In the context of business transactions, a payment gateway is a tool that allows merchants to receive debit or credit card payments from their customers. A card machine makes the customer’s life easier. The physical credit card machine found in brick-and-mortar retail locations and the payment processing gateways seen in internet stores. A payment gateway is an online payment service that, when coupled with an ecommerce payment system, serves as the payment channel.
An ecommerce payment system’s primary function is to approve the transaction between the merchant and the client. It acts as a facilitator who carries out an online transaction. The customer must fill out some details, such as credit/debit card number, expiration date, and CVV, to initiate a transaction. An ecommerce payment gateway aids the ecommerce platform’s existence by providing the convenience of payment to its clients. Furthermore, it leads to the ecommerce platform developing a reputation for not only speedy and safe payments, but also convenience and success with the same every time. Businesses need a card machine with speedy payments. Ecommerce payment gateway services can be supplied directly by banks or by payment service providers authorised by banks.
How does a payment gateway work?
The following steps illustrate how online payments with a payment gateway work:
Step 1
Begin accepting online payments by creating a website and connecting it to an ecommerce payment gateway.
Step 2
Your customer can purchase from your website by clicking your payment link and inputting their credit card or debit card information.
Step 3
Only your consumer and their bank will have access to their card details because the card information is securely transferred to the ecommerce payment system.
Step 4
Once the customer has provided the payment gateway with their card information, the gateway verifies their payment amount and determines if they have sufficient funds to complete the transaction. If they do, the payment gateway will complete the transaction. Furthermore, the payment gateway uses anti-fraud measures to prevent fraudulent activities.
Step 5
The payment gateway then takes over and requests that the transaction be initiated with the customer’s issuing bank. The money is subsequently transferred from the issuing bank to the merchant bank, which deposits them into the merchant account.
Step 6
The merchant will receive notified of the transaction’s status. In most cases, the length of time it takes to receive your payment depends on the payment gateway you are using. In most cases, payments are received in real time, shortly after the transaction has been completed, but if there are any processing issues, some may take up to 21 days.
Things to consider when choosing a payment gateway for your ecommerce business
Choosing the best ecommerce payment system for your company is a crucial decision. You may lose a lot of money and clients if you choose an ecommerce payment gateway that is not suitable for your business strategy.
Security
Because you’re storing sensitive financial information when you accept payments online, the security of your payment gateway should be a top consideration. Remember that different payment gateways have varying security standards. Make certain that the gateway you select is PCI DSS level-1 compliant. To safeguard your business from unauthorised transactions, certain payment gateways include fraud detection and other screening technologies.
Types of cards accepted
Visa, MasterCard, and American Express are the most regularly used credit cards. Most payment gateways accept all these card kinds. If your consumers typically pay you with another sort of card, such as a debit card or a Diners Club card, you must ensure that your payment gateways handle that card.
Cost
The most crucial factor to consider when selecting a payment gateway is the total cost that you will incur. Payment gateway fees are classified into three types: setup fees, monthly fees, and transaction fees. The volume and value of your transactions must be analysed to discover the most cost-effective ecommerce payment gateway for your organisation. If your company primarily handles high-value transactions, search for payment gateways that charge a flat monthly price and a minimal transaction fee.
Holding time
The funds are typically credited to your account a few days after being approved, even though payments are usually authorised instantly. This allows for the processing of refunds and chargebacks. These holding periods vary on each payment gateway as per their policies. Typically, holding time ranges from one day to seven days. You must select a payment service provider whose policies are compatible with your cash flow.
Multiple currency support
If you do business worldwide, you must ensure that your payment gateway can accept payments in multiple currencies and countries. It is critical that your customers pay in their native currency.
Recurring billing
If you run a subscription-based business, you’ll need a payment gateway that can handle all the moving components that come with recurring billing. Any service provider you choose should be able to save and store customer information for future purchases, automatically charge credit cards on predetermined subscription schedules, and provide retry options for failed transactions. Otherwise, you may have to complete all this extra work by hand.
Mobile payment support
Mobile wallets are becoming more popular these days. As a result, it is critical to select an ecommerce payment gateway that accepts payments through mobile payment solutions such as Apple Pay, Google Pay, and others.
Limits
Some payment gateways have a monthly transaction limit on the quantity of transactions you can process. This may not be an issue for small firms. However, if your company deals with high-value commodities or conducts a significant number of transactions, you must be aware of any such limitations or risk losing potential customers.
Integration with other systems
Evaluate whether your payment gateway can communicate with your invoicing or accounting software, so that when an online payment is made, the associated invoice in your bookkeeping system is automatically updated. This will save you a lot of time and effort because you won’t have to keep track of payments and then manually update that payment information in your accounting system as it comes in.
Customer support
Every day, thousands of dollars pass through the accounts of most organisations that have payment gateways set up. Even an hour of downtime may be devastating to a firm, much alone a lengthy period of outage. Choose an ecommerce payment gateway supplier who is one call away from you to assist in any difficult circumstances.
