The huge problems faced in business enterprises and by individual consumers are the processing of payments. From here, such problems emanate from a very slow, insecure, and most importantly, very inconvenient system with regards to delays in payment and fraud, in addition to high transaction fees. Basically, for business—including small and medium-sized enterprises—independent management of several ways to collect different means of payments and securing them can be quite complicated and resource intensive. While businesses want fast, frictionless, and secure payment experiences, the same applies to consumers; therefore, any flaws in this process could lead to dissatisfaction and loss of trust.
In the light of the foregoing, payment gateways help address such issues by facilitating secure, efficient, and seamless processing of transactions online. Payment gateways act as an intermediary between the merchant and the financial institution to begin with, ensuring that the passage of payment information is secure before completing transactions efficiently and effectively.
On the part of businesses, integrating a payment gateway into their processes will let the latter come up with loads of choices in payment options and increase convenience and customer satisfaction. Payment gateways use advanced encryption and security protocols for protecting sensitive financial information, reducing the potential for fraud and chargebacks or other problems with transactions. It, therefore, makes extra administrative duties minimal for any given business in a way that automated processing of transactions and real-time verification of such payments allow a business to focus on the core operations.
These payment gateways facilitate the checkout process for customers at stores or through electronic storefronts, making it easier for customers to check out in any environment. One-click payments, stored payment information, and mobile payment method options make a user experience faster and more convenient. They also support international payouts, enabling consumers to easily buy from any merchant across the globe and without bothering about currency conversion or safety in making payments.
Modern commerce requires payment gateways that have security, efficiency, and user-friendliness in processing payments. To this end, businesses are using the payment gateway platform to revolutionize their payment systems toward minimizing fraudulent activities and improving customer satisfaction for the growth and success of business in a digital economy.
Success in any e-commerce requires knowledge of the mechanisms behind online transactions. At the core of the building blocks for success lies businessmen and women, a payment gateway. What is a payment gateway, and how does it work? This article presents the details surrounding the functionality, security features, cost, and other issues surrounding payment gateways and their importance to online businesses.
What Is a Payment Gateway?
A payment gateway captures, verifies, secures, and communicates online card transactions. Basically, it is the electronic version of point-of-sale systems found in physical stores—the devices customers swipe, tap, or dip their cards into—but for online sales, a payment gateway does pretty much the same thing, just with added measures to make sure everything goes through securely and effectively. Payment gateways also crucially help protect against fraud, hence making them most needed for online business.
Key Terms: Payment Processor and Virtual Terminal
Before delving deep into how payment gateways work, there are two associated terms that should be explained in advance: payment processor and virtual terminal.
Payment Processor: It is just the financial institution that moves money from your customer’s bank to yours. It processes the actual transfer of money in a transaction.
Virtual Terminal: This is the online interface where you will manually key in your customer’s card details.
Transaction processing through a payment gateway can be broadly divided into the following steps:
Customer Action: A customer types their card details via an online shopping cart or payment page on a merchant’s website.
Merchant Action: The merchant may alternatively type the card details on the payment gateway’s virtual terminal.
Verification
The payment gateway checks the customer’s details, including his/her name, billing address, expiration date, and security code. This step helps in fraud detection and prevention.
Securing the Transaction:
After verification, the payment gateway encrypts the transaction data and passes it on to the payment processor.
Finalizing the Transaction
The payment processor relays the response from the bank back to the payment gateway.
Finally, the payment gateway informs the customer about whether the transaction has been successful or not. Surprisingly, all of this happens in a second or two.
Are Payment Gateways Safe?
Security is the bedrock of all payment gateways. There are several security measures shared between gateways to safeguard online transactions from fraud and some unauthorized access to personal information. This includes:
1. Data Encryptions:
Translating information into bounded text and then decrypting the information using a key to access it ensures that all sensitive data remains confidential during transit.
2. Tokenization:
Tokenization enhances security by replacing sensitive data with some non-sensitive token. The process is one in which information cannot be misused, even if it falls into the hands of a potential aggressor. Consider a casino where you are given chips in exchange for cash. Those chips have no value outside the casino. In much the same way, tokenization transforms sensitive data into tokens useless outside the secure transaction system.
Do You Need a Payment Gateway?
A payment gateway is necessary when online payments are to be accepted for an ecommerce business. On the other hand, physical stores have the option of handling cash payments or a Point of Sale system, while e-commerce stores need to set up and maintain a payment gateway so that payments can be processed digitally. Online shopping is expanding, underpinning to a greater extent the demand for secure, efficient transaction mechanisms.
How Much Do Payment Gateways Cost?
The payment gateway pricing varies and, oftentimes, the cost will be tailored to the needs of the user. This can include:
Standard Monthly Fees: Fixed monthly amounts to be paid for availing the services of a payment gateway.
Per Transaction Fee: A minimal amount charged for each transaction that is processed through the gateway.
Batch Out Fee: Fees taken to club various transactions into one batch for processing.
Add-Ons and Premium Features:
Extra charges for any added features or services that may be provided by the provider of the payment gateway.
Every online business has to make an investment in a payment gateway. Though there is a one-time payment, safe processing of the online transactions immensely enhances the sales by gaining the trust of the customers.
How to Select the Right Payment Gateway
Pick the right payment gateway for your business by security features, ease of use, integration capabilities, and cost. You want to have a gateway that is worthy to work with, fitting your business suitably and not leaving you high and dry if you need customer support.
Want more information on payment gateways and exploring what might be specifically for you and your business? Check our detailed blog post linked in the description. Ready to get started? Click the link to fill out a quick form to start your free journey with PaymentCloud today.
