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In a customer landscape wherein one-fifth of all purchases take place online, both vendors and customers need secure payment processing. A Payment Gateway is an essential tool for merchants to process card payments, detect fraud, and ensure there is enough money in a customer’s bank account.
An online Payment Gateway takes a customer’s debit or credit card details and runs checks instantaneously in a three-step process. This involves collecting customer information such as debit card details, transferring them to a payment processor, and finally authorising card transactions.
Those running eCommerce platforms need to understand what a Payment Gateway is and how it works. Using this secure system, customers can make purchases faster and more securely. With the right Payment Gateway providers, retailers can increase conversion rates and retain customers.
What is Payment Gateway?
A Payment Gateway is a piece of technology that verifies your customers’ card information. If we think about the in-person shopping experience, we have point-of-sale (POS) software that processes the transaction. As soon as the customer taps their card or enters their PIN in-store, their credit card details are securely passed to the merchant and then the bank.
So, what is Payment Gateway in eCommerce? An online store works in the same fashion. Debit or credit card information is submitted by the customer to be approved by the bank. Once it’s been approved, the merchant can process the payment and the funds will leave the customer’s bank.
Understanding Payment Gateway meanings
The retail customer journey maps the path a potential customer takes from first hearing about your brand to becoming a loyal supporter. Understanding this process through customer journey mapping gives retailers valuable insights. You’ll learn about consumer behaviour, purchase decisions and demographic metrics, including ideas for improving your customer experience.
Which is a good Payment Gateway?
There are many considerations when it comes to choosing Payment Gateway providers. You may have heard of brands such as PayPal, Stripe or WorldPay. But if you’re running an eCommerce site, you need to think about factors such as:
- Security: Is your provider PCI compliant? (Payment Card Industry)
- Transaction fees: Can your provider offer transparent pricing for transaction and/or setup fees?
- Payment methods and international currencies: Are you able to offer a range of payment options including credit cards, debit cards, foreign currency and digital wallets?
- Customer experience: Do you feel confident that you can access technical support 24 hours a day?
- Scalability: Can your software integrate with your eCommerce platform, and will it grow with your brand?
Trust Payments offers a fully scalable solution with API integration, allowing you to customise your setup based on your brand. There is also Dynamic Currency Conversion for international payments, and every Strong Customer Authentication via EMV 3-D Secure.
What does Payment Gateway do and how it works
The Payment Gateway is a front-end payment processing system which works by sending customer information to the payment processor. (This may also be known as an acquirer, acquiring bank or merchant bank – essentially, the bank of the retailer.)
So, how does Payment Gateway work? It starts with the collection process, wherein a customer enters their payment information at the checkout page. These cardholder details are processed securely and sent to the merchant bank.
Finally, the information will travel through the card network to the issuing bank – that is, the bank account of the customer. If the customer has the funds to complete the transaction, payment will be made. If they do not, or if the bank suspects fraud, then the payment may not be authorised.
What are the steps of Payment Gateway?
When we break down the collection, transfer and authorisation steps, we have something that looks like this: [DIAGRAM]
There are separate steps at play here, from customer information going to the merchant, to the merchant bank speaking to the payment processor:
- The checkout stage: When the customer hits the payment page on the merchant’s website, they enter their details into a secure form.
- The encryption stage: The best Payment Gateway providers will encrypt these details. They will then run fraud checks and send the card information and transaction details (such as the final price) to the payment processor.
- The card scheme stage: The payment processor (or acquirer, acquiring bank or merchant bank) sends this information to the card scheme. These are payment networks linked to payment cards, such as Visa, Mastercard or American Express. These schemes carry out further security checks so that they can authorise the payment.
- The authorisation stage: Whether authorised or denied, this information goes back to the Payment Gateway service. Here, the customer and the merchant will find out if the payment has been approved.
- The confirmation stage: Finally, the card issuer (the customer’s bank) will display confirmation information. If the payment is denied, this will show up as ‘declined’ and the customer will be asked to use another payment method.
This information travels between banks, merchants and customers in seconds. It’s ideal for online businesses that want a real-time, convenient user experience – instantly notifying buyers if there are any issues with their payment.
What are the types of Payment Gateway?
There are three types of Payment Gateway: on-site, on-site and off-site combined, and redirect.
An on-site Payment Gateway processes payments through the site’s own servers. This works well for dealing with large volumes of payments, but may be vulnerable to security threats.
Meanwhile, an on-site and off-site combined Payment Gateway presents the checkout on the merchant’s site. However, the payment is processed in the back end, which makes it more secure.
Finally, a redirect offers a range of payment options such as PayPal. It redirects customers to a third-party payment service provider to securely process the transaction.
What is a Payment Gateway with examples?
Some examples of Payment Gateways include SagePay and TrustCommerce. Trust Payments takes this one step further. As a payment service provider, Trust Payments combines both the Payment Gateway and the merchant account.
