A payment gateway is one of the easiest ways for the digital collection of payments. A payment gateway is used for sending as well as receiving payments either to a bank or an e-commerce website. It is like an electronic credit card reader which makes the payment processing very simple and easy for the businesses.
Who are the players in the online payment system?
A customer will click on the pay button on the merchant’s website to carry out the payment process. Let us look at the important players in the online payment system.
- The merchant – An online business that will be operating in any field and offer their product and service to the customers.
- The customer – He is also the cardholder who wants to access the products and services that the merchant is selling. He will initiate the transaction.
- The issuing bank – It is the customer’s bank that will issue the credit or debit card of the cardholder.
- The acquiring bank – It is the financial institution that will maintain the merchant’s bank account. The acquiring bank will pass the merchant’s transactions to the issuing bank for receiving the payment.
Are payment gateways and payment processors the same?
Most people think payment gateways and payment processors are the same as they are not aware of the differences between them. The payment process works through these two fundamental modules. Here are some of the differences between the payment gateways and payment processors-
- The payment gateway will receive the information of the customers and then forward it to the payment processors which will verify through the card system. The payment processors will transmit the data and will verify the validity of the card details and ensure that they are secure.
- Payment gateways will inform the customers as well as the merchants about the transactions which have been approved or declined. With the help of data transmission between the issuing and the receiving banks, payment processors can share the response to a payment gateway.
- Payment processors will have increased development costs as well as a long development time as compared to payment gateways. Payment gateways will need just an SSL encryption to work.
- The payment gateways are much more cost-effective in relation to the certification and the development costs as seen above, which makes them more suitable for the upcoming and small businesses.
Points to bear in mind while selecting a payment gateway
- Selecting the appropriate flow of payments.
- Making sure that the consumers are protected.
- Considering the fees as well as requirements of the service agreement.
- Ensuring quick and effective transactions.
- Making the process of checkout very easy on all devices.
- Enabling mobile payments.
How do Payment Gateways Work?
The customer will transfer his personal as well as financial information between the merchant and the customer when he will swipe their credit or debit card or will process his bank account information. The levels of security will encode these transactions and prevent the sensitive information from falling into the wrong hands. It determines the number of funds in the customer account that are being used for the purchase and, accordingly, notifies the approval or decline of the transaction.
Do we need payment gateways?
In online payment, one has to depend on the card information that is being entered by the customer on the payment pages. There is a huge fraud risk, hence, there is a need for a payment gateway. Frauds can have very easy access to the processed card data. The business is exposed to deceit and fraud. Fraudsters could start with illegitimate transactions which leave the business even more exposed to fraud and can damage its brand reputation. There is also the multi-currency payment gateway which allows payments in a number of currencies. These will enable the processing of the international payments as well as the acceptance of online payments from customers all over the world.
Setting up a payment gateway
For setting up a payment gateway for a website, there need to be proper PSP requirements for the setting up of configuration details.
Takeaway
Payment gateways are an important aspect of a digital economy. It is the technology that will collect and transfer the payment data from customers to the acquirers. It will enable customers to enter their credit card information in a safe and secure manner. These are sophisticated systems for the collection and authentication of the signatures, PIN numbers, as well as other data for the merchant transactions which will ensure that the transactions are taking place in a safe, effective, as well as a prompt manner. The gateway will manage the sensitive card information of the customer.
