“Payment Gateways: Everything you need to know” 

Visual representation of types of payment gateways

A payment gateway is an instrument that safely authenticates the credit card details of your customer, guaranteeing that funds are accessible for you to get paid. They are the services that charter credit card payments for online, as well as offline businesses. Payment gateways are online counterparts of the offline point-of-sale systems at shops, supermarkets, and so on. 

They enable your customer to conceal the details of their credit cards and then let the information pass securely from the customer to the trader and the bank. Your payment gateway indicates if the money has been validated by the cardholder’s bank and submits your charge for the deal. 

Payment gateways are imperative for business owners who have their businesses registered on e-commerce platforms. They help business owners receive the revenues of their businesses. Payment gateway enables the e-commerce site you own or are registered on to request charges from your customer’s bank account for goods or services that they have availed themselves of. 

If the customer approves it, the payment is safely transferred to your bank account. Now that you have understood what a Payment gateway is, it is time to understand how its mechanism works. 

How does a Payment gateway work? 

The payment gateway validates the payment from the customer made to the trader/merchant involving many behind-the-stage parties in it, in accordance with the mode of payment chosen by the customer. This is how the process works: 

  • After selecting the goods/services from the website, the customer proceeds to the cart and enters preliminary details such as Name, Contact information, and so on to avail of the delivery services. 
  • Then, the customer is redirected to the checkout page by clicking on the ‘Pay Now’ option and filling in their preliminary details. An order is then created on the payment gateway. 
  • The mode of payment is selected by the customer and the page is redirected accordingly to the associated server in an encrypted way by the payment gateway. 
  • The payment request is then sent in an absolutely secure manner to the customer’s payment medium after the approval of the payment is received by the payment gateway. 
  • In the background, an authorization/validation request is sent to the bank in which the customer holds an account. The payment gateway checks if there are funds available in the customer’s bank account and waits for the authorizations to deduct the required funds. 
  • After receiving approval from the bank, the required amount is deducted and transferred to the payment gateway in the given settlement period to the trader’s bank account. If the request is denied, the user is received with an error message. 
  • An E-mail is received by the customer when the transaction becomes successful and the order is placed. 

Related Article: Payment Gateway Terminologies Entrepreneurs Need to Know

Why is a Payment gateway important? 

  • It has the ability to receive payments online through multiple modes of payment. 
  • Helps in effective revenue management and curating dynamic financial strategies for your business. Planning, improvising, and enhancing your business gets easier with the help of payment gateways. 
  • You can receive online payments with the help of a master payment link even if there is no website.
  • If some issues arise between the buyers and the sellers, there is a provision for dispute resolution which effectively resolves the disputes of both parties. 
  • Customer support is readily available in case of errors in payments and transaction-related errors. 
  • Payment gateways can be integrated with every online payment service provider from banks to wallets, and so more. 
  • Complex processes are completed in a very simple manner and the customer is offered a seamless user experience that is user-friendly and hassle-free. 
  • Payment gateways offer rapid and easy integration resources and services with readily accessible plugins. 
  • Payment gateways get the approval part done quickly and also make sure that no fraudulent operations take place in the process. 

They are globally accessible and enable businesses to expand their reach beyond a certain location. Since they are not bound by any location, they are soaring in popularity each passing day. 

How to make use of Payment gateways? 

Payment gateways can be incorporated with websites or apps as checkout or payment buttons. For this technical process, companies offer ready Plugins, modules, and SDKs, these days. This makes the whole process very convenient and fast. 

Not having a website is not a cause of worry as you can still provide a checkout portal to your customers through payment/master links. These links can be copied and pasted and sent to the customers through any social media/messaging platform such as Messenger, WhatsApp, and so on. 

Who are the stakeholders involved? 

The payment gateway usually involves the participation of the following stakeholders: 

  • The Issuer: The financial entity that manages cardholder activation and participation. It authenticates cardholders when they make purchases online and provides a response to the traders for each transaction. 
  • The cardholder: Refers to the account holder who has a debit or a credit card that he/she uses for the online transaction. The card is used for online exchanges. 
  • The merchant: Merchants are online sellers who provide their customers with merchandise or services via websites or apps. They can either use a third-party facilitator of payment or create their own payment solution. 
  • Card Network: Card infrastructure providers such as MasterCard, Visa, and so on form the card network. They are responsible for verifying validation results from the issuer and sending a response to the acquirers as per the transaction that is being held. 
  • Acquirers: Financial entities that register sellers for card networks and ensure that they operate as per the guidelines laid down by card network programs. 

Conclusion

Before signing up with a payment gateway, it is essential that you do some preliminary research about everything that goes into it. A single payment gateway solution cannot fit all businesses. For some sellers, the cost may top the list of priorities. For others, it may be about specific modes of payment or currencies. Whatever you choose, be sure to check out various options before finalizing one. Make well-informed decisions. 

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