The Best Payment Gateways for Digital Downloads

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It takes a very different strategy to sell golf clubs online than it does karaoke versions of pop songs. With golf clubs, the sale is pretty straightforward. Customers know what golf clubs do. With digital products like songs, software, ebooks, white papers, or digital art, you have to work harder to explain what customers are paying for.

To successfully sell digital products online, you have to make the entire transaction process as straightforward and simple as possible. Shoppers who can’t find their preferred payment option will leave your site. Hastily scrolling customers who don’t see the “Buy Now” button will abandon their carts.

All of the small checkout steps and payment processing are part of your customers’ experience and determine whether you’ve got a sale or an ex-fan of your store. Your payment gateway is a critical part of that process, especially for digital products.

With digital products, the checkout experience doesn’t include things like sizing, shipping or unboxing a product. It only involves checkout and receiving a downloadable link. Your payment gateway shoulders much of the weight of the customer’s experience. So, choose one with the features that grow your revenue, rather than shrinking your customer base.

What’s a Payment Gateway?

Any credit card transaction over the internet needs a third-party service to process the transaction. That’s the job of a payment gateway. Payment gateways keep your customers’ payment information secure by encrypting it throughout the process. While all payment gateways perform the same function, they each have different features, fee structures, and add-ons that make some fit your business better than others.

Mobile-Friendly Payment Gateways

Mobile eCommerce sales in the U.S. are projected to top $330 billion by 2020. If you’re not working with a payment gateway that’s built for mobile, then you’re shooting down your digital product efforts before you get started. Many gateways support mobile payments, but a few, like PayPal and Square, also offer mobile apps to make it easier for customers to pay on their Android or iOS devices.

Mobile payment gateways are good for store owners selling digital products customers experience on mobile devices—mp3 songs, cross-stitch templates, and video tutorials. Customers can pay, download, and begin enjoying their purchases all on their phone or tablet. These apps also make checkout easy because consumers can save their payment information within the gateway. Auto-filling payment information for small screen devices makes buying digital products easier.

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Fees Are Inevitable, But You Have a Choice

To keep from paying too much for your merchant gateway, compare fixed costs to merchant rates. Some gateways have fixed monthly costs like monthly fees and returns charges. Others have higher merchant fees, which they charge for every credit card purchase. Generally, you want to look for lower merchant fees when you’re selling big-ticket items and to minimize your fixed costs if you’re selling low-priced items.

find a merchant gateway with the lowest fees

Do you plan to sell internationally? If so, look for a payment gateway with low international fees. Actual merchant fees vary depending on many factors, like the type of card (credit vs. debit) and where the sale takes place (domestic vs international). For example, PayPal’s domestic fees are 2.9% + $0.30 per transaction, but they charge 4.4% + fixed fee based on currency received for international charges. Stripe charges a +1% conversion fee, which may work out cheaper in the long run if you’re selling low-priced items at higher volumes.

Most payment gateways bill you a chargeback fee when a customer asks for a refund. How many refunds you get will depend on your digital product and your return policy. For example, you may have fewer returns selling posters versus ebooks—with visual products, people can see exactly what they’re going to get. So, factor in chargeback fees if you expect high return rates.

Website Integration Gives You Control

The best payment gateways for digital products are fully integrated. Complete integration allows customers to make purchases without leaving your website. PayPal offers both integrated and hosted payment options with different pricing.

PayPal’s hosted payment option is less expensive, but your customers will have to go to PayPal’s website to checkout. You lose control of your customer’s experience at the most critical moment—checkout. With an eCommerce platform like WooCommerce, you can integrate multiple gateways into your WordPress site for a streamlined checkout process.

After checkout, it’s time to deliver your product to the customer. Delivery is usually followed by a “Thank You” email, which includes a link to download the product, followed by a confirmation email. You control this email process with your eCommerce platform or recurring payment service like Recurly if you offer subscriptions and memberships. Make sure your payment gateway integrates with these platforms. The software and services that deliver your digital download links are essentially the UPS or FedEx of your store. If customers don’t get their products because of payment problems, you’re losing sales.

