If you are planning to run an online ecommerce business and intend to accept payments from your customers from across the world, its important that you understand the importance of payment gateway services and how it works to enable businesses receive money. Payment gateways basically help provide payment processing facilities, as a result of which your customer can use a debit card or credit card or an e-wallet to make payments for their purchase on your website.
Let’s Understand How Payment Gateway Services Works
Payment gateway services work by performing a variety of tasks (and checks) to ensure the transactions are carried out fast and securely. Here is an overview of how it happens.
- Customer places an order online.
- The customer’s web browser then encrypts the information before sending it to the merchant webserver via (usually) Secure Socket layer (SSL) encryption.
- The merchant forwards the information to their registered Payment gateway via another SSL encrypted connection. The payment gateway forwards the transaction to the payment processor. The Payment Processor further transmits the information to the customer’s card issuing authority.
- The card issuing authority transmits its response (approved, denied, etc) to the payment processor in code, which transmits that information to the payment gateway which relays the information to the original website, the merchant and the customer.
- The merchant submits all approved responses to their chosen bank in batches (constituting many approvals) for account settlement. The bank deposits the approved amount to the merchant’s given bank account.
Advantages
1. Saves Time: You do not need to worry about installing expensive softwares, hardwares, servers and security protocols. All you need is a payment gateway, which does all the work for you since it removes the need to integrate a full payment platform.
2. Helps in Bookkeeping: Before payment gateways, keeping track of all transactions was a complicated situation, with many transitions getting lost in the process. Now, every transaction is stored and can be referenced by the client at a click of a button.
3. User Friendly: Payment gateways are designed keeping user-friendliness as a top priority. The best payment gateway service providers make the software extremely simple so that small businesses have no difficult adapting to it.
4. Affordable Fees: Due to the nature of payment gateways (which handle thousands, if not millions of transactions), they charge a very low fee for conducting the transactions (Usually just 1% of transaction amount). This is considerably lower than suing other channels of secure payment.
5. Convenient: Almost all online transactions use payment gateways along with almost all online merchants. This means it can be used anywhere.
Things To Consider While Choosing A Payment Gateway
1. Check whether your payment gateway accepts international payments and multi-currency payments.
2. Find out whether the payment gateway is Payment Card Industry Data Security Standard (PCI DSS) complaint. It should also offer built-in security capabilities.
3. It’s also good to ensure that your provider has the necessary technology to fight fraud and offer screening tools.
4. Understand whether your business requires a hosted or a non-hosted payment gateway. And then check whether your provider offers the type of service you want.
Choosing the right payment gateway is critical for your business. As an online ecommerce entrepreneur, it always makes sense to understand the full scope of the service before you launch your business.
