How To Choose a Payment Gateway in India: A Complete 15 Step Checklist

Looking for answers on how to choose a payment gateway? Here is a complete 15 step checklist that covers anything you might possibly need!

---

Choosing a payment gateway provider can be a daunting task.

After all, payments are the only thing that keeps a business afloat. Right from integration to security compliance- any single feature can make or break your eCommerce store. 

But here’s the good news. 

It is possible to make an end-to-end complete checklist of payment gateway features. A resource like that can help you:

1. Figure out your requirements from a payment gateway
2. Weigh out your payment gateway provider options

Matter of fact, here it is now. 👉😎👉

P.S. While this checklist is quite exhaustive for any use case, every industry niche has its own set of requirements from a payment gateway. So, how about a one-on-one with industry experts?

What is a Payment Gateway? 

In simple terms, a payment gateway is a platform that helps businesses accept and disburse payments. 

Moreover, it also helps you (a merchant) to reconcile and settle these payments according to your needs. 

Payment gateways and settlement systems help brands create customer loyalty by providing a safe and reliable payment environment. 

Related Read: Payment Gateway vs Payment Aggregator

Needless to say, choosing the right payment gateway provider is a major decision for a merchant. 

So, how can you go about finalizing one?

Let’s find out.

What Services Do You Require From a Payment Gateway?

While at first look, all payment gateways may look similar and claim to be the best.

As a merchant, you need to carefully evaluate the options available according to your business requirements.

For instance:

• Are you going to accept international payments?
• Do you want to provide wallets like Paytm as a payment option on your checkout page?
• Would you want to offer “Buy now, Pay later” options for a smooth checkout?
• Does your business have a high average order value that needs multiple EMI options?
• Does your business need to collect recurring payments?

Once you know your requirement, you can evaluate the options. 

Next up, we will be sharing a 15 step checklist that will help you evaluate your payment gateway options. 

15 Step Checklist: How To Choose Payment Gateway in India?

1. Payment Security

This is probably, one of THE MOST important factors when are on the hunt for a payment gateway. 

As a merchant looking to accept payments, you must be aware of PCI-DSS Certification. Essentially,  it is a set of requirements established by the Payment Card Industry that ensures the security of customer card data. 

Every payment aggregator needs to be in compliance with PCI-DSS to help you accept payments.

Apart from this, ensure that your payment gateway:

1. Stores and processes customer data in the same geographical location (same country) as your business
2. Handles all communication over TLS and HTTPS protocols
3. Conducts end to end encryption of data at rest and in transit

Furthermore, ensure that your payment gateway adheres to data security and risk monitoring measures such as:

1. Penetration tests
2. Data Retention Policy as per RBI norms
3. Antivirus solution deployments
4. Velocity and geographical checks

… And a lot more.

Contact our payment gateway experts for more information on the same.

2. Mode of Payments

Having a vast pool of payment options has 2-fold benefits for your business:

1. Customers have more choices to checkout and the comfort to purchase via their preferred method.
2. Lower cart-abandonment rates as you’re able to provide all options to your customers.

In fact, 9% of your carts are abandoned due to a lack of preferred payment methods.

So, while doing your research, look at the payment methods offered by each of your shortlisted payment gateway platforms. 

Here are the payment options that are accepted in India:

• Debit, Credit and Prepaid Cards – Debit and cards from leading banks and card networks (MasterCard, Visa, American Express and Rupay).
• NetBanking Options – Net Banking allows you to directly log into your banking account and authorize payments. 
• UPI – UPI has seen an incredible surge in usage, surpassing cards for the first time as the defacto payment mechanism. So yes, it would be a mistake to not have this option present for collecting payments. (Check this blog on UPI integration for more info!)
• Digital Wallets – Digital wallets such as PayPal, PayTM, Freecharge, and Mobikwik all are quite popular payment methods available in India, ensure that your PG supports them.
• Pay Later and Cardless EMI – New lucrative services like OlaMoney Postpaid, Lazypay, ZestMoney, etc, offer consumers a way to pay for their orders on a credit from these services. 

