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15 May 2021

A Quick Guide to Payment Gateways in the GCC

For any ecommerce enterprise today, the need for a secure online solution is paramount for customer confidence and to safeguard against fraud, data theft, and other business risks.

Given this necessity, no online business can hope to operate effectively without a reputable payment-gateway solution integrated into its sales flow.

However, payment gateways can be complicated to understand—and it may not be easy to identify and select the right one for your online store or business.

So to help you get to grips with the complicated topic of online payment gateways, here’s a brief rundown of how they work, and the various options available to consumers and merchants in the GCC.

The GCC Ecommerce Explosion

The GCC states were slow starters in the ecommerce world, with the sector contributing just 0.4 percent of the region’s GDP in 2015, but over the past five years retailers have shaken off the inertia and ecommerce has rocketed.

From revenues of just $5bn (USD) in 2015, the sector had revenues of $24bn in 2020, and, driven by the Coronavirus pandemic, revenues are forecast to hit $50bn by 2025.

Market researchers have determined that the region’s top five ecommerce websites have increased to 21 million users per month from just 3 million in 2015.

The number of websites offering ecommerce has tripled from about 45 to more than 150 in the same period, and customers are spending more per basket of goods purchased. The most popular buys are fashion and beauty products, electronics, healthcare, groceries, and banking products.

This increase in ecommerce activity means the volume of online transactions taking place in the GCC has also risen significantly, making an efficient ecommerce payment gateway vital for any company wanting to be competitive in the fast-growing, ever-evolving ecommerce world.

What is a Payment Gateway?

Broadly, a payment gateway is a service that authorizes credit card or direct payments for merchants engaged in ebusiness, online retail, and traditional retail (bricks-and-mortar).

The process is the same whether you use a physical or virtual payment gateway, but online payments go through more security checks than payments through the type of credit card readers used in real-world settings & stores.

What is the Role of a Payment Gateway?

The main function of an online payment gateway is to authorize or deny transactions between merchants and customers.

Payment gateways, therefore, are the most important part of any GCC ecommerce business and a major contributing factor to its effectiveness and popularity with customers.

Merchants have a responsibility to provide a secure payment gateway for their patrons. If customers develop trust issues with a merchant’s online payment system, they may put products in the cart but then abandon it at the checkout.

Types of Payment Gateways

Typically, there are three types of payment gateways:

1. Redirects: This type of gateway “redirects” the customer to a payment platform such as PayPal.

2. Checkout on site, payment off-site: Checkout occurs on the merchant’s site, but the payment process takes place on an off-site gateway, such as Stripe.

3. On-site Payments: Checkout and payment are processed through the merchant’s system.

Payment Gateways, Payment Processors, and Payment Aggregators

Sometimes, you may hear some similar-sounding terms relating to online payment services and think they all mean more or less the same thing. This can be confusing. So, what is the difference?

Payment gateway: This captures and sends credit or debit card data to the payment platform, the first click for your customers when they are ready to pay.

Payment processor: The payment processor then works behind the scenes to route data securely between the various parties involved in the transaction.

Payment aggregator: A company such as PayPal is a combination of both of the above, and is known as a payment aggregator. It has its own payment gateway—Payflow—and, unlike traditional payment processors, does not require businesses to set up separate merchant accounts.

How Does a Payment Gateway Work?

It takes just a minute or two, but online payment processing comprises several intricate steps:

  1. The buyer makes a credit or debit card payment through the merchant’s credit card reader (bricks-and-mortar) or ecommerce site.
  2. The payment gateway determines which credit card network issued the buyer’s card (Visa, Mastercard, or others), and then routes the transaction information to the correct payment switch.
  3. The payment switch routes the request to the bank that issued the buyer’s credit card and pushes the transaction information onto the correct credit card network.
  4. The issuing bank checks for fraud and determines if there is enough credit in the account to cover the cost of the product or service being purchased.
  5. The bank authorizes (or declines) the transaction and notifies the merchant via the credit card network and the payment gateway.

Choosing the Right Payment Gateway

It is vitally important to choose the correct payment gateway provider for your enterprise. Which one you go for will depend on the size of your business, what you are selling, and your customer base.

Factors to consider include: - Set-up costs - Monthly charges - Hidden costs - Customer support - Simplicity of use for customers - Security - The banks the payment gateway has relationships with - The currencies the payment gateway supports (multiple currencies, including crypto, may be essential for your business).

Security and Trust

To develop that all-important trust factor with their customers, your payment system needs to be secure. This is not always easy in a fast-developing digital world where cyber-criminals are constantly developing new ways to get around security measures.

More than 33% of customers are wary of placing orders online due to security concerns such as potential data breaches, malware, and mobile payment issues.

How to stay one step ahead:

1. Make sure your business is PCI (Payment Card Industry) compliant. The PCI’s Data Security Standard stipulates a set of security measures aimed at safeguarding data involved in the transmission of credit card information.

While it’s not a legal requirement for GCC merchants to be PCI compliant, it is highly recommended.

Indeed, some credit card companies and payment gateway providers may decline to work with your business if your online sales system is not PCI compliant.

2. Select a reputable payment gateway that constantly updates its ecommerce security measures. Some payment gateways, for example Stripe, have systems to help merchants work through the often intimidating process of becoming PCI compliant. This is especially useful for smaller businesses.

3. Apply multiple payment gateways to your ecommerce platform.

Payment Gateway Challenges in the GCC

Merchants and customers in the GCC face particular challenges when dealing with ecommerce payment. These include:

  1. Not all the leading US- or UK-based payment gateways support local GCC currencies, and currency conversions can be pricey and time-consuming.
  2. Extra fees can be charged for having to go through a third party to transfer money between bank accounts.
  3. Some payment gateways do not have a relationship with certain local GCC banks, which creates problems for customers of those banks when they try to use these online payment services.
    1. Complicated red tape is demanded for non-US or non-EU customers by some payment gateways, which makes the system less fluid for new-generation eshoppers who want their purchasing experience to be quick and efficient.
  4. Sharia banks may block online transactions for products and services they regard as improper.

Top Payment Gateways used in the GCC

These are some of the top payment gateways that can be integrated with an ecommerce site in the GCC:

Saudi ArabiaUAEOmanKuwaitBahrainQatar
PayPal Express Checkout******
Bit Pay******
Coinbase Commerce******
My Fatoorah*****
Splitit Monthly Payments*****
Pay Fort****
Pay Fort Start**
K-Net Payment*

Find Your Gateway to Success

Your choice of private payment gateway could be a substantial factor influencing the success of your online business or ecommerce enterprise.

As GCC ecommerce expansion continues, your challenge is to choose an online payment interface that will help you cope with modern demands and expand internationally, while also embracing traditional shoppers and the local shopping culture.

Do some research, consider your options, and then go for the one you consider to be the best payment gateway—the one that will help propel your business into the forefront of the GCC ecommerce galaxy.