With the advent of E-commerce, payment gateway has flourished in leaps and bounds. Though online payment is still considered a risk, the payment landscape has evolved with new market entrants, fintech startups disrupting the space and providing alternatives to traditional payment over the past few years.
A payment gateway is essential for customers, but it is also crucial for business merchants and their inventory. There lies a need for a reliable partner in terms of finance.
Payment Gateway has significant growth in the coming years :
- ‘The Era of Rising Fintech’ shows digital transaction growth by 338% from 2018 to 2019, with UPI and card transaction showing the highest growth
- The convenience of UPI-based payments and app-based payments has to burgeon the spirits of digital payments and has since witnessed the emergence of myriads of payment gateway systems, entry of non-bank players, and a gradual shift from cash to digital wallets.
- Digital Payment volumes have grown at a CAGR of 55.1% from March 2016 to March 2020
- A new report by Reports and Data has forecasted, the global scenario of the digital payment market to reach USD 11.20 trillion by 2027
Thus, it’s a wake-up call for financial industries to create their space in the online market.
Here, this article entails introducing payment gateway, its importance, benefits, and how it works in the modern era.
What is a Payment Gateway?
Payment Gateway is a service provider that helps you to make payments for your purchases. The mode of payment can be credit card, debit card, or through bank transactions. This enables the payment process to be faster, secure, and more manageable.
There is no rocket science in learning the process. It is the most emerging technology used by almost everyone to achieve a product-market fit. The role of the payment gateway is to process the payment transaction between merchants and customers. It majorly involves online transactions.
How does Payment Gateway work?
The Payment Gateway does not run single-handedly; a series of processes are involved through the back-end parties instead of the customers’ payment mode.
To start with, it is simple, easy, and hassle-free :
- Customers select a product/ service from the website/app. Then approaches the cart counter and fills in details like Name, Contact info, address for the delivery.
- After filling in the details, they proceed to the checkout page by clicking on ‘Pay Now’ and fill out the payment details.
- When a customer selects the desired payment mode, the page is redirected to the Payment Gateway server in a secured manner and sent to the customer’s payment platform.
- Similarly, an authorization request is sent to the bank, investigating the available balance; awaiting to deduct the amount.
- When the authorization is received from the bank, and the amount gets deducted’ it is transferred to the merchant account through Payment Gateway.
- Suppose there is any hindrance or failure of the authorization from the bank. In that case, an error message is sent to the customer, whereas if the payments get approved, the customer will receive an email of the successful transaction and order being placed.
How to use Payment Gateway?
Payment Gateway is integrated with the website/app as a checkout and payment button. It acts as a catalyst for not participating in the payment process but initiates the payment process and links the customer and merchant accounts.
The technicalities like ready plugins, SDKs, and modules are provided by the companies to make the whole process easy and convenient.
Payment Gateway is built in a manner wherein even if you do not have a website or an app, you can access it through payment links. These links are easily generated through the copy/paste method and can be forwarded through messenger, chats, and other social media platforms.
Types of Payment Gateway
With the rapid sneaking of the internet into our lives, we have probably shed the archaic payment model and shifted towards digital platforms to leverage our growth and sustain in the dominant digital environment. We have seen market-o-nomics of digital payment now. Our focus lies in selecting the service that is apt for your business. These services work on different types of payment gateway. Let us, therefore, have a look at types of payment gateways:
- Hosted payment gateways
Eponymous to its name, a hosted payment gateway is a type that involves third-party services like a payment service provider(PSP) to enable the transaction.
In Hosted Payment Gateway, the third party allows your customer to exit from your website and complete the online transaction. Thus, you have no control over the customer during the payment process.
When the users go for payment, they are redirected to the PSP page. The users fill up all the details, and once the payment is made, he is turned back to your e-commerce website. As the payment information is done through an inline frame hosted by PSP with no involvement, the data is collected by PSP. This type of integration is easy and can be customized according to the needs of the customers
- Self-hosted Payment Gateway
Self-hosted service does not involve the third party, but Ecommerce store owners step in. As a result, the details of the customers are also collected by the owner itself. When the details are forwarded to the payment gateway URL, the payment is debited, and the customers and the owner are both notified of the payment details.
