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What is the best payment Gateway to use for Digital Products?

Feb 28, 2023

Choosing a reliable and secure payment processor is crucial for ensuring that your customers are able to easily purchase your offerings. This article outlines the various payments gateways to think about in selling digital goods.

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What is a payment gateway?

Payment gateways are an enabler for customers to pay for products or services. It's a user-facing application which receives data from credit cards to deduct a certain amount from the issuing bank.

There are many payment options in the market, they all allow users to input their credit card details safely and pay quickly. The most popular ones recognized by most include PayPal, Stripe, Amazon Pay, Braintree, and Square Payments.

Statistically  the leading payment gateways on the market are:

  • PayPal -- 60.18%
  • Stripe 16.00% 16.00%
  • Amazon Pay - 3.51%
  • Stripe Checkout - 2.21 percent
  • Braintree -- 2.10%
  • Square Payments 1.81 percent

Of these, PayPal and Stripe capture the most market share, and they're regarded as dependable digital payment processors.

An overview of the most reliable payment gateways to use for selling digital products

Udemy, SkillShare, and Amazon are all popular choices for people who create digital goods, however they do have a few drawbacks.

  • They display other related digital items on the same webpage, which may distract your customers.
  • If the marketplaces deliver an unsatisfactory service to their clients, you may suffer the loss of your share of the market due to their faulty customer service.

So, it's always recommended to put money into your virtual real estate for selling digital products. Once you're ready with your digital product You must plan for its availability, engage in meaningful marketing that encourages buyers to buy on your site right away.

Stripe in contrast to PayPal

Stripe and PayPal have a good reputation with users around the world and fulfill all five requirements listed in the previous paragraphs. They employ high-end encryption for data and have PCI-DSS certification (Read more about this here or here). They provide their services to nearly every country, with the exception of a few, making the service universal. The checkout process is easy as well, which makes it effortless for you to sell your digital goods.

Because online courses and membership sites typically thrive with recurring revenue, PayPal and Stripe make significant choices. They allow you to establish subscriptions frequently and ensure that your clients' information is secure.

PayPal operates almost all over the world. PayPal can be used to generate sales from over 200 nations and regions. It also supports 25 currency pairs. It's secure, flexible as well as efficient, which makes it the ideal platform to sell your digital goods. The majority of buyers were more comfortable shopping with a site that accepted PayPal. According to another study, there an increase of 28% of conversion rates at checkouts after PayPal became payment gateway.

One of the most important functions of PayPal are:

  • It helps you mitigate risks with sophisticated payment security tools.
  • It allows you to implement and test rules at any time.
  • It allows an interactive routing system and detailed data analysis that ensures high-quality transactions.
  • PayPal has advanced risk prediction algorithms that help identify risky patterns in order to be prepared in advance to take the appropriate precautions.
  • You can securely store the personal information of your customers inside a vault that is encrypted.

PayPal provides sellers with the most powerful tools for conversion. It allows you to sell on various devices, channels as well as markets. In short, you can get to your customers wherever they may be. With more than 400 million customers who are registered with PayPal It's quick and easy to sell to the people they are. You can also utilize PayPal's customer intelligence feature to encourage your online education purchasing of course. These tools can assist you in increasing customer loyalty as well as generate constant growth in monthly subscriptions.

What is stripe?

Stripe is the 2nd most popular worldwide payment processing platform that accepts credit card transactions. It is easy to quickly and efficiently sell your online courses through integrating Stripe to your website or an online platform for courses. It has a simple pricing structure that's reasonable and transparent. Stripe's API is free from glitches and technical problems, which makes it easy to use with all applications or platform. As a result, several websites choose Stripe for their payment processor to avoid the hassle of checkouts.

  • Stripe is suitable for all kinds of businesses. From subscription-based firms to eCommerce retailers, it handles a variety of transactions.
  • You can scale easily since it can support more than 135 currencies.
  • Thanks to advanced technologies including machine learning as well as Big Data, it protects your clients from fraudulent transactions.
  • Stripe will deposit the money generated from your digital product sales directly into your bank account.
  • It comes with a highly efficient user interface, making cart abandonment less likely.
  • It also has a number of capabilities to let you grow your company without having to invest in the development process or designing.

It is also priced reasonably when compared with other processors for payments. For instance, the company costs just 2.9% + 30 cents on every transaction as processing fees. It is compliant with PCI-DSS and manages secure data on encrypted networks. You also do not have be charged any extra fees to establish or terminate your account.

If you're curious about whether Stripe and PayPal compare against each other, check out the table of comparison.

Features PayPal Stripe
Fees for the US 2.9 percent + $0.30 per transaction 2.9% + $0.30 per transaction
Costs in Canada 2.9 percent + 0.30 CAD 2.9 percent plus 30C/ per transaction
Fees for all other countries 4.4% and more in accordance with the country of origin. 2.9 percent + $0.30 per transaction
Number of countries supported more than 200 more than 135
Dedicated support Yes Yes
Embedded checkout Yes No

Other payment gateways

Alongside PayPal and Stripe, there numerous other options could be used to market your digital goods. In this article, we will focus on the top five commonly used alternative options.

         Magento    

Magento is one of the market leaders in terms of designing eCommerce platforms. The version hosted on the cloud is employed by numerous small companies particularly those selling physical-delivery products. It allows for a variety of customization options and can help you set up a store that looks exactly the way you would like. The store also has the payment method of its choice, and integrates with third party payment gateways. It allows you to facilitate quick checkouts once you have set up an eCommerce store.

Though it comes with many benefits but you'll likely need to hire someone to set the system up. Furthermore, it's best suited to physical items because of its robust shipping and delivery features. It needs reliable hosting but could also be overkill when the sole purpose of selling online-based learning products.

