Digital Goods Payment Processor

Digital Goods Payment Processor: Industry Guide

What Is a Digital Goods Payment Gateway?

A Digital Goods Payment Gateway is a specialized credit card processing solution for businesses that sell non-physical products such as ebooks, digital content, NFTs, software, and music. These accounts are generally provided by specialized payment processors that are comfortable with the immediate delivery of products and also support recurring payments. These payment processors implement enhanced security features for safe transaction processing.

The market for digital product sales is booming. Ebooks, software, and downloadable courses are all considered digital goods. Most of these products are sold over e-commerce websites. For such businesses, a reliable Digital Goods Payment Gateway is extremely important. With the right digital goods payment processor, businesses can increase conversion rates and boost customer satisfaction.

QuadraPay has been providing digital goods payment processing solutions to international merchants since 2016. Our Digital Product Payment Gateway Experts have created this guide for you.

In this guide, we have covered the key features that you must look for when choosing a payment gateway. We have discussed common challenges such as fraud and microtransactions. Along with that, you will find strategies that can help you find the Best Digital Goods Payment Gateway for your company. Let’s begin.

How Does the Digital Goods Payment Gateway Work?

When a customer purchases a digital item on the merchant’s website, the payment gateway encrypts all transaction details and sends them to the customer’s credit card-issuing bank.

Based on the available balance on the customer’s card account, the transaction is either approved or declined. Here, it is important to know that during this entire process, the transaction passes through multiple parties, like the merchant’s website, payment processor, card scheme, and card issuer bank.

Upon successful completion of the transaction, the digital product is instantly delivered to the customer’s email. Simultaneously, the payment gateway sends a transaction success confirmation to the merchant.

Types of Digital Products That Can Be Sold Using a Digital Goods Payment Gateway

How do Digital Goods Payment Processors Differ from Others?

Digital goods payment processing companies differ from conventional credit card processors in many aspects. Let us explore a few of these differentiators.

Immediate Fulfillment: In the digital goods industry, customers expect to get the product immediately after the purchase; however, for many payment processors, this can be a red flag. Specialized payment processors have experience working with similar businesses, and they can easily support this requirement.

Recurring Billing Support: Most websites in the industry use subscription models to bill their customers. Traditional payment processors avoid working with merchants that accept subscription payments; however, specialized processing companies provide robust recurring payment capabilities.

Microtransaction Handling: In the digital goods industry, the average ticket size is usually low. This is the key reason why many providers avoid working with such merchants.

Global Accessibility: Most low-risk payment processors only allow merchants to accept payments from local customers. They may not provide multiple currency processing. However, specialized payment processors allow merchants to accept international orders in multiple currencies.

Higher Fraud Risk: As this industry operates on a global scale, the risk of fraudulent transactions always stays high. Many domestic processors shy away from digital goods businesses, and the only options available are through experienced, high-risk processors.

Key Features to Look for in a Digital Goods Payment Processor

Fraud Prevention: Security should be your number one priority when choosing a Digital Goods Payment Processor. You should choose a provider that fully complies with the latest PCI DSS standards. The processor should implement enhanced encryption for better data protection. You should work with a payment processor that has a robust security framework. This will help you in reducing the risk of fraudulent transactions and chargebacks.

Multiple Payment Method Support: To grab your deserving share in the global digital goods market, you will need a processor that allows international transactions. The processor must support multiple currencies and various payment methods. Work with a provider that supports all major credit cards, Apple Pay, Google Pay, bank transfers, ACH payments, Alipay, iDEAL, SOFORT, and cryptocurrency payments.

Subscription Management: If your business model includes subscription products, then you should choose a provider that supports flexible billing cycles, such as monthly, annual, or at custom intervals. The processor should also support automatic retry for failed payments, upgrades, downgrades, and proration.

Easy Integration: The payment solution for your digital goods business should integrate with your existing setup. The provider must offer well-documented API information. It is common for most credit card processors to offer ready-made plugins for platforms like WooCommerce, Magento, and Opencart.

Competitive Fee Structures: The payment processor should offer competitive pricing.

Types of Digital Goods Payment Processing Solutions

Credit and Debit Card Processing: These are the most common and widely used payment methods. Most digital goods businesses operating in Europe, America, the UK, and Canada use credit and debit cards as their primary payment method. Apart from well-known card brands, merchants should also accept local credit cards like UnionPay and JCB.

Digital Wallets: Another popular mode of payment is digital wallets. Hundreds of digital wallets are used across the world; however, the most popular ones include Apple Pay, Google Pay, Alipay, and Samsung Pay.

Cryptocurrency Payments: A variety of digital goods businesses are considered high-risk and may not be approved by conventional credit card processing companies. These businesses can accept cryptocurrencies like Bitcoin, Ethereum, and altcoins.