3. International Payment Support

If you have customers outside India, or customers in India using international cards, it is vital to support international payments.

The key challenges around international payments are ease of onboarding. 

Now, most banks and payment gateways are reluctant to offer international payments. Moreover, they often ask for hefty security deposits and setup fees.

Customers outside India will prefer to pay in their local currency, so they know the exact amount they are paying. 

This requires international payment gateways to offer multiple foreign currencies as the payment currency while converting the final payment amount to INR for the merchant’s convenience.

For international payments, the best payment gateway supports multiple currencies with easy onboarding. Paypal is the most trusted and preferred choice of payment for consumers worldwide.

In addition to supporting all payment options like credit cards and direct debit from a bank account, Paypal also offers buyer protection. Thus, offering Paypal as a checkout option can greatly increase your conversion rates.

4.  Payment Settlement Cycles

Settlement duration is the time it takes for the seller’s account to be credited after the buyer’s account has been debited.

To understand the payment settlement cycle let’s take the example of a customer who makes a payment via his HDFC debit card. 

1. When a customer enters payment details, the information is captured by the payment gateway.
2. The payment gateway encrypts the data and securely sends it to HDFC for authentication. 
3. When HDFC approves the transaction, the fund flows from HDFC to the payment gateway. Thereafter, funds flow from the payment gateway to the merchant’s account. 

This process typically takes two to four working days.

The key here is to select vendors that offer the fastest settlement cycles, between T+1 to T+2 days at most.

5. Integration Support for your Platforms

If you are looking for a payment gateway, chances are that you have already done with your platform.

Either you’re using a third-party platform like Shopify, Magento, WooCommerce, or you’re using a platform built on PHP, Ruby, Python etc.

Therefore opt for payment gateways that offer plugins for the most popular payment platforms. Apart from that, ensure that they offer detailed integration guides for major computer languages such as PHP, Python, Ruby, C#, etc.

6. Recurring Billing Options

The subscription economy market has grown >435% in the last 9 years. 

While this number may seem colossal, it’s hardly surprising. 

After all, most SaaS businesses and eCommerce stores have started moving to the recurring billing model.  

As a merchant, you can choose to enable subscriptions for your customers through:

1. e-Mandate
2. UPI Autopay
3. ECS
4. Standing Instructions on cards

Furthermore, ensure that you choose a payment gateway provider that offers various subscription models. For instance:

1. Fixed Model: A fixed price is charged on a recurring basis. For example, Rs. 100/month.
2. Fixed+Overcharge Model: Fixed and variable components. For example. Rs. 100 for 60 units + Rs. 1/unit after reaching the limit of 60 units
3. Usage Model: Charged as per consumption. For example, Rs. 3/unit.  

7. Customer Friendly Payment Innovation

Here’s a stat that might interest you. 

70% of consumers say they choose to support a company that delivers great customer service.

But here’s the catch. 

As tech evolves, so does customer expectation.

The payments industry is no different. 

Customers expect payment gateways to offer cutting edge payment features along with innovative products to make their transactions easier. Here are some examples:

1. Static and Dynamic QR codes for Scan and Pay feature
2. Payment links to accept customer payments and turn COD orders into online ones.
3. Easily shareable Payment forms embedded on websites 
4. Near Field tech-enabled pos machines for Tap and Pay 

8. Swift Onboarding Experience

Many payment gateway platforms promise onboarding within a few minutes.

However, the ground reality is that opening a fully functional account could easily take over 2 days. 

This is due to the fact that there are various formalities attached to opening a merchant account with a payment gateway that has to be provided and verified before the account can be activated.

To ensure that you don’t have a poor onboarding experience, confirm these details first-hand so that you don’t suffer due to false promises.

9. Reliable and Timely Support

Make sure that your payment gateway provides consistent support. 

You can consider talking to other merchants already using the payment gateway services from that particular provider. 

It comes in handy if you can get a dedicated account manager who becomes your single point of contact at the time of your onboarding and also when you go live.

 Some platforms also provide real-time assistance by providing communication options like live chat, email etc.