The risk for Self Hosting payment gateways is the customer details need to be protected using a particular format. The entire onus of customer information lies in the owner’s hands; therefore, a separate technical team is required, which adds on an additional cost.
The main advantage of self-hosted gateways is it enhances user experience because the customer does not navigate away from the website during the payment process
- API/ Non hosted Payment Gateways
Here neither the third party nor owner has been involved; instead, API or HTTP query comes into the picture. Ecommerce websites handle and control the payment process.
The customers’ details regarding payment are stored in an e-commerce website accessed by API during payments.
- Local bank Integration/ Direct Payment Gateway
As the name suggests, the payment is processed by local banks. The customers have been directed to the bank website for the payment. The customers fill up all the details, and once the payment is made, they are redirected to an eCommerce website. The bank notifies and updates about the payment process. However, if there is any cancellation or refund, the website owner needs to inform the bank.
This type of payment service is ideal for small scale business since no complicated procedure is involved and can be easily managed by the owner.
We have provided the best of our knowledge on payment gateway integration, now the ball is in your court to choose the best e-commerce gateway that satisfies your business needs.
Importance of Payment Gateway
Payment Gateway is considered as a counterpart of your credit card processor. This type of service sends credit card information from a website to the payment network for secured processing. It returns the details of the transaction and the credit card payment network’s responses to the respective website. This makes the payment gateway significant in an online retail environment.
There are several reasons why a payment gateway is crucial to every business and E-commerce website.
According to Shape Security, 90% of the total login attempts to online shops and businesses were hackers attempts. To prevent hacking, the payment gateway is essential, especially for small-sized companies. A Payment Gateway can resolve hacking incidents and makes the client feel more secure.
It accepts credit, debit, and other online payment methods.
Payment Gateway accepts and processes payments for all the business owners and merchants. The diversification in payment mode makes it easier to cater to the needs and demands of different buyers.
Minimizes credit card fraud
It lessens the instance and possibility of online payment fraud. Payment fraud is often envisaged by online businesses during transactions that involve the use of credit cards to receive payment from customers. To minimize the possible errors, it is necessary to have a gateway that brings together in a single platform the different channels through which users could reach.
Modern Payment Gateway has a feature that lets businesses have a payment page for customer checkout. This ensures that the customer need not be directed to another page when processing their payment. According to E-Commerce studies, bayard, 68.6% of visitors checkout without completing the order. Therefore seamless site navigation helps in completing the process without any technical glitches.
With the help of automation, it’s easy to install and maintain payment gateway software. There are also scheduled to upgrade the software; therefore, regular maintenance is not required. The automation also cut out the high rates of installation fees.
Privacy of customer data
Payment Gateway augments the security and encryption of customer data. This reinforcement makes it an ideal choice to avert online business frauds. Businesses accepting payment gateway has seen the profits doubled up because of frequent purchases by customers.
Role of Payment Gateway
- PCI-DSS Wallet
This makes the customer’s personal information very secure for recurring payments as well. If you are buying something from a website quite frequently, you don’t have to add your payment details every time. You can save it while using it the first time, and the saved data is saved correctly through PCI-DSS compliance.
- White-Label Wallet
As payment gateway allows you to pay by digital wallets, you can make your transactions just by sitting in one place. Your account balance is being linked to your digital wallet through this. You can make payments only with one click, which becomes much more straightforward than going to places for payment proceedings.
- Fraud Screening Tools
There are screening tools provided by your payment gateway to prevent cybersecurity threats. These tools include the Card Code Value, i.e., CCV, Card Verification Value, i.e., CVV, or Address Verification Service, i.e., AVS. This will prevent you from being fooled.
5 tips on how to choose the best payment gateway for your Business
Choosing the best, ideal, and affordable payment gateway is essential for your business because one wrong turn can make you lose your business and customers as well.
Therefore, we recommend you to choose the best payment gateway with the following 5 tips which are apt for your business needs:
This is the first and foremost factor to consider while choosing a payment gateway. If you are a startup that is yet to build, your business can go with transactional charges instead of setting up fees. If you are an established brand, you can opt for a payment gateway with transaction charges lower but set up fee.
- Review the purchasing funnel
Too many cooks spoil the broth; similarly, if you ask for too much information or too many pages for confirmation of payments, a consumer may leave your site. Therefore, it is advisable to review your purchasing funnel by asking for a demo for your functions. This will help you to analyze your payment service.
