A payment gateway is an intermediary between an e-commerce platform and a financial institution. If you run an online retail platform or an e-commerce website, you will need a payment gateway to authorize, process and complete your customers’ transactions. Implementing a payment gateway is a complicated process, but it is fundamental to the working of any online purchase platform.
How Does a Payment Gateway Work?
The payment gateway company you choose should meet all your business goals. The parameters for success are different for every business. Think of it as a virtual cash register. All payment gateways follow six steps to complete a transaction. These steps are:
Step 1: Once the customer fills their cart and completes the checkout process, they place the order.
Step 2: Your platform redirects the customer to the payment gateway. The customer chooses their preferred mode of payment – PayPal, credit card, debit card, stripe etc.
Step 3: When the customer enters all their card details, a transaction request is delivered to their bank for authentication.
Step 4: The customer’s transaction is either accepted or declined depending on availability of funds.
Step 5: The payment gateway notifies the transaction status’s merchant, and the payment gets settled.
Things to Remember While Selecting a Payment Gateway:
Appropriate payment flow
Your business will grow over time. You need a payment gateway that will grow with you. You need to select the correct payment flow for your business. A payment gateway needs to be put in place for your website. The leading payment gateway companies include the following options:
- A website with an integrated payment form: This form has all the necessary data which is sent to the gateway provider through API calls. This form is highly secure but might need additional programming which costs extra.
- Payment redirection or iFrame: Customers are either redirected to a secure payment page or share their information on an embedded iFrame on the site.
- Escrow system: Funds are withheld until the platform admin authorizes it.
Location and incorporation
You will need to be incorporated into the place where you carry out business operations. Most often you would live in that area, but that is not always true. There are two types of payment providers: US payment providers and European payment providers. A US incorporation usually links you to a bank or payment provider in the US. Similarly, European incorporation will let you be a contractual payment provider and the acquiring bank behind it.
Some payment providers operate in both Europe and the USA. This allows you to use both payment gateway services in both continents.
Many payment getaways specialize in detecting fraud. Online portals use this to uncover any suspicious activity that might take place. Majority of customers have genuine problems during transactions. But some will try to scam you by using invalid or blocked credit cards, returning products after damage etc. You need a payment gateway company that secures transaction information using fraud management tools and end-to-end encryption.
Average transaction amounts
Payment gateway providers will give you tiered pricing. This defines the number of transactions to be done and the value of those transactions within a given period. Choose a pricing plan that aligns with your customer base. Otherwise, you might incur additional charges that will reduce the profitability of your business.
Fees and service agreement
The pricing plans that gateway providers offer depends on the types of transactions taking place on your site. Therefore, you must evaluate your business model and ensure that it fits the payment structure you opt for.
There might also be transactions that need an additional set-up or carry extra transaction fees. Make sure you know what you are paying for.
In 2021, over 53% of all online transactions will take place on mobile devices. This will require more stable connections, higher security, and accessibility via different devices. Make sure the payment gateway you choose is compatible with all mobile devices. With mobile payments, payment gateway providers allow buyers to transfer funds and complete transactions using a mobile-optimized website or platform.
In case something goes wrong with a transaction, you need to get prompt customer support. Failure to do so might cause your customers to drop off and perhaps not return to your platform. You will be surprised to see how many platforms offer no customer support. Ensure your payment gateway company provides customer service at least during your average traffic hours and preferably 24/7.
Happy Customers is the Goal
Evaluate your business goals and make sure you choose a payment gateway provider that matches your needs. Secure and fast transactions will keep your customers happy, which translates to better business and more customers over time.