What is a payment gateway?

A payment gateway is a secure technology that acts as an intermediary between a buyer and the merchant in case of online transactions. Merchants use payment gateways to accept debit and credit card payments from customers. The payment gateway concept is limited not only to brick-and-mortar retailers but also involves payment processing portals found in online stores.

It helps to validate a customer’s credit card details and sufficient funds in the buyer’s bank account to ensure that the transaction is completed securely. It also encrypts sensitive user information, allowing communication between the merchant’s system and the acquiring bank to complete the payment process, thereby acting as the bridge between the customer, the merchant, and financial institutions.

How does a payment gateway work?

When the customer initiates a payment on the merchant’s website, the payment gateway receives the customer’s payment information, for example, their credit card details. As the next step, the payment gateway verifies the customer’s payment information and checks for sufficient funds.

It encrypts sensitive customer information to ensure secure transmission. Then, the payment gateway communicates with the acquiring bank to complete the payment process. The payment gateway sends a payment response to the merchant, indicating whether the payment was successful or not.

What is a merchant account?

A merchant account is a specialized business bank account that allows businesses to collect payments for services from customers. Merchant accounts allow for debit and credit card payments. Funds, when collected from the buyer’s account, are temporarily held in this account before reaching the merchant’s bank.

As the first step, a business applies for a merchant’s account with a bank or a payment processor along with all the required documents and information. As soon as the account is approved, the account is set up and the business is facilitated with the necessary equipment and software to process payments.

When a customer purchases something, the payment details are transferred to the merchant account provider for processing. The merchant account provider settles the funds with the customers bank and the payment is credited to merchant account.

What is the difference between a merchant account and a payment gateway?

A merchant account and a payment gateway serve two varying functions such that a payment gateway facilitates online transactions, and allows processing them whereas, a merchant account acts as a holder account where payments are temporarily held before reaching your business bank account.

In order to ensure secure payments, you need both of them. Their combination enables safe and secure payments from the buyers end and reduced risks in the payment processes.

What functions does a payment gateway have?

A payment gateway facilitates online transactions by processing and verifying payments, securing sensitive customer information, and transferring funds between merchants and customers.

What is the cost of integrating a payment gateway?

Payment gateways have varying prices with a combination of initial setup fees, a flat monthly fee, and a small fee for every transaction. Certain gateways charge a fraction of each purchase. For instance, Stripe charges 2.9% plus 30 cents per transaction. There also may be fees for equipment and installation.

What is a payment service provider?

Payment service providers are companies that facilitate a business to handle their payments. They offer a merchant account and a payment gateway to a business, thus helping the business collect and manage its payments. Payments go to the PSP and are then transferred to your business account.

What is a payment terminal?

A point-of-sale terminal, or payment terminal, is a physical device that allows customers to make payments using credit cards, debit cards, or contactless payment methods such as smartphones with near-field communication technology.

What are the types of payment gateways?

In general, there are 3 types of payment gateways: onsite, onsite and offsite combined, and redirect. In onsite payment gateways, payments are managed by the site’s own servers. It helps in the transparency of transactions and helps handle large volume payments. Onsite and offsite combined allow payment checkouts to be visible on your site; however, they are done at the back end. This type of payment gateway allows less access to a customer’s journey. In case of redirect payment, the payment options are PayPal and Stripe, and this takes customers to another site, often adding an extra step for the customer. However, this might discourage some users from choosing your service.

What is a mobile payment gateway?

A mobile payment gateway is a secure online platform that facilitates mobile transactions, enabling businesses to accept payments from customers through smartphones/tablets. It enables secure and convenient transactions from the buyer’s end, through various payment methods such as credit cards, debit cards, digital wallets, or mobile carrier billing.

What is the role of encryption in a payment gateway?

Encryption in a payment gateway is the process of converting sensitive customer data, such as credit card details, into a secure, coded format to protect it during transmission. This ensures that payment information remains confidential and inaccessible to unauthorized parties, safeguarding transactions from fraud and breaches.

What are some payment gateways offered?

Some of the payment gateways that are commonly integrated are PayPal, GoCardless, Stripe, CardConnect, Braintree, Square, and Authorize.net.

What are the security features in payment gateways?

Payment gateways allow robust security features, including:

1. Encryption (SSL/TLS) and secure protocols (HTTPS)
2. Authentication and verification methods (3D Secure, CVV, AVS)
3. Compliance with industry standards (PCI-DSS, GDPR)

What types of cards are accepted by payment gateways?

Payment gateways often support a broad range of credit and debit cards, enabling payment gathering from the customers with ease. Some of the commonly accepted card types include Visa cards, Master cards, American Express and more.

You can also consider integrating bank payment solutions like GoCardless, which allow you to collect payments directly from your customer’s bank account in over 30 countries.

What are some of the business benefits of payment gateways?

Payment gateways can facilitate your business by streamlining payment processes and reducing the burden on administration. They offer a wide range of payment methods to help customers choose the best suited one, thereby leveraging customer loyalty. The advanced security features in payment gateways can prevent fraudulent activities and secure customer’s data. You can integrate payment gateway to your existing system and benefit from scalability option as your business expands.

What is a white-label payment gateway?

It is a payment gateway with a customizable branding option as per the client’s preferences. It allows merchants to receive payments through third-party services while using their own name and brand.

What is Payment Card Industry (PCI) Compliance?

Payment card industry compliance is the technical and operational standards followed by businesses to protect and secure credit card information from the customers submitted through card processing transactions.

What is Secure Sockets Layer (SSL) Certification?

