Enabling customers to make frictionless and secure payments through any form or channel they wish to is the aim of an ideal payment gateway. Streamlining the operations and keeping tabs on the finances is just another reason why merchants nowadays rely heavily on a high-quality payment gateway. With the help of a financial software development company, integrating your ecommerce business systems with a payment gateway or even building an effective payment system of your own is now easier than ever before.
So what is this payment gateway exactly? Well, we are going to answer that and discuss its basics in this article so read your way till the end of the article.
What Is A Payment Gateway?
Now you can make online transactions using your credit or debit card information. This enables you to pay for products or services you have bought or accept payments from your customers. All this is possible with payment gateway services.
Payment gateways also allow you to store customer information so that you can target them with future sales efforts and make it easier for them to buy more of your products or services.
The good news is that there are many different types of payment gateways available, so you can choose one that fits your business needs perfectly. Here's everything you need to know about them:
How Does Payment Gateway Work?
The first step is to sign up for one of the many payment gateways available. Each gateway has its terms and conditions that you need to read thoroughly before signing up. After that, you need to create your account in the respected payment gateway system. This involves providing personal information such as your name and address as well as other details about your business such as your tax id number or bank account information so that it can be used for processing payments on your behalf.
After signing up with a payment gateway, you can begin accepting payments from customers who are making purchases through your website. To do this, all you need is for them to provide their payment details and then wait for the transaction processing process to complete before sending out their order (or refund if there was an issue with the transaction).
The process of processing payments through a payment gateway from a customer point of view is very simple. The following steps are involved:
● A customer submits an order for a product or service.
● The customer enters their credit card details, either manually or by using an online form.
● After you authorize the payment, your bank will approve transacting the requested amount from your account to the merchant’s bank account via the payment gateway services provider.
● Once approved, the merchant receives a payment request from their bank, which they then forward to their payment gateway provider.
● Your payment gateway provider processes your transaction, which may involve calling your bank to verify the details of the transaction or contacting your customer directly to update them on the progress of their order (such as invoicing them).
Types of Payment Gateways
Mainly there are two types of payment gateway -
Hybrid Payment Gateway
Hybrid payment gateways are basically used by ecommerce to integrate ecommerce system and payment processor. They typically provide an API for developers to integrate with the eCommerce platform, allowing them to collect credit card data directly from the checkout page of your website. One key component of this integration is the payment processing API, which facilitates secure transactions by connecting your platform with the payment gateway.
Aggregator Payment Gateway
Aggregator payment gateways are designed to collect payments from multiple payment processors in one single application. These gateways can be used to manage multiple merchant accounts, but they also allow you to collect multiple types of payments (e.g., credit cards and bank transfers) using a single program interface.
Payment Gateway Features and Functionality
Fraud Protection
With the advent of technology, the threat of cyberattacks also grows. The more you strengthen your systems, the better. It seems logical to use some out-of-the-box financial fraud detection that safeguard the financial data and all the transactions. This way you can stay ahead of the skilled cybercriminals.
Tokenization
The payment gateway providers use this to make sure that your card payments must stay secure. It is to protect the sensitive financial information that is filled on your site.
Recurring Payments
Creating a payment schedule is in the interest of both parties. This way, the payment is made automatically which helps in customer retention. This also helps in keeping the cash flow alive. It's a flexible choice but it's far more convenient for your customers.
Software Integration
If you integrate your existing business system with the payment gateway you use then it ought to work more accurately as well as save more time.
Hosted Payment Form
When you are running an ecommerce platform then it is one of the most secure ways to receive credit card payments. By hosting a payment form, you not only safeguard the sensitive financial data of your business as well as that of customers on your ecommerce platform but you also lower your liability and the scope of PCI.
Virtual Terminal
With just an internet connection and a virtual terminal, you can transform your PC into a POS system. This allows you to process your payments through emails as well as your mobile phones. Its structure seems to be similar to that of a cloud. There is no need to install any software. All you have to do is sign up to the payment gateway and start receiving your payments through credit cards, debit cards, or any other means you can set up into it.
Limitations of Payment Gateways
Payment gateways have a variety of limitations and drawbacks. The most common limitation is that you must use the same payment processor for all of your customers. In other words, if you want to accept payments from an e-commerce store, then you need to use the same payment processor as you do for your brick-and-mortar stores. This can be a problem if your client base consists only of online merchants or if there are different types of transactions that require different payment processors.
Another limitation is that many payment gateways charge setup fees and transaction fees on top of the merchant fee. These fees can add up quickly, which makes it difficult for small businesses to afford them. Another issue with some gateways is that they may not allow you to accept credit cards from certain countries or regions (for example, only European banks are allowed).
Moreover, Many popular Payment Gateways like Paypal only accept credit cards from Visa, MasterCard, and American Express.
Most of the payment gateways are limited to working in their native countries only and are not of any use for any international transaction.
The Final Word
Gaining the proper understanding of what a payment gateway is, how it works, and what its essential features, as well as its limitations, help you make an informed decision while picking a payment system to match your business requirements. And even if the most suitable payment gateway in the market isn't up to your task then you can always collaborate with a financial software development company to tweak it to your advantage or even better, build a new one for your business.
