How to choose the best payment gateway for your startup


When Kerala saw an unprecedented rise in COVID-19 cases during the early stages of the pandemic, residents of the state began ordering significantly more food online. And that’s understandable, given that eating out was no longer a safe option.

Meanwhile, a startup that adequately met their needs was Eatiko. In a world where Swiggy and Zomato are now known, Eatiko has also captured a good share of the Kerala market. They made over 300,000 deliveries in their first year.

And they haven’t looked back. Largely because from the start, Eatiko focused on the customer experience. One of the areas they focused on was providing a hassle-free payment experience. They wanted to integrate with a payment gateway that could guarantee higher transaction success rates and give their customers the option to pay through different payment methods.

But of course, the choice was not easy. When startups in India have to choose a payment gateway, they don’t have a plethora of options to choose from. The names that usually come to mind are Razorpay, Paytm Payment Gateway, PayU, and Instamojo. But the choice is critical because they cannot change their payment gateway too often.

Integrating a payment gateway consumes a fair amount of technological bandwidth, which is why the choice must be made with a long-term perspective. For start-ups, this becomes even more important as they would have limited resources for payment gateway integrations.

Therefore, to make the right choice of payment gateway, here are 5 parameters that startup founders and developers should consider.

Easy integration and quick integration

It’s almost obvious. As a founder, you want a payment gateway that lets you onboard quickly and also allows your tech team to onboard quickly. Most payment gateways like Paytm Payment Gateway, Razorpay, Instamojo, and PayU have a smooth, fully online integration process. These payment gateways also provide robust APIs and custom SDKs to get you up and running in no time. On top of that, all of these payment gateways also provide plugin support for ecommerce platforms like Shopify, WooCommerce, and others.

Support for multiple payment methods

Online consumers often deposit at the checkout page because the website or app they’re shopping on doesn’t support their preferred payment method. This is something a startup can hardly afford.

You need to make sure that the payment gateway you integrate supports all payment methods like credit cards, debit cards, online banking, EMIs, UPIs, etc. You would also want payment sources like Paytm Wallet and Paytm PostPaid. While making your choice according to these criteria, take a look at the payment methods listed on their websites. For example, PayU and Paytm Payment Gateway listed Paytm Wallet but Razorpay does not support payments through it.

High transaction success rate

Failed payments are painful for both buyers and sellers. A consumer facing a failed payment on your website or app is unlikely to come back to you. Of course, payment failures can also occur for many reasons on the consumer side. But what a startup can guarantee is to integrate a payment gateway that has a high success rate.

Besides the technological infrastructure, success rates also depend on factors such as registered instruments. Paytm Payment Gateway, for example, has over 250 million registered cards, over 100 million registered bank accounts, and over 10 million registered UPI IDs that contribute to higher success rates. PayU talks about features like fast payments and smart recommendations that improve success rates. These features ensure that consumers don’t have to enter their details every time, which means they’re less likely to make mistakes. In short, fewer payment failures for you.

Lower merchant discount rate

The merchant discount rate or MDR is the commission that a business pays to the payment gateway for accepting payments online. These payment gateway fees vary by payment method, but a lower MDR means bigger savings for the startup.

For example, while payment gateways like Razorpay and PayU charge 2% MDR on UPI, Paytm payment gateway has a lifetime of 0% MDR on UPI. For a startup making monthly sales of Rs 1 crore, this can translate into savings of Rs 97,700 each month. Google “save 97700 on payment gateway” for more.

Fastest payment settlements

Payment settlement time refers to the number of days it takes for payments you have accepted to arrive in your bank account. For a startup, it is very important to get the money that your customers have deposited into your bank account as soon as possible. This money can be used to grow the business, replenish inventory, pay suppliers, pay salaries, etc.

PayU and Razorpay have a T + 2 business day settlement cycle while Paytm Payment Gateway’s default settlement cycle is T + 1 with no holidays. These payment gateways also allow faster settlements at an additional cost.

In conclusion

These are some of the things a startup founder should consider when choosing a payment gateway. The most reputable payment gateways like Razorpay, Paytm and PayU also have a dedicated customer support team who can help you at any stage of your onboarding and integration. Also check out customer stories on their website to see which brands are already using these payment gateways. This is another factor that can give you a good indication of which payment gateway to choose.



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