Payment Gateway 101: Importance, structuring, value and support

What is a Payment Gateway?

A payment gateway is a digital tool best suited for online businesses. It falls among the list of online payment processing solutions that accepts or declines credit card transactions on behalf of an online store.


Online payment gateway is one of the best eCommerce payment solutions that fill the gap between an online business and the payment processor and thus is considered to be the ultimate middle man for both online business websites and stores that exist in the physical realm.


A payment gateway sends all the necessary information related to the customer’s credit card to the payment processors to get it authorized. Upon acceptance, it sends an instant message to both the business owner and the customer to ensure that the transaction has been approved.


In addition to authorizing payments, payment gateways automatically add tax and screen for fraud, the two features that contribute drastically to the popularity of payment gateways, and for earning the title of the best eCommerce payment solutions.


In a nutshell, the gateway for payment is a software application that works as a middleman between an e-store and the bank that authorizes a customer’s credit card payment.

Payment gateways process credit and debit cards, eCheck (ACH), and even cryptocurrencies like bitcoin without any trouble.


Payment gateways offer secure transactions and make the online payment more straightforward than ever. They are considered to be the best eCommerce payment solutions by several online businesses due to the services that have elevated the world of eCommerce to new heights never seen before.


Importance of Payment Gateways:


Online payment processing cannot happen without a payment gateway.


It’s the digital equivalent of a point of service device we use to pay for products or services at different shops and stores.


The payment gateway is a necessity for eCommerce payment processing; here’s why:


1. The payment gateway ensures the security of online payment processing and brings down the frequency of credit card frauds.


2. The payment gateway is quick to set up (it takes less than a day) and demands minimal maintenance.


3. Most users are already familiar with payment gateways as at one point or another, they have interacted with it, so you don’t have to spend a lot of time or effort in marketing it.


4. Most payment gateways support several currencies and multiple payment methods, which can cater to all the needs of your customers.


5. When you cater to the needs of your customers, whether local or international, you consequently satisfy a vast market and end up with skyrocketing conversion rates.


These are only a few reasons why payment gateways are important and should be the eCommerce payment solutions that are incorporated in every business present online.


According to a survey conducted, about 50% of users abandon carts because their preferred method of payment wasn’t available. This survey alone is enough to win the case; payment gateways are an essential requirement that cannot be denied.


PayPal is inarguably one of the best eCommerce payment solutions available in the market right now and a great example of a payment gateway.


It is considered to be one of ‘the best’ eCommerce payment solutions


Structure of Payment Gateway:


When a consumer decides to purchase from an online store, they input their necessary credentials to pay for the purchase.


It is the job of a payment gateway to collect the information given by a customer and send it to the payment processors to get the payment authorized within the matter of a few seconds.


For a customer, the process of entering their credit card details may seem simple. However, in the back end, a complex process takes place.


Here’s how a payment gateway works:


Step 1: Encrypting Collected Information

The process begins when the customer places an order and enters payment information in the required fields present on the site. Once the transaction information is submitted, it is encrypted and sent.


Step 2: Sending data to payment processors

The encrypted data is then sent directly to the payment processor to get it authorized or declined.


Step 3: Routing data to the Credit Card Association

The payment processor upon receiving the transaction data routes it to the relevant credit card association.


Visa, MasterCard, or American Express are credit card associations. It is important to note that these card associations do not work for free. They charge an interchange fee per transaction.


Step 4: Approved or Denied

This is the step where the transaction is either authorized or declined. The acceptance depends on the card as it needs to be valid and have enough funds to pay for the purchase.
In case the user has any holds or freezes, the transaction will be denied automatically, and the customer will be notified immediately.


Step 5: Authorized Transactions

The transaction has been authorized. What next?
The issuing bank, after authorization, transmits the authorization back to the parties that exist in the payment processing network.
The process is quite simple. It begins at the website and ends right there.


Step 6: Funds transfer

The process looks complicated, but the transaction only takes a few seconds. However, it can take up to 2-3 business days for the funds to be available in the business owner’s account.


Value and Support

One might think that passing information from Point A to Point B is smooth without much to analyze. However, that’s not the case. There are a lot of factors that should be taken into consideration.


Payment gateways are one of the most popular online payment processing solutions due to the benefits they offer.

So how exactly do online payment gateways contribute to your company?


• Creating Agility

Payment gateways provide the users with a payment gateway that encompasses all global payment methods in a fluid and fast way.


• Ensuring Customer Loyalty

It provides a smooth checkout experience to customers, which creates customer loyalty and increases customer retention.


• Time-Saving

As compared to manual management, payment gateways provide automated management, which saves a lot of time and effort.


• Aiding in Risk control

Payment gateway simplifies account reconciliation.


• Adding convenience

Incorporating a payment gateway in your online store means your store is accessible to the consumers 24/7, allowing them to shop at any time from the comfort of their homes.


The list of benefits that a business can enjoy from having a payment gateway is endless. They are a beneficial tool in the world of e-Commerce and contribute drastically to online payment processing solutions.


Here is how they create support and value for online businesses across the globe.


• Creating Growth Opportunities

A company operating in Asia can have access to the same payment processing solutions being offered by a company operating in Europe. This creates opportunities in the sense of business growth as well as providing quality services to consumers present globally.


• Securing Transactions

To be one of the best eCommerce payment solutions, payment gateways offer services that match the standard of being ‘the best.’ They use industry-standard encryption and, thus, are successful in protecting sensitive data. Theys secure and provide safety from fraud to not only consumers but merchants as well.


Among numerous online payment processing solutions, payment gateways are quite possibly the most prominent and well-known payment methods as they help a business flourish and grow by providing excellent customer experience, fluid, and fast transactions, and secure payment methods.

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