Switching of payment gateway
If you have committed an earlier mistake of choosing the wrong payment gateway, you can improve upon it and move on to the next payment gateway unless you have pocketed huge setup fees.
- CMS integration with Payment Gateway
All e-commerce CMS comes with off-shelf payment gateway plugins. But you can check with your service provider regarding the integration.
Multiple payment gateway options
If you are new in the business, it makes sense to have multiple options to generate faith in your customers.
- Customer Support
Ask them for 24×7 customer support because the problem can come at any time. If they don’t have customer support its time to change your payment gateway option.
- Cash on delivery
It is a must for any business because all customers cannot pay via a prepaid mode of and also, it takes stim to gain the trust of your customers, so cash on delivery is a must for choosing a payment gateway.
Benefits of Payment Gateway
It plays a pivotal role in approving the transaction between merchant and customer. This helps E-commerce platforms to leverage their existence with ease of payments to offer to their customers.
Besides, it is safe, secured, and convenient. Thus, E-commerce is gaining popularity.
A Payment Gateway services can be provided by banks directly or a payment service provider who is authorized by a bank
- Multiple payment options are available to receive online payment
- A merchant dashboard helps manage the business effectively; every activity related to the payment received can be scrutinized based on major, minor analytics, graphical representations, and other functions.
- It is not mandatory to own a website or app; a master link/payment link will suffice the need for payment
- Dispute resolution center is provided for seller and buyers sake
- Can easily reach out for resolution and support at any time of the day
- Seamless integration with every possible source of online payment service provider from banks to wallets
- Helps in getting PCI DSS compliance, thus making secure payment transfer possible.
- Payment Gateway is also responsible for taking care of the approval part and making sure that the power to collect payments from anywhere does not go to any fraudsters.
Payment Gateway Security- A major aspect
The convenience that technology has brought into our business and personal lives alike has been a significant rise in digital payment. Similarly, the space for risk and threat of online fraud mushroomed too.
As the E-commerce transaction entails multiple entities apart from the consumers, each can serve as a vulnerability for a malicious act like cybercrimes, where the black hat hackers attempt to trace out the security leak system and steal the financial wealth. This is also a significant constraint for the growth of digital payment in the market. Though the government, along with RBI, are taking actions to mitigate the frauds in the digital payment space and safeguard customers’ interests, we, as liable users of the service, should also be aware as the sensitive information and funds are involved in the process. For that, one should be cautious of the Payment Gateway they choose. It should follow proper security standards like as below:
- The PCI DSS security standard prevents the leakage of the sensitive information data of the Cardholder.
- Taking a look at encrypted code. If the encrypted text is complex to decipher, it could be even difficult for hackers to decode.
- The ‘s’ in the web address ‘HTTPS’ means the website is safe and secured.
How Payment Gateway is useful in daily life?
The growth in digital payments comes with a spate of innovations in the fintech sector, smartphone ownership, and improved user experience spurring UPI’s reigns. Thereby more consumers are taking to digital payments.
The driving force for cashless payments, over cash, has a favorable role of lax governmental policies, greater convenience, and evolving consumer behavior. With digitization, the curbing of fake currencies that disturbs economic growth, and the cost of printing currencies has created a conducive environment for cashless payments.
The rapid rise in smartphone penetration is expected to introduce mobile wallets. A consumer is asked to add money to the app and use it later within or outside of this merchant is adopting digital payment services.
The payment gateway also gives you this unique feature where you can manage all your expenses. You can get all your daily, or monthly expenses reports in your hand just by a click. Thus enabling all your expense tracking wisely.
It is helpful for merchants because retail stores and services are rapidly adopting and integrating mobile payment applications to accept payments. Due to the evolving lifestyle, daily commerce, and fast-paced online retailers, this trend is expected to continue further.
Here are the following advantages for merchants as well:
Secure and robust enforcement is critical, which is taken care of by the payment gateway. This will create a strong bond of trust between you and your customer. It is vital to save the customer details, but you can also protect your bank security with its details.
Using a secure platform of payment gateway will also increase your growth in several ways as customers will trust and buy products from you. A proper payment gateway also ensures you have the proper data of the customer. You can understand your customer better about what kind of products they like the most, and you can increase your business’s growth more perfectly later.
