the other side, meaning your bank, will take the transaction request and run the authorization required to release the money.

Then, once the bank has determined whether or not the transaction can go through, the getaway will once again take over the whole process, get the reply from the bank and deliver it to the customer so they can know their payment was successful.

Types of payment gateways

When online shopping, it is very likely that the last thing you ever think about is the different types of payment gateways and how they work, but the truth is we do think about it, because it makes a huge difference.

In total, there are four different types of payment gateways, each one with a different set of characteristics and features that help make the e-commerce experience much more pleasant both for the merchant and the customer.

The difference to recognize each one of these types from one another are minimal if you’re not paying attention, but trust us, they are there, and you’ll notice them from now on. Let’s begin.

1: Hosted payment gateways

If you have ever purchase anything on Ebay and chose PayPal as your payment method, you have already experienced this type of payment gateway, since it is a hosted one.

You see, when you get something on Ebay and pay via PayPal, the platform instantly takes you to their website for you to introduce your payment information on a new emergent window. Once that’s done, you’re immediately returned to the e-commerce site to continue with your checkout.

That’s basically what hosted payment gateways are. They are an external service that redirect the payment to their provider for a couple of minutes, and then return the buyer to your website.

The main reason merchants come for this option is because it’s simple to set up and customize, not to mention, these types of transactions are PCI compliant and offer a certain level of security to the buyer, avoiding possible frauds situations.

2: Self-hosted gateways

This type of payment gateway is usually confused with the API hosted gateway, which we will be talking about in a few minutes. But for now, you should know they aren’t the same thing.

A self-hosted gateway is a service that is provided within the very ecommerce website, meaning customers aren’t redirected to any other platform while performing the transaction.

Basically, the costumer fills in the information fields in the merchant’s website, and this data is immediately collected, transformed into the required format and sent to the payment gateway’s URL in order to make the transaction possible.

Much like hosted gateways, this method is customizable and offer a much more comfortable experience to the customer, since everything is done within the original website.

3: API hosted gateways

This is probably (along with hosted payment gateways) the most common type of payment services. It is done either through an Application Programming Interface or through HTTPS queries.

Like we said, it’s very similar to the previous one since both of them are performed directly on the merchant's website, since you manually introduce your credit or debit card information into the website itself.

Once the client submits the information, the payment is processed using the API, managing to authorize the transaction is just a couple of seconds, and allow the client to proceed with checkout.

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4: Local Bank gateway

Although this not the most popular type, it does exists, and it’s pretty similar to hosted payment gateways, with the only difference of course, that the customer is redirected to the bank’s website.

The payment itself is done via the bank’s website once the customer is directed there to give their personal information. Once that’s done, they get back to the merchant's site and are notified their payment has been successful.

Top factors to consider about payment gateways

There are many factors that should be taken into consideration when choosing a payment service that attracts customers but also fits your e-commerce site, however, we are going to focus on five main factors, which are:

1: Cost rates and fees

Depending on the platform, the costs and fees per transaction can vary significantly, making the whole transfer of money much more expensive than you might expect.

Make sure to check out whether the payment gateway you picked has regular costs per transaction, if they also cover a fee for every transaction made, whether that fee varies depending the amount of money spent or not, how much do they charge for additional processes and more.

In total, you should be aware of three types of costs:

1. Regular costs per operation within the getaway, including but not limiting to: Costs per successful or failed transactions, costs for refunds, costs for chargebacks, monthly or annual costs and such.

2. Fees: How much the fees are, what is the fee percentage per transaction, does it vary depending on the amount of money or frequency of payments? Do the fees vary depending on the type of bank account?

3. Additional costs: This refers to the costs for transferring the money to an actual bank account or withdrawing the money for the gateway platform itself. It also applies for any setup, registration, cancellation or reserve cost that you might have to pay.

2: Checkout options

Depending on the type of e-commerce you have, the services or products you offer, you can give your clients different checkout options for them to pay, whether it is a one time payment only, or recurring payments.

