If you start your business online, you will need to accept payments from your customers’ credit cards. But how is it ensured that the transferred funds reach you and the customer gets the payment confirmed? That’s the job of a payment gateway. With it, you are enabled to receive payments with your website securely and quickly.
How a Payment Gateway Works
So, you embed the form for online payments on your site. But how do you and your customer trust each other? It’s easy in a brick-and-mortar store where the chip embedded in the credit card is read with a terminal. But how does it work without physical contacts? With a gateway based on a payment processor.
The payment processor is a part of a gateway responsible for technically enabling the transaction. The processor, necessary as it is, requires extra methods of authorizing it securely. That’s why the two are not exactly the same (though the terms are often used as synonyms).
An advanced gateway accepts alternative payment methods as well. It accepts payments from Apple/Google Pay, PayPal, Skrill, TransferWise (which are, in turn, mega gateways).
What does security mean? When it comes to online payments, the card itself with its embedded chip is excluded from the process, hardware authentication replaced with purely digital. This happens the following way:
- The customer enters their credit card number and other data (the issuer, issuing date, validation number, or the one-time password generated by the issuer) on the merchant website.
- The merchant site sends this data to the payment gateway.
- The gateway checks whether this data is valid, whether the customer has enough funds, and whether this type of transaction is authorized by the issuer (according to general and personal settings).
- The gateway encrypts the sensible data (card number, other transaction details) for it to be protected from leaks. On the receiving side, the gateway decrypts it, so the payment provider can access it. Then the transaction details are passed further safely.
- If the transaction is legit, the gateway returns the information to the merchant’s server.
- Having the customer data confirmed, you can proceed with the order.
The entire exchange sequence happens in a matter of seconds. This way, the transaction is enabled to be completed. The gateway also provides information about some transaction details (date, time, and so on). If you want more detailed stats, you may need to connect to the merchant portal often provided by gateway services. The data collected by the gateway can be presented visually and is easier to process on such portals.
If you opt for a self-hosted payment gateway, you become responsible for its security. So some merchants prefer to integrate hosted gateways, redirecting customers as they start transactions on your online store.
How Much Do You Pay for the Gateway?
Of course, nothing is free when it comes to money. But a payment gateway is the service that pays. Usually, you have to pay a fixed monthly fee (up to $25) and a certain fee for each transaction (up to $0.10). Given that even a single purchase can cover it all, the service does not look overpriced. With extra services, of course, it can cost more. But these services (like chargeback prevention or analytics) can help you in your game even more.
Some gateways offer enhanced services, for example, accepting payments in cryptocurrency. It’s up to you to decide whether you need to pay more for these expanded abilities. What it takes from you is understanding whether your customers deal with cryptocurrencies at all. The same goes for other extras.
Open the Gates!
If you start your online business on your standalone website instead of marketplace safe harbor, you will definitely need to connect a payment system to it. Refusing it is like denying money. Share these considerations on your Twitter or Facebook to start a friendly discussion. Or leave a comment here to share your experience and highlight something you find important. We’ll be grateful for that.
Interesting Related Article: “Important Factors To Consider Before Choosing A Payment Gateway Provider“