Starting your own eCommerce business, including building a well-designed and content-packed website, may be the first thing on your mind, but it may not actually be the most important thing for your business.
Do you have any idea what we are talking about?
Getting paid from your customers would be the next step. This is where the concept of payment gateway comes in. However, if you are not a tech aficionado, you may find the entire concept complex. We are here to help you understand the entire thing from start to finish.
In this article, you will learn how payment processors and payment gateways work together. Let’s dig deeper:
What is Payment Gateway?
An online payment gateway combines technology along with electronic payment methods. It works as a physical point-of-sale system by authorizing a customer transaction.
It also provides:
- During the transaction, the payment gateway encrypts sensitive information.
- Before proceeding with the transaction, all of the customer’s data is stored securely.
- Payment gateways always provide reports for discrepancy identification and easier reconciliation.
- Modern payment gateways offer flexible and robust integration capabilities with accounting, tax, and eCommerce platforms.
How Does a Payment Gateway Work?
A payment gateway does the same job as a POS device we use when paying in a shopping mall or a restaurant.
This process involves an online store, a customer, and a bank to make the transaction.
The Difference Between a Payment Gateway & a Payment Processor
A payment service provider is a channel between the customer’s bank and the seller’s bank. It allows sellers to receive payment from customers. When an eCommerce business contracts with the payment processor, they set up a merchant account for the transactions. However, all transactions are on hold until the approval comes from the payment processor.
On the other hand, the payment gateway securely processes the payments. It encrypts data, streamlines the entire transaction process, which improves the customer experience.
To sum up, a payment processor is required for the credit/debit card transactions and a payment gateway goes in between the website and the payment processor.
Types of Payment Gateways
While selecting the payment gateway, you need to understand the different methods of payment gateway and their working procedure.
1. Hosted Payment Gateways
During checkout, hosted payment gateways direct customers to the payment processor page. Once the payment is approved, the customer is redirected to the merchant’s site.
2. API Payment Gateways
API payment gateways collect data from the merchant’s checkout page. They are customizable and easy to integrate with various digital selling channels. However, the merchants bear the cost for PCI, DSS, and SSL security compliance. When you are integrating a payment gateway through its API on to your own website or app, you have a higher responsibility for dealing with chargebacks and security. Read this article to find out more about chargebacks and how you can avoid them.
3. Self-hosted Payment Gateways
Self-hosted payment gateways collect the information from the merchant’s website. They require more customization as this type of payment gateway accumulates data in a specific format. Stripe.net and Authorize.net are the most popular self-hosted gateways.
How To Select the Right Payment Gateway for Your Business
With rapidly changing customer expectations and payment options, payment options can vary from time to time. Therefore, selecting the right payment gateway may be a challenge for you. However, we will make it simple for you:
1. Customer’s Preferred Payment Option
Business customers use various methods of payment which include debit cards, credit cards, e-checks, and bank transfers. US customers may prefer Paypal, Google, or Apple Pay. On the other hand, if you are selling in China, buyers will prefer WeChat or Alipay.
Begin by analyzing your customers and their business related requirements. Are you compiling a transaction for the accounting team or are the customers asking for a specific payment option?
Every payment gateway may not meet the requirements. For instance, most US customers will prefer PayPal, and European customers will pay with a credit card. If you have a different customer base, you should use separate payment gateways.
3. Integration Needs
Apart from the payment gateway features, you may need additional functionality. Evaluate the integration options and the capabilities of the payment gateway. Without the integration, the API may speed up or complicate the integration.
4. Integrating With Ecommerce Platforms
Few digital commerce systems have pre-built integrations. When you are developing your eCommerce website, make sure you are talking about the payment integration processes. Experts can suggest to you the best payment solution to meet your specific needs.
5. Support Options
You do not want discrepancies. To eliminate any frustrating situation, the payment processor should be quick and easy. Choose a payment gateway that is trustworthy. This will increase the purchase rate. Good support options are essential if you are selling high-risk products that may have return or refund issues.
Higher conversions, greater efficiency, and better customer experiences—all these will inspire you to get the right payment gateway which will lead you towards business success. Take your time to understand the different payment gateways and how you can implement them.
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