Your One-Stop Guide to Online Payment Gateways

A payment gateway is an essential piece of the puzzle if you are looking to successfully manage your online business operations and provide an empowering shopping experience for your customers. However, if you’re still unsure how this essential technology adds value to your business, you’re not alone.

Although as an online merchant you don’t need to go into the nuances of technical details that govern modern payment gateways, it is useful to know how it facilitates a seamless transfer of money from the wallet of the customer to your bank account. So, whether you’re a thriving online business or aspiring to become one, here’s our brief explainer on payment gateway, what makes it so important to your organization, and how you can choose one that’s right for you.

What is a payment gateway?

A payment gateway acts as an interface between your e-commerce site and your merchant account. It offers the mechanism to capture and transfer the customer’s payment information to your bank and then transmits the payment acceptance or rejection data to the customer. A payment gateway securely validates your customer’s payment details, ensures that enough funds or transaction limits are available, and finally helps you get paid.

An online payment gateway is a cloud-based application that greatly simplifies the integration of technology into your e-commerce website and helps to continuously generate revenue for your business. While it gives you the convenience of plug and play, it protects sensitive payment information through encrypted data flow between various environments and provides a seamless shopping experience for your customers.

A payment gateway plays a pivotal role in protecting your business interests against fraud, expired cards, insufficient balances, closed accounts, or exceeding credit limits.

What are the different types of payment gateways?

Based on their modes of operation, payment gateways can be categorized as follows:

– Redirect: The payment gateway redirects the customer from your website to that of a payment processor like Worldline to complete the transaction.

– Hosted or off-site payment: Your customer completes the entire purchase and payment journey on your website. However, payment information is processed on your payment gateway provider’s servers.

– Self-hosted or on-site payment: The complete transaction is executed on your servers.

Who are the key players in online payment ecosystems?

Before delving into the other aspects of payment gateways, understanding these key stakeholders involved can give you a better understanding:

– Merchant: It’s you as an online business offering products or services to your customers.

– Customers/cardholders: These are people who are interested in your offers and who initiate transactions after making purchases on your website.

– The issuing bank: This is the organization that issues your customers’ payment information. For example, the bank may issue a customer’s debit or credit card on behalf of card schemes such as Master, Visa, American Express or RuPay.

– The acquiring bank: This is the financial institution that manages your business account (merchant account). Once the transactions have been validated, the acquiring bank transmits the details to the issuing bank for the release of the payment.

What’s going on behind the scenes?

With the basics of the payment gateway and online payment ecosystem in place, let’s take a look at what happens when your customer makes an online purchase, enters the details on the checkout page, and presses the “Pay” button. now”. Step by step, the process goes as follows:

Step 1: The payment gateway tokenizes or encrypts the customer’s payment details and runs anti-fraud checks before sending them to the acquiring bank.

2nd step: If the payment method is a card, the acquiring bank sends the information to the card schemes for processing.

Step 3: The card scheme applies another layer of checks and authentications before transmitting the data to the issuing bank.

Step 4: Once the issuing bank authorizes the transaction after checking parameters such as the available balance and the validity of the card, the messages of approval or refusal of payment are sent to the acquirer.

Step 5: The acquiring bank relays the message to you through the payment gateway. If the payment is approved, the acquirer collects the amount from the issuing bank and credits it to your merchant account.

Step 6: Your website may show the payment confirmation or ask to try another payment method depending on the status of the transaction.

Step 7: Based on the agreement with your payment gateway provider, settlement takes place within a specific time frame, by depositing the funds into your merchant account.

Here is a very simplified graphic for you to understand and remember the essence of the concept:

What are the benefits of payment gateways for your online business?

In this digital economy, ease and convenience is a major differentiator, alongside the quality of your offerings. Investing in a complete payment gateway solution brings many benefits to your organization today, giving it a head start. While the benefits of having the right payment gateway are many, here are a few you should know about:

Faster and more secure transactions: The most fantastic advantage of a good payment gateway is that it can significantly speed up your transaction while ensuring its security. This means that while improving the conversion rate of your hassle-free inventory, it can also provide a safe and reliable shopping environment for your customers, thereby building brand loyalty.

Accept Payments Worldwide: With the right payment solutions, you can easily market your business to a global audience. Currently, payment gateway products are available in the Indian market, allowing you to collect payments in over 27 foreign currencies at very low transaction fees.

Automation of processes: A payment gateway can completely automate your payment processing, saving a lot of administrative bandwidth and minimizing data entry errors. Modern payment gateways allow you to connect them to your billing system. So, rather than manually tracking your transactions, they will be automatically updated in your books each time an online payment is closed.

Mobility: Many payment gateway solutions are designed to handle mobile payments. If you want to provide a seamless experience for your customers across multiple platforms, these solutions can deliver the desired results.

How to choose the right payment gateway for your online business?

While the business relevance of a good payment gateway solution might as well be obvious, how do you find one? Here are some tips that you may find helpful while shopping:

Safety assured: Choose a product that complies with PCI DSS and ISO standards. Also, check to see if the vendor regularly performs third-party audits of its processes to ensure the privacy of customer data.

Short integration cycle: Installing the payment gateway solution should not disrupt your usual business. Therefore, it is recommended to look for a payment gateway provider that can get you started using the solution within a few days of online activation.

Easy integration: As mentioned, payment gateways can now be integrated with many systems. However, when buying a payment gateway, it is essential to understand how merchant-friendly its integration aspects are. Is onboarding documentation readily available? Do they offer a variety of integration kits? How responsive are their technical integration teams? These are some questions you should ask yourself.

Empathetic customer support: When processing sensitive monetary transactions, your payment gateway provider should assist you in the event of a service outage. Turnaround time should be minimal and vendor support teams should be available on demand to work alongside you to resolve issues.

Commercial values: Some payment gateway providers may be hesitant to be stakeholders in high-risk businesses like debt collection and credit repair. If your business is categorized as high risk, try to find a payment gateway provider who is comfortable working with you.

We hope this information guides you to the right payment gateway solution that can enrich the online shopping experience and build seamless shopping journeys that your discerning customers are looking for right now.



The opinions expressed above are those of the author.


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