Secure Sockets Layer is a technology meant to secure an internet connection by securing data sent between two servers. It helps to eliminate chances of data exploitation and theft from hackers. This allows security of customer data and safer transactions.

How to opt for the right payment gateway?

To choose the right payment gateway you must ensure features such as PCI-DSS compliance to protect sensitive customer data. You must ensure that the gateway allows tokenization and user data encryption feature. It must also have fraud detection and prevention features.

The API compatibility, plugin and module support, and mobile optimization are also crucial to look at. Moreover, you must check the pricing model and multi-currency support feature to handle international customers. The payment gateway you choose must also offer support for transaction methods you are offering such as PayPal, Stripe or bank transfer.

What are hosted payments?

Hosted payments are a payment processing solution where the payment gateway provider hosts the payment page on their own secure servers. This method is suitable for small and medium enterprises looking for a secure and cost-effective method of payments online. It enables businesses to reduce risks of compromising sensitive customer information.

What are non-hosted payments?

Non-hosted payments allow customers to enter their details while not leaving your website. For you to take payments onsite, you must have your SSL certificate and comply with PCI requirements. However, sometimes, your payment service providers allow sending your card details from the customer’s browser to the provider while not reaching your server.

What are international payments in payment gateways?

If you want to opt for a payment gateway offering international payments, you must look at this feature as well as the multi-currency support option. You must ensure there are no additional charges for serving customers from other countries and also whether you must have a merchant account in another country.

What are recurring payments in a payment gateway?

Recurring payments in a payment gateway allow businesses to charge the customers on recurring basis such as subscription-based services, membership fees, or installment payments. This functionality is often integrated into payment gateways, thereby helping businesses to efficiently manage and process recurring payments. Although this feature is now available on many gateways, practically all of them also require that your company have an online merchant account.

Does my payment gateway integrate with the existing system?

For secure and smooth business operations you must ensure that the payment gateway you choose integrates with your existing system. Some key factors you must consider are: API compatibility, Payment Protocol Support, Data Format compatibility, compliance with PCI-DSS and GDPR.

What is tokenization in payment gateways?

Tokenization protects user data, credit/debit card numbers, and more, allowing actual card number information to not be used during transactions. It is a security technique that replaces user personal data and information with a random set of characters called tokens.

What is payment gateway fraud?

A payment gateway fraud is a significant risk posed on businesses involved in online transactions. This fraud is targeted at exploiting or misusing customer information, thereby compromising customer data and disrupting business operations. Businesses must be aware of payment gateway frauds such as: Identity theft, credit card theft, phishing scams, malware attacks and unauthorized transactions.

What is Address Verification Service?

It allows fraud prevention to limit frauds as well as chargebacks. AVS helps in verifying that the address added by the customer is linked to the cardholder’s credit card account.

What is Card Verification Value?

It is an anti-fraud technique opted for by credit card companies across the globe. It is indicated as a three- or four-digit number on the signature panel on the back of credit cards. CVV is the method used by Visa, and CVC is used by Mastercard.

How do payment gateways prevent fraud?

Payment gateways prevent fraud by their built-in fraud tools, they allow protection of user data by tokenization of credit cards. They can also prevent fraud with Address Verification Service, Card Verification Value, Device Identification, 3-D Authentication, and monitoring of ‘high risk’’ countries.

What is the difference between a payment gateway and a payment processor?

Both payment gateways and payment processors are different because payment gateways authorize transactions, handle security and encryption, and connect merchants to payment processors.

On the other hand, payment processors allow the actual processing of transactions, handle settlement and funding, and manage relationships with banks and card networks.

In other words, payment gateways act as the “doorway” to the payment processing system, while payment processors handle the behind-the-scenes work of processing and settling transactions.

Can payment gateways handle subscriptions?

Yes, they are critical in handling subscription-based business models. Allowing collection of regular payments through debit/credit cards and digital wallets. Their built-in fraud detection and security features can make the customer feel secure about purchasing goods.

What is secure data storage in payment gateways?

Payment gateways ensure secure data by employing intricate encryption protocols. They encrypt important information such as credit and debit card details so that the data remains unaltered even if accessed by outside entities.

What is No Gateway Failure?

Payment failures often lead to payment failures, thereby leading to an elevated churn rate. However, by using a competitive payment software, your customers can switch from one gateway in case of payment failure. This saves time and reduces churn.

What is gateway failover or multi-gateway?

In most cases, it is possible to integrate multiple payment gateways, and this approach is called multi-gateway or gateway failover. It allows reduced redundancy, better scalability, improved payment success rate, and enhanced flexibility. Businesses opt for a multi-gateway approach to reduce downtime, reduce failed payments, and enhance customer experience.

What are chargebacks?

A chargeback is a transaction reversal initiated by a cardholder’s bank due to a dispute or issue with a payment. In the context of payment gateways, a chargeback occurs when a customer disputes a transaction with their bank, the bank investigates and decides in favor of the customer or the bank reverses the transaction, and the payment is returned to the customer.

How do payment gateways handle chargebacks and disputes?

Payment gateways handle chargebacks and disputes by notifying merchants about the chargebacks, offering dispute resolution tools and platforms, allowing documentation submission as evidence, providing analytics and insights to help merchants identify and prevent chargeback causes, and integrating with merchants’ systems to automate chargeback handling processes.

What is a payment gateway API?

A payment gateway API involves a set of programming instructions that allow merchants to integrate a payment gateway into their website or app. It enables developers to securely process transactions, manage payments, and retrieve payment information. With the help of a Payment Gateway API, merchants can customize the payment experience, improve security, and enhance the overall journey of customers using a service.