What is a payment gateway?
Published: 01/01/2012 - Updated: 04/04/2016 - Tags: Blog, Payments.
An online payment gateway allows payments to be made over the internet, by acting as a direct link between a companies website and their bank account. This payment process is completed in real-time and does not reqire any human intervention.
Until recently, online transactions had to go through a complicated Payment Authorization and Payment Settlement process. The customer input credit card details to a merchant's website, which sent the details to a payment processing service that then routed the details to a financial institution. The issuing bank then authorized or declined the transaction to the processor who sent the result to the merchant which then needed to be accepted or declined. That was just part one.
For a merchant to receive the funds, it contacted the payment processing service which verified transaction information from the customer's issuing bank and finally sent funds to the merchant's account.
Why use an online payment gateway?
More and more transactions are moving online. Not only are people buying goods shipped to their door, but companies are starting to pay for contract work, such as freelancers. Individuals have become the merchants who need a trusted payment system to rely on. Without an all-in-one payment system, getting remuneration could take days to process with large flat fees or charges up to 5% or more!
All-in-one payment solutions for merchants that make it simple to manage customer transactions. Customers have the benefits of sending money privately from the convenience of their own home. Payment gateways also reduce the number of fraudulent transactions and make them easier to resolve. Say goodbye to fake transactions, identity theft, and chargeback disputes. By cutting out the middle-man, online transactions are not only more secure, but faster too.
By incorporating a payment gateway into your e-commerce website you can ensure you are providing the easiest and most streamlined buying experience for your customers. The easier it is to buy from your online store the more likely visitors are to purchase.
A payment gateway is beneficial for a few reasons:
Visitors stay on site: Many websites will take advantage of third party or hosted payment processing facilities such as PayPal. These facilities do work well and can provide secure payment options, however they do have draw backs. A major advantage of using a payment gateway is that customers will not leave your website to make payment. All user information and credit card details are inputted on your website meaning fewer steps for the buyer. Further to this, re-directing users to a separate website for payment often leads to mistrust and payment abandonments.
Real time transactions and payments: Utilizing a payment gateway allows you to accept credit cards directly on your website, but also means that these credit card transactions are processed in real-time. Real-time transactions mean that you as the merchant get paid immediately and that the customers get instant feedback as to whether their payment has been accepted or declined.
Saves time and reduces administration: A payment gateway saves time with the fact that credit cards are processed in real-time and funds are deposited directly into a merchant account. A payment gateway removes the need for manual card processing or third party account consolidation.
Netregistry provides a secure, ultra fast payment gateway service for your e-commerce needs. Unlike other providers where you are charged per transaction, Netregistry charges a flat, highly competitive monthly fee no matter how many transactions you process! Find out more.
There are many payoffs of choosing the right payment system.
- Fast - Online payments are instant
- Easy - It only takes a few minutes to sign up
- Convenient - Transactions can occur anywhere and be sent to anyone
- Simple - Payments are recorded, searchable, and downloadable
- Private - Your transaction history can only be seen by you
- Secure - Personal details are encrypted and not shared with anyone
- Cost Effective - Low transaction fees and currency conversion
How does a payment gateway work?
Payment gateways work by providing the secure, integral link between a website (web server) and the bank. When credit card details are submitted on a website the payment gateway receives these details and sends them to the bank for verification. The bank then replies with a response; usually either accepted or declined. The payment gateway then sends this response back to the web server when the appropriate message is displayed to the user - for example "Your payment has been successful".
The actual process is a lot more complex than this and the technical details can be found here
What is required for a payment gateway?
If you are looking at accepting real-time credit cards on your website then a payment gateway is required. There are three main requirements for a payment gateway to work:
A website that meets the security and eligibility requirements for the bank to issue a merchant account
A merchant account from a bank. A merchant account is a special kind of bank account that can be linked directly to a payment gateway. These bank accounts are issued only upon review of a website to ensure it meets privacy and security requirements. Requirements often include an SSL certificate and a privacy policy.
A payment gateway provider. Payment gateway providers offer the server that acts as the link between your website and the bank. The server has a very special configuration and a very high level of security due to the sensitive nature of the data being transferred.
Once all three requirements are met, the payment gateway then needs to be connected to the website and to the merchant account. This will then allow for real-time credit card processing.
Examples of payment gateways
Some common Payment Methods are PayPal, Skrill Moneybookers, and Western Union. However, many payment service providers continue to enter the market. Choose a payment solution that is both convenient for you and your customers.