This majorly helps when you have a subscription business. Here payment gateway plays a vital role in acquiring customers. You have to choose a payment gateway, and they will ensure the customer is there for a longer time.
As per ITU, with the rapid rise of internet penetration and favorable governmental norms and regulations, the demand for digital payments in daily life is expected to further augment the Payment Gateway sector.
Limitations of Payment Gateway
Payment gateways have permitted instant payment processing, access to payment channels, cross-border connectivity, and flexible integration; therefore, they have become crucial to customer experiences.
Unfortunately, many businesses are still headstrong about the traditional payment model; they reckon payment gateway as an evil monster because the service providers are tainted of being sleazy and money-grubbing, taking advantage of retailers.
To wipe off the negative connotations in the E-Commerce industry, they should focus on improving a few things:
Risk of sensitive information
Payment gateway deals with customers’ most secret and valuable information. They have customer’s data like their bank account names, credit card numbers, date of birth, etc. Deceitful and fraudulent people will be more than eager to pay a huge sum of money to access this information, and untrustworthy payment providers can sell this information to such people without customers’ knowledge.
With fraud and treachery in the increasing technology world, customers are hesitant to pay online, involving personal information. Therefore, even if the merchant buys the payment gateway service and the customer won’t reciprocate, the merchant is at the bargain’s losing end.
Any software is bound to get corrupt when such software goes awry; it can have a delirious effect. The customers cannot make any online payments, and the technical glitch will render the merchant website inoperative. It may take a few days to troubleshoot the problem and for the website to return to normal.
Hidden fee structure
While merchant processing fee falls under to categories
- Wholesale fees – they are the interchange rates set by issuing banks and credit card companies. They are consistent regardless of the payment gateway you choose.
- Markups-these fees depend upon how the processor earns profits from your business. With the right selection of gateway, payments will be modest, but with the wrong gateway, you’re caught in the web of trouble. Some service providers trick you by using mystifying terms and pricing models to baffle even the most experienced business owner or retailer.
It is always advisable to find an interchange-plus pricing model that is usually transparent and cost-effective. Traditional gateways are the murkiest, charging the hidden fee. The new and updated versions model keeps pricing low but recovers cost for high volume businesses like debit transactions.
Here are few FAQS regarding Payment Gateways
How do we come to know that the information we provide is safe with a payment gateway?
The transaction is processed through an HTTPS web address. Therefore they use a signed request from the merchant to process further for a request of transaction. The signed request stays only between the merchant and the payment gateway, which means it is properly secured. After this, the IP of the requesting server is verified thoroughly to detect any fraud activity. Payment gateways backup Virtual Payer Authentication (VPA). It helps to secure the process of issuing money. Further, the 3-D secure protocol adds a much-filtered layer on top.
Is it safe to have a payment gateway?
If your business deals with an eCommerce site, there is no other way to process online payments. Within a few years, the payment platform has tremendously changed, and the new services have taken into account the customers’ safety first. This way, the merchant doesn’t get to see the credit card; instead, he sees the credit card’s information. This is called “card-not-present.” In this case, there is no way to run data on the card’s chip. This way, it is a secured process.
What are the charges or fees?
There can be different charges, i.e., monthly fees, setup fees, and registration fees. The payment processing fees or the transaction fees can be quite a surprise to you, but it is all worth it. You will have to pay the fee once all your processing with that payment gateway has started. As an online merchant, you will have to pay the fee right after you hire them.
What kind of support is available?
However, it’s easy to manage the gateway, but if you need someone to talk about the problem you are facing, you have to wait sometime as it is not available 24/7. If you cannot do the processing, then the reason must be most probably due to high-risk products. High-risk products include e-cigarettes, pornography, etc.
Payment gateways are the most integral part of customers and business merchants. Customers expect fast, seamless processes when and where it is suitable. These demands make the organization and merchant incumbent have a flexible payment gateway, easy to integrate, and able to scale with constant change in customer demands.
Flexible and dynamic payment service providers offer the benefits associated with strategic bank independence and a flexible customer-centric approach. This puts merchants back into control of their payment strategy, which is a win-win situation for merchants and customers.