10. Real-Time Reconciliation

Reconciliation is the process of matching your business’ income and expenses.

Now, this task can get quite complicated for medium and large business owners. So, ensure that your payment gateway provider offers an in-built dashboard that makes reconciliation a breeze.

However, that is not all.

Real-time reconciliation allows merchants to get a definitive confirmation of the status of the transaction. Is it successful? Is it still pending? 

This way, you, as a merchant, can: 

• Get complete visibility on the real-time status of each payment. Thereafter, they can choose to provide the service accordingly.
• Recover the full amount for payment gateway like Cashfree Payments in case of failed transactions
• Avail Zero cost refunds. So, you do not have to pay MDR for unsuccessful transactions. 

11. Preauthorization

Speaking of no-cost refunds…

Pre-authorization is a facility offered by payment gateways that blocks a customer’s funds temporarily during transactions. (Usually for 7-9 days)

So, in case the customer cancels the purchase (and asks for refunds), the transaction will be marked void. Thereafter, the full amount will be refunded to the customer.

This way, you as a merchant, save on Transaction Discount Rate, and hence, negate losses. Moreover, the customer’s refunds are done instantly, leading to higher satisfaction.

12. Value-Added Payout Services

Apart from accepting payments from your customers, there is a spectrum of payment activities a business enters with accepting payments. 

For example, an eCommerce company, have to ensure that apart from the collection of payments, they also have to process refunds for order return. 

Based on your requirements, selecting the best payment gateway entails additional payment solutions like – 

• Bulk payments and marketplace settlements
• Instant Refunds for vendors and customers
• Instant fund collection on COD orders via digital payment links
• Employee salary payouts and reimbursements 
• Enabling disbursement through payout links where the beneficiary’s bank info is unknown

And more.

Based on these additional requirements, we’d suggest looking for a payment gateway platform that could tackle these business aspects as well.

13. Payment Analytics

Once you gain traction and your business starts growing, predicting growth and scalability depends a lot on your current cash flow. 

Therefore your payment gateway should be able to provide you with detailed reports and analytics of all your transactions. 

Some payment gateways have developed smart analytics boards that showcase your:

• Summary of transactions
• Payments Volume, 
• Number of Transactions, 
• distribution of your payments across payment methods (Cards, Netbanking, Wallets etc) Customer preferred Platforms (iOS, Android, Desktop) etc. 

You can analyze this data grouped by hours, days, weeks or months across any time span.

14. Personalised Checkout experience

A seamless, personal checkout experience is when you have your very own payment processing pages. This is also known as a self-hosted checkout process. 

A self-hosted help you offer your customers: 

1. A holistic payment experience
2. Zero redirections- which can lead to higher conversion rates

Moreover, customers tend to trust the payment process when they are not redirected to a third-party page while buying the product. 

In fact, the entire process negates the need for a customer to jump from one page to another which reduces friction as well as improves checkout velocity.

The best payment gateways offer payment processing with your own brand relevance like having your custom design for collecting payment details with your brand logo and design language. 

15. Pricing

Most payment gateways charge an upfront of 2-3% per transaction as a standard. 

This could be subject to change based on your transaction volume and additional requirements. 

While selecting the payment gateway, ensure that you speak with the sales team and broker the best possible rates, while keeping in mind the additional features that come with the gateway.

Related Read: Transaction Discount Rate: How Payment Gateway Charges are Decided

Conclusion

So these are all the major factors one should look out for while you are deciding how to choose a payment gateway in India for your business. 

What are your thoughts?

We’d love to know what else could be included here. In fact, which one of these factors is the most important for your business case?

 Please do share your feedback in the comment section below. 🙂

And of course, if you wish to talk to our payment gateway experts, we are always happy to help! 

FAQs on Payment Gateway 

What are some of the use cases of a payment gateway in India?

Below are some of the most common businesses and platforms that use payment solutions to power their business:

eCommerce Platforms

Platforms such as Shopify and Magento help individuals and businesses sell physical goods online. Moreover, larger eCommerce brands like Amazon, Flipkart and more have a payment settlement system in place in order to run their business smoothly.