Choose a Gateway With a Merchant Account

Whether you’re selling digital or physical products, you need a merchant account. Merchant accounts are how you get paid from your credit card transactions. You get them from a merchant account provider, which will charge you a merchant fee.

Some payment gateways include a merchant account with their services, making it easy to get started. However, these gateways charge higher transaction fees for the service. For example, Authorize.Net charges 2.9% + $0.30 per transaction if you open a merchant account with them. But if you only need a payment gateway, they charge $0.10 per transaction.

authorize.net pricing plans provide a good experience for best payment gateways for digital downloads

Payment Gateways With Recurring Payments

Digital products are often sold on a subscription basis. Some artists, for example, sell memberships that permit access to exclusive content, like songs, videos, and books. Even if you’re not selling subscription-based products now, you may want to keep that possibility open in case you decide to later. In the fast-paced world of eCommerce, the more options you have to pivot, the better.

Payment gateways like Payflow offer recurring billing features. Other gateways integrate with third-party plugins that give you this functionality. Stripe integrates with many different recurring payment extensions. With WooCommerce Subscriptions, you can set automatic or manual recurring payments for dozens of different payment gateways.

Gateway Security Protects You and Your Customers

If your customers don’t feel their information is safe on your site, they won’t buy from you. Get a payment gateway that meets current security standards. To adhere to industry standards for processing payments, payment gateways need to be PCI compliant. This compliance indicates the software adheres to the current security standards for encrypting and transmitting customer data. Look on the gateway’s compliance page to find out their PCI Service Provider level.

best payment gateways for digital downloads build trust with SSL and other security measures

Payment gateways like Stripe will require you to confirm your own PCI compliance every year, usually through a Self-Assessment Questionnaire (SAQ). The biggest requirement for your website will be to install an SSL certificate for your site—a technology called Secure Sockets Layer that helps you safely transfer data. There are six different types of SSL certificates to choose from.

Not Having Fraud Detection Is Costly

Credit card fraud continues to punish eCommerce stores—to the tune of $6.4 billion in losses 2018. Gateways can help prevent these losses. PayPal offers seller protection programs to guard against unauthorized transactions or “Item not received” schemes. Stripe Radar uses machine learning to stop fraudulent purchases before they happen, and you can purchase an add-on for more fraud fighting features.

Whether you choose a gateway with fraud insurance, machine-learning algorithms, or both, make sure the protection covers digital goods before signing up.

Reporting Makes You More Money

Choose a payment gateway with reporting features that help you identify popular products, high-spending customers, and other relevant sales data. By identifying popular products, you can put more resources into promoting them through social media ads. By grouping your customers (e.g., “one time buyers” versus “big spenders”), you can tailor your email marketing more effectively. For example, you could send coupons and discounts to customers who buy the least or promote big-ticket items to the customers who spend the most. With WooCommerce, you can also look in depth at similar analytics.

braintree reporting for best payment gateways for digital downloads
With Braintree’s reporting features you can easily manage all your chargebacks and payment disputes

Payment gateways like Mastercard have powerful reporting dashboards. You can view a single transaction or look at the yearly sales trend for a specific product. Braintree reporting lets you see disputed transactions so you’ll always know the status of your refunds and chargebacks.

Your Gateway Will Help—or Hinder—Your Growth

In October 2018, the founders of the project management program Basecamp were elated with the reception of their new book, It Doesn’t Have To Be Crazy At Work. They appeared on multiple major podcasts and got positive reviews in The Economist and The Wall Street Journal. One big problem was driving them crazy, though—their publisher hadn’t printed enough books.

People trying to buy on Amazon couldn’t, and some were shown they’d have to wait two months for delivery. All of their launch publicity was wasted because the lost sales kept them off the bestseller lists.

You know your digital product is valuable. An influential expert might too—mentioning it on her podcast or social media account. If that happens, and sales explode, you want your payment gateway to be ready. An outage at the wrong time could cause you to miss your big chance. You’ve invested your time, creativity, and knowledge into your digital product. Invest in a payment gateway that sets you up for the success you’re dreaming of.

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