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What is Payment Gateway?

by | Mar 9, 2021 | Payment Solutions

A payment gateway is the simplest way for a business to collect digital or online payments from their website or application. Online payments have become a part of our daily lives. We are transacting online not only through debit or credit cards but through other modes like UPI(Unified Payment Interface), internet banking and other forms of digital wallets as well. Paying online is a fundamental feature that every e-commerce platform in the world offers. And they can provide this facility by integrating with a payment gateway.

A payment gateway is a portal that connects a bank account to the relevant payment processor. E-Commerce businesses need a payment gateway as it ensures secure payments and protects sensitive data. Customers can safely store their essential information, like credit card details in the Payment Card Industry Data Security Standard (PCI-DSS) portal.

Many payment gateways also come with fraud screening tools, including CVV (Card Verification Value) and payer authentication, to reduce the risk of information loss and theft. Some payment gateways also support cross-border online payments, making it easier for aspiring business owners to upscale their eCommerce globally.

How payment processing software works

There are three components of any payment processing platform.

Merchant account

This is a bank account that allows your business to accept online payments. You can receive a merchant account via a payment processing company or a large bank. This is where the money your customers pay you goes to.

Payment processor

A payment processing company or financial institution handles the transactions between your customers’ banks and your bank. They deal with credit card validity, available funds, card limits and so on. One more essential function of the payment processor is security. It is the responsibility of a payment processor to check whether the card information is correct and to protect you from fraudulent activities. They also managed errors, accidental transactions and incorrect charges.

Payment gateway

This is like an online point of sale. A payment gateway is a mediator between all transactions on your website and the payment processor. It connects your merchant account with credit/debit card issuers like Mastercard and Visa. A payment gateway is needed because security measures forbid transferring data directly from bank to bank. Without it, you will not be able to receive your customers’ payments.

Importance of choosing the right payment gateway

The correct choice of a payment gateway is the key to the successful development of your business. After all, the seller needs to ensure the safety of information and personal data that the buyer transfers to him when making a payment. The buyer, in turn, will appreciate the speed of the payment and the high level of security during data transmission. This will give the buyer an incentive to make another transaction from you again.

There is a huge number of companies offering their services for connecting gateways. All of them are able to process payments from a bank card of any financial organization.

What should be considered when transferring and accepting funds on the Internet? It is important to pay close attention to the interest that the payment system deducts when transferring a payment. If the interest is more than 8%, then such a system is not profitable as you will lose a significant part of your money. Choose systems in which the interest is less than 5%.

Remember that a high-quality payment system provides a huge range of services without ripping off sky-high interest rates from its customers.

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