    Shopify    

Like Magento, Shopify is another great online platform to host eCommerce websites. It's simple to use and looks good on mobile and computer gadgets. There are a variety of themes and templates that help to create a stunning digital store. Many developers note that Shopify sites load fast and result in lower cart abandonment rates.

         Braintree Payouts    

Braintree Payments is another popular payment service that has flat rate pricing. Its pricing can be compared to Stripe However, there are some disadvantages. It's not suitable for international commerce since it is not able to provide support for multiple currencies and countries. In addition, it requires some modifications to make it work as you want. It does not offer any assistance for businesses that need the highest risk of transactions. It takes a long time to setup and is relatively not the right choice to make if all you want is a payment gateway.

There are other options that may be better suited for those who plan to sell your digital items globally. However, Braintree is an excellent choice if you plan to market your courses or publications in the US. It's quite well-known among smaller businesses in the US and Canada.

         2CheckOut    

2CheckOut is available in a wide range and offers excellent flat-rate pricing. It supports monthly subscriptions, and many international merchants use it. It is however not recommended on high-risk sites, and there have been reports of money being kept. The site also doesn't process all the cards issued in diverse countries. This is an issue when you intend to market the online course or book internationally. In particular, some customers have complained 2CheckOut had to shut down their accounts for reasons that are not explained.

         Square    

Square is also a well-known payment gateway and POS platform for small businesses owners use. It is a simple tool for selling both digital and physical items. It's cost-effective and features an outstanding interface that makes it easy for customers or clients to buy the digital items you sell. They can also terminate your account due to lack of activity if you are looking for an income stream that is passive and you only have an ebook or two you want to sell. In this case that it might be better to select Stripe or PayPal, as the account is active after indefinite inactivity.

How do payment gateways operate and what do you need to be looking for?

Let's understand this with an illustration. Let's say a buyer chooses an online course or ebook, adds it into their cart, then enters the payment details. What after that?

A payment gateway integrated into the system transmits the data to the payee's bank at the backend. Once the payment is cleared it is transferred to the acquiring bank (or your bank as a seller).

Although this process sounds simple, it's a complex one. It's crucial to select an online payment service that's safe and secure and that is able to meet the requirements above mentioned to be a smooth process.

The criteria includes conformity to security, compatibility the ability to be universally applicable and appropriate.

Let's look into these in detail:

  1.    Compliance  

Payment gateways are regulated by financial authorities in order to guarantee that customer data is protected. The majority of government agencies demand that payment gateways adhere with Payment Card Industry Data Security Standard (PCI-DSS). This ensures that card transactions are secure and that the data of cardholders isn't taken.

If you gather health-related information in the course of selling digital products, you may also have to select a gateway for payment which is compliant with Health Insurance Portability and Accountability Act (HIPAA). If you are accepting the payment of European Union residents, you might also need to select the right payment processor that is General Data Protection Regulation (GDPR) compatible.

  1.    Security  

Numerous instances of customer information being stolen and resulting in financial crimes, often make headlines. Businesses like Enron as well as others have suffered millions of dollars as a result of data theft.

To avoid this, the payment gateway you choose must support data encryption. A few payment platforms hide data from cards to guard customers' personal information. This is called tokenization of information about a card because it's saved in such a manner that it can't be encrypted. It is essential to make sure that your payment gateway supports data encryption and tokenization for uncompromised security.

  1.    Compatibility  

The choice of payment method you pick should also work with various processors on the network. The major network processors include American Express, MasterCard, Visa, Diner's Club, as well as Discover.

Network processors offer debit and credit cards which are co-branded with banks that issue them. The more banks your payment processor supports more convenient it will be for consumers to purchase your digital products. However, you need to ensure that your chosen payment processor at a minimum supports Visa as well as MasterCard because they offer the majority of debit and credit cards.

  1.     Appropriateness  

There are many payment processors that are fantastic but cannot be seamlessly integrated into sites. It is possible that checkouts must be conducted in a complicated method. This may cause customers to lose interest and abandon carts. One example could be long checkout forms. So, it is important to select an online platform that is seamless with your learning product page without causing the user to experience friction.

  1.    Universality  

In the case of selling digital products, the world becomes your oyster! It isn't necessary to limit yourself to serving customers only from your local area. While the US as well as the EU account for 85% of the market share of online classes, Japan, India, and other countries of Latin America also account for a large number of transactions. Therefore, your payment gateway needs to accept multiple currencies, be in compliance with international regulations on financial transactions, as well as provide multi-lingual assistance.

What's the verdict for the most secure payment method for digital products?

PayPal along with Stripe are ideal payment gateways for online creators selling digital goods. They're effective in helping in generating sales as well as ensuring you get paid on time without any hurdles. In comparison to other payment options, PayPal and Stripe are widely used in most countries and support different currencies.

Selling digital products can be an excellent source of passive as well as active income. Making online courses, webinars membership sites, and ebooks can be exhausting.

In addition, having to promote them to the right target audience takes more effort. This is why it is preferable to choose an infrastructure that requires less effort and maintenance. Hosting your site might seem like a great idea. But, you'll have employ experts to tweak specific features, and make sure that your website undergoes regular maintenance as well as security updates.

A platform online that incorporates payment gateways that do not hold the funds of customers in any way can be a better option to market digital items. It allows you to focus your best efforts on creating digital products, such as online training courses and leaving all the other work on the platform.

One such platform lets you run your online course. You can also create your courses in an appealing format for learners without prior technological knowledge. It integrates both PayPal and Stripe as payment processing platforms into its platform. This makes it easy for users to earn income for a long time, whether you remain active or passive. Additionally, you do not have to worry about suspensions or terminations and get all your sales-related money directly transferred to your account.