What Is a Payment Gateway?

What Is a Payment Gateway?

An online payment gateway is a software that allows a business (such as an eCommerce website) to accept online payments from customers.

Payment gateways, which are becoming increasingly widespread in the internet world, can merge many payment methods, such as credit cards, e-wallets, and, more recently, crypto payments, into one seamless payment experience for customers.

For credit card transactions, an acquiring bank serves as the final link in the authentication process, and the organisation is responsible for holding customer funds until they are released.

Because they deal with such private information as credit card numbers, security is essential. For example, under the updated Payment Services Directive, standards and organisations govern and assess the security level of such software solutions, such as strong customer authentication (SCA) (PSD2).

Why Are Payment Gateways Important?

You can now appreciate the importance of payment gateways because you know how they work. Payment gateways don’t appear to be “that” vital at first glance. They’re nothing more than a go-between for the entire transaction. Nevertheless, the importance of payment channels cannot be overstated.

Consider online transactions to be “card not present” transactions. Because the cardholder cannot swipe his or her card to allow you to log in to his or her bank account, a different type of credit card processing is required. There is a checkout page that displays the card information of the customer.

Unfortunately, there isn’t a means to know if that person owns the payment given without asking him or her directly. The likelihood of fraud occurring when a card is used in the cardholder’s absence is very high. There is a way out of this issue, thanks to the advent of payment gateways. In the absence of a payment gateway, cyber hackers can easily access your card information. Situations like this put your company at risk of chargebacks and other fraudulent activities.

What Is a Payment Gateway

Additionally, fraudsters may discover new methods of initiating transactions that aren’t legal, leaving you open to reputational damage and financial loss. Data encryption is used to limit risk away from sensitive information by a payment gateway, the gatekeeper for client payment data.

Gateways can also guard you against the loss of money due to insufficient funds or accounts that cannot process payments.

How Does a Payment Gateway Work?

Customers are usually sent to a checkout page after making a purchase when payments are processed. Although processing only takes a few seconds, it may appear as though many things are happening in the background.

1. Pay for Your Purchase

When checking out after a purchase, a new payment system is created in the system. Customers are to complete and submit a payment form in which their credit card number is included. The data is encrypted and stored in line with the PCI DSS security standards. After that, it is being forwarded to the merchant’s acquiring company or bank.

2. Acquiring Company to the Processing Facility

Encrypted data is sent to the payment network, where the bank handles it before being sent to the processing facility.

3. Acceptance or Rejection

Processing centers authorise payments and check with credit card companies to make sure everything is in order at this point. A response is sent to the payment gateway, informing it whether or not a transaction was successful.

4. Approval of the Transaction

The payment gateway receives the final judgment from the credit card provider and sends it to the merchant’s website, alerting the customer of the transaction’s success or rejection. Upon completion of the transaction, the payment gateway notifies the merchant through email or text.

5. Owned Sums Are Fully Paid

The payment gateway is tasked with settling customer-merchant conflicts.

What Is a Payment Gateway

What to Consider When Choosing a Payment Gateway

Customers, especially commercial clients, utilise various payment methods. Credit cards, debit cards, bank transfers, e-checks and others are examples of payment methods. Customers in the United States may favour PayPal, Venmo, Google, or Apple Pay as payment options. Customers in China prefer WeChat Pay or Alipay if you’re selling in that country. Some customers prefer ACH payments or wire transfers.

If you’re selling internationally, you’ll need to accept payments in several currencies, as payment preferences can shift over time. Ultimately, the gateway must accommodate the payment methods that your clients prefer.

What Are the Most Essential Functions for You?

Analyse your business and client needs first. Customers frequently request a specific payment option. Thus, you need to prepare transaction and batch reports for the accounting staff.

You won’t be able to use every gateway if they don’t match your needs. In the US, for example, most of your consumers will pay with PayPal, whereas credit cards are preferred in Europe. Using multiple payment gateways may be necessary if you sell to diverse customers or across borders.

What Are the Costs?

When it comes to selecting payment gateways, always make sure that all charges are detected and recorded. Examine any additional fees that may apply if you exceed your credit limit or use third-party services, as they may be applicable. If your payment gateway provider is charging you for switching payment processors, it may be more expensive. If you plan to connect to a large number of payment gateways, keep an eye out for hidden fees.

What Kind of Integration Do You Require?

You may find yourself in need of features beyond what the gateway offers. The gateway you’re using, can it send data to your accounting or tax program? It will be necessary to manually transfer transaction data between systems if you don’t use this solution.

Pay close attention to your payment gateway’s capabilities and integration possibilities. Even if you don’t have these connections, the APIs on your gateway can help or hinder your integration process.

How Well Does It Work with Your E-Commerce Platform?

Prebuilt integrations or payment gateways are available with some e-commerce platforms. Consider your payment processing requirements and B2B eCommerce security when looking for an eCommerce solution. They’ll likely have recommendations for an integrator or payment processor who can help you with your particular business or customer needs.

What Are Your Options for Assistance?

If there are discrepancies, it’s usually easy and fast to reach out to your payment processor. When you have a payment gateway that provides 24/7 customer care, customers are more inclined to patronise you. Around the clock, help is required by businesses that sell high-risk products or handle chargebacks or refunds regularly.

Is It Going to Grow with Your Company?

Avoid meddling with a payment gateway, only to discover later that it’s not suitable for your needs. You must have in mind that in the course of the expansion of your business, you may want to add more payment methods, integration possibilities, and other features to your gateway.

How to Find the Best Payment Gateway for Your Business

Deciding on your business’s payment gateway can be stressful at first, but it is essential for you to take payments. As a result, emerging businesses have an abundance of wonderful options to choose from.

Consider your clients’ needs and the kind of transactions you want to facilitate online and offline before developing a strategy. If you’re looking to expand, a payment gateway with additional nation support and bonus features can be a good choice.

Olufifun A.

Content Writer

I write unique, well-researched, educative and entertaining articles and blog posts to meet specific needs. I deliver articles on time, and I am diligent, dedicated, and focused on generating amazing results.