It is important for you to identify the differences between these two types, and make sure your payment gateway allows recurring payments solutions to be implemented. If you want to know more about this particular technology, we encourage you to read our research on it, [here](http://www.mckinsey.com/industries/financial-services/our-insights/counting-the-worlds-unbanked).

3: Money transfer

Once you get the money into the payment gateway, the most important part beings: Getting it out and into the “real” world. This is why you need to find out whether this is possible via the service you’re thinking about getting.

Keep in mind whether or not your payment gateway allows you to transfer your money either to a bank account or a credit card, the fees and costs per transfer and how much time does it take to be effective.

4: Type of platform

We mentioned this a couple of minutes ago when we talked about the four different types of payment gateways and the different characteristics each one has.

Now, the important thing here is choosing one that is easy to integrate almost out-of-the-box, it’s customizable, it’s easy to use (for the costumer) and adapts to your website. If it doesn’t meet each of these points, it isn’t the solution you’re looking for.

It is also important to look for platforms that have basic integration features, like a coding language that can be fully integrated and compatible with the SDK you are using.

To be more specific, look for a payment gateway that has the following characteristics available:

1. Easy integration

2. Configuration flexibility

3. Customizable

4. Programming languages that are compatible with SDK

5: Security and reports

We have already mentioned that payment gateways carry on transactions by encrypting the information of each client when processing their payment back and forward, which is why, paying attention to the security methods of each service and how they encrypt this information, if they have CVV2 verification, whether or not they offer fraud protection, if they manage ballots or not and how they take care of the data.

It is also important to make sure the platform you do chose is able to give back full on reports of every single transaction as well as keeping a history of every process performed on the service.

6: Support

As with any other software service available, a support team is a MUST, especially since this is a bridge that helps you manage third people’s payment, which is an extremely delicate matter.

A proper customer support team, contact details and a help center should be available for the payment gateway service you end up using.

7: Withdraw time and conditions

Last, but definitely not least, every payment gateway has their own rules regarding how much money you should amount before you withdraw it, and the time that it will take you to do so.

Inform yourself on the time rates on the platform you’re thinking to choose and make sure it suits your necessities according to the size and approach of your e-commerce website.

Comparing Panama’s top payment gateways

While we prepared to take a look at the following comparison chart amongst the top four Panama’s payment gateways, it is important to keep in mind the are still two institutions who haven’t respond to the interview, but will be included in the chart once this has been done.

Before showing the comparative table, we will evaluate these institutions based on the following characteristics: Time in the market, types of clients with whom they work, costs and rates, type of platform, recurring payments, types of payments implemented, and withdrawal time .

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Credicorp Bank, S.A.

1. Time in the market: They have been working for 22 years as a banking institution, offering Ecommerce services.

2. Types of clients with whom they work: All types of public and private companies, and pymes.

3. Costs and fees: They offer this information directly to the clients who contact them.

4. Type and platform: They use all the main types of platforms mentioned above in this study, including but not limited to Api's, self hosted and SDK.

5. Recurring payments: Yes, they accept recurring payments.

6. Type of payments implemented: API's, shopping carts, plugins, etc.

7. Time and conditions of withdrawal: The processed payments take 48 hours to become effective.

Paguelofacil

1. Time in the market: 8 years

2. Types of clients with whom they work: They only work with legally constituted companies in Panama.

3. Costs and fees: They have different plans and services that can be seen directly on their website. In addition, they have competitive commissions that adapt to the current market.

4. Type and platform: They use all the main types of platforms mentioned above in this study, including but not limited to Api's, self hosted and SDK.

5. Recurring payments: Yes, they accept recurring payments.

6. Type of payments implemented: API's, shopping carts, bookings platforms, mobile platforms, physical processing, plugins, etc.

7. Time and conditions for withdrawing money: They do not have any type of conditions or minimum amount to withdraw the cash. Once the processing request has been made, only 48 to 72 working hours should be expected for this operation to become effective.

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