Buy Now, Pay Later (BNPL): Customers get the option to buy digital goods and pay in installments. Although this payment method is not common for digital products, it can be useful for higher-priced digital items like software licenses or comprehensive online courses.

Alternative Payment Methods (APMs): In regions like Asia, Africa, and Latin America, there are a variety of alternative payment methods. In some regions, the usage of APMs is higher than that of many credit card brands. By offering alternative payment methods to customers, businesses can grow their footprint in emerging markets.

How to Find the Best Payment Gateway for Digital Goods & Products

There are a few steps that you must take to search for the best payment gateway for your digital goods businesses. Let’s explore these in detail.

Check Your Business Needs: Ask yourself about your expected monthly volume, average ticket value, and highest transaction value. Identify your target markets. List all products that you plan to sell using the payment gateway. Share these details with the payment gateway company in the initial email. This will help shortlist the processors that support your requirements.

Consider Vital Features: The gateway should have tools to identify and stop fraudulent transactions. It should support recurring billing. The integration should be easy. The checkout page should be fully responsive.

Evaluate Pricing: Talk to multiple processors and collect their quotes. Compare and then decide. Explore flat and tiered pricing. Check other fees like monthly fees, annual fees, termination fees, and anything else that you may be charged for.

Check Compatibility: The payment gateway and your website must integrate well. Check the compatibility first. Ask the payment gateway company if they can integrate with your e-commerce platform. If you are using accounting software for easy reconciliation, ask the provider if that accounting software can be integrated with the payment gateway or not.

Research customer support: Work with a payment gateway company that offers 24/7 customer support and has multiple support channels like phone lines, email, and chat. Some payment gateway companies also offer dedicated account managers for larger businesses.

Consider scalability: Make sure that the payment gateway company has the ability to offer you high-volume processing capability as you grow. The payment gateway must be scalable and should support your international expansion.

Read user reviews, complaints, and case studies: Check online reviews of payment gateway companies. Look carefully at the reviews listed by companies like yours. Pay attention to the comments about reliability, ease of use, and the customer support provided by the payment gateway company. Check case studies, if any are available, to see how these payment gateways have helped businesses in your industry.

Test the user experience: You should ask if they can provide a sandbox integration where you can go through the checkout process without committing anything. Consider a payment gateway that offers simplicity when it comes to the checkout process.

Understand the Contract Terms: Carefully understand the process of withdrawing funds from the merchant account and transferring them to your business bank account.

By carefully evaluating all these factors, you will be able to find the Best Digital Goods Payment Gateway company that meets your business requirements.

Frequently Asked Questions About Digital Goods Payment Gateways

What Is the Average Cost of Digital Goods Payment Processing?

The price that you pay using a digital good payment processing solution can vary depending on many factors. Keep in mind that in some countries, the transaction fees are regulated by the government. In other nations, these prices are generally determined by the payment processors.

For a digital goods payment processing account, you may either be offered a fixed pricing or an interchange plus pricing. The fixed rate can vary between 2.5% and 3.5%, plus a fixed fee of around $0.30 per transaction.

If your processor offers you an interchange plus pricing model, then you will be paying actual fees determined by the card brand plus a markup set by your processor. If you expect to process high-volume transactions each month, then you can definitely negotiate custom rates.

How Long Does It Take to Set up a Digital Goods Payment Gateway?

The timeline depends on how prepared you are. If you have the website and the KYC documents ready and your profile is good, then you can expect to get approval within a week’s time. However, if your website is under construction and documents are not prepared, then it may take a long time.

How Do Digital Goods Payment Gateways Handle International Sales?

Digital Goods Payment Gateways come with a dynamic currency conversion feature that allows you to display the prices in customers’ local currency. The conversion happens at real-time rates. Apart from this, good providers allow merchants to accept local payment methods and also provide assistance with automatic tax compliance features.

What Happens If a Customer Requests a Refund for a Digital Product?

In case of a refund request, the merchant should refer to the policy on their website. If the terms allow a refund, then do it to avoid chargeback. If the refund policy does not permit a refund, the merchant should communicate with the customer and direct them to review the policy page. Most payment gateway companies allow merchants to initiate refunds directly through the payment gateway panel.

Conclusion: Digital Goods Payment Gateway

Choosing the right Digital Goods Payment Gateway can be the most critical decision for your business. The right processor must offer you a combination of features targeted toward security, user experience, and cost-effectiveness. Along with that, it is important for you to work with a processor that offers a scalable and future-ready solution.

Take your time and evaluate at least five providers to find the best payment gateway company for your digital goods business. If you need any assistance, contact QuadraPay by email at [email protected] or by filling out the merchant account application form.

Suggested Readings

https://www.marketresearchintellect.com/product/global-digital-market-size-and-forecasting-market-size-and-forecast/