On-Demand Services 

 A range of services provided via a mobile app or website, fall into this category, including ride-sharing apps (Uber, Ola), in-house assistance (UrbanClap, HouseJoy), F&B delivery services (Swiggy, Zomato) and others.

Travel and Hospitality 

Travel and tourism marketplaces come in this category. Brands like MakeMyTrip and ClearTrip, are some examples. 

Booking Platform 

Platforms like BookMyShow, Insider India and others which offer customers a way to book movies, events and other entertainment-related tickets fall under this category.

Logistic Services

Organizations that offer logistic solutions to individuals, as well as businesses across India, fall into this category. Some of the prominent examples would be proprietary services like eKart, Delhivery as well as the more traditional giants – DHL, FedEx and more.

SaaS businesses

Online platforms that provide various business-based solutions like CRMs (Pipedrive, LeadSquared), ERPs (Microsoft Dynamics, SAP), helpdesks (FreshDesk, Zendesk) and more.

Subscription-based Platforms – Platforms that offer subscription-based services, whether from the entertainment and content sector like Netflix, Prime Videos, or daily groceries like MilkBasket.

Retail

Online retail stores that might be run by traditional retailers or dedicated ones like LensKart, Xiaomi, OnePlus, Urban ladder and more. 

Others

At Cashfree Payments, we constantly witness new business ideas being adopted in an online model, whether it’s petcare, online medical store, or furniture rentals.

Payment gateway platforms like Cashfree Payments work at the Nexus of Banking, card networks and regulatory bodies. 

It is an enabler which helps these platforms provide differentiation to their customer in terms of flexibility of payments. A payment gateway enables any online business or merchant to collect payments in the method they deem fit, whether its via cards, net banking,  UPI or others. 

How does a payment gateway work?

Payment Gateways were popularized in India, in the mid and later 2000s, with the inception of platforms like Flipkart, Snapdeal and others. 

It’s no hidden fact, that India like the other developing nations have been slow to adopt digital payments. 

The real adoption rate started soaring after 2010, and when UPI rolled out, the entire digital adoption rate saw an incredible rate of growth, with UPI transactions overtaking card-based transactions in India for the first time in mid-2019.

The payment gateway model has evolved continuously in India with regulatory bodies like the RBI and NPCI relaxing norms and adding flexibility to allow more third-party providers to enter the ecosystem. 

Here is a brief on how current payment gateways work:

1. Your customer/The buyer initiates a purchase on your website or mobile app and heads to the payment page.
2. The payment page is the space where the buyer interacts with the payment platform for the first time. Depending on the merchant, the payment page could be a generic page provided by the payment platform or a completely personalized one. The buyer at this page needs to select their preferred payment method (cards, net banking, UPI, Digital wallet, etc) and enter the details. 
3. The information is collected by the platform, which now directs the customers to the gateway, where this PG issues a signal to the seller’s bank. The seller’s bank now reciprocates by sending a collection request via the payment gateway.
4. The request goes through one of the card/interchange networks, like Visa, MasterCard, and others. These networks allow or deny transactions on the basis of a few authentication variables –
   1. Knowledge parameters – Information of the buyer like PIN, CVV, passwords and more.
   2. Possession parameters – Physical cards, cheques, account numbers, etc.
   3. Inherence parameters – Additional verification biometrics or OTPs like a signature, fingerprint, or 2-factor authentication code

5. Once the interchange network authenticates the payment, it passes a request to the buyer’s bank. The issuing bank checks for sufficient funds and authorizes the payment.

6. In the last step, the money is transferred from the buyers’ account to the PG’s account which settles it with the seller in the pre-agreed settlement window. The seller receives the monetary settlement under this frame of time.

As a business owner, it’s important to understand the process above, exactly how money travels from the consumer’s end and reaches your business account.

For an even more detailed answer, head over to our blog.

We hope this blog answered your queries on how to choose a payment gateway.

Did we leave anything out?

Let us know your thoughts! 🙂