This means we handle both the sending of information and the processing of funds into your merchant account. In turn, it saves you time setting up your own merchant account, offering an integrated service that can accept a range of payment methods.
What is merchant account and Payment Gateway?
While the terms “merchant account” and “Payment Gateway” are often used interchangeably, they’re actually two different things.
A merchant account is a specialist bank account used to accept credit or debit card payments from customers. You may have also heard the term “acquirer”, which refers to the provider of your merchant account. When you make a sale, the customer’s funds sit in a merchant account temporarily, before being deposited into your company bank account.
By contrast, a Payment Gateway simply transmits customer data to the acquirer. The card or customer does not have to be present. While a Payment Gateway communicates information and tells customers their payment is authorised, the merchant account works to authorise the transaction.
Merchant account
- Belongs to your business only
- Holds customer funds temporarily before transferring them to your bank account
Is controlled by the acquirer (the merchant account provider)
Payment Gateway
- Securely transfers details of debit or credit card payments to the acquirer
- Communicates information and runs fraud checks (banks run additional checks too)
Notifies the customer about whether or not their payment has been successful.
A payment services provider offers both these services in one. This means it can both authorise transactions and communicate information securely. Trust Payments is a payment services provider, offering PCI compliance and integration with a range of systems.
What is the difference between a bank and a Payment Gateway?
The term “bank” may refer to the issuing bank or the acquiring bank. In the case of the issuing bank, this is the company that issues payment cards to customers. It works on behalf of card schemes like Visa or Mastercard.
An acquiring bank, or acquirer, processes card payments on behalf of the merchant. They maintain the merchant account and also route customer payment details to card schemes for authorisation.
A Payment Gateway, meanwhile, transfers data to the merchant and the bank. The bank can then approve or decline the payment, and this information goes back to the customer. If the payment is authorised, the funds will leave the customer’s account. If it’s not, the payment will show up as “declined” and the customer will be asked to offer an alternative payment method.
Why do merchants use Payment Gateways?
Merchants use Payment Gateways to make customer payments faster and more secure. Payment Gateways help to encrypt customer information, meaning it can travel between the customer, merchant and vendor safely.
They also help to assure users. Payment details go through fraud checks so that they can be authorised. If, for any reason, an issue is flagged, then a Payment Gateway can notify the customer within seconds. A message will display saying that the card has been declined, and that the customer should find alternative payments.
They are essential for fraud prevention and help merchants to offer a range of payment options. The best Payment Gateway providers can integrate with multiple currencies, payment methods and eCommerce content management systems.
When choosing a Payment Gateway supplier, an integrated payment services provider is ideal for:
- Ensuring functionality across payment methods such as Apple Pay on mobile or international currency conversion
- Uniting all essential components in one place, including gateways and acquirers
- Helping merchants secure better rates if they can integrate services from the same payment provider
- Promoting cyber security with Strong Customer Authentication Payment Card Industry Data Security Standard (PCI DSS) compliance
- Adhering to payment legislation such as the E-Money Directive.
How to choose the right Payment Gateway for your business
So, what is the best Payment Gateway for you? The service you choose may depend on the needs of your business. For example, if you’re an international eCommerce retailer, you may be more concerned about currency conversion or streamlined checkout pages.
For anybody taking online payments, the biggest considerations should be:
Time
You may need to start taking payments straight away or you may need time to get things set up. If you’re in a rush to get started, it’s best to go with a provider like Trust Payments that has an API. This offers simple integration, which saves time and developer resource.
Cost
What is the cost of a Payment Gateway? Depending on your provider, you may have to pay a monthly fee, transaction costs and setup costs. There may also be fees for chargebacks, which are disputes in credit card processing.
When you work with Trust Payments, we’ll charge you a customised cost based on your sales volume. We’ll always be transparent about whether it’s better value to have a monthly subscription or pay-as-you-go model.
Security
Secure Payment Gateways run stringent fraud checks. This can help to protect your brand from potential scam buyers, while it also adds extra assurance for customers. A quick notification of a declined payment improves the user experience and alerts buyers to suspicious activity.
Supported payment methods
Online shoppers are discerning and like to have a range of options. Trust Payments supports Visa, Mastercard, PayPal, Alipay, Apple Pay, Google Pay and American Express. It’s also compatible with international payments thanks to its Dynamic Currency Conversion system.
Integration
To save time and money, you’ll want a system that can easily integrate with your ePOS (electronic Point of Sale) or PMS (Property Management System) software. Trust Payments supports multiple payment methods and all major card providers. It also works across trusted eCommerce platforms such as BigCommerce.
Conclusion
If you’re looking for a secure system that speeds up customer payments, a Payment Gateway is a great place to start. Payment Gateways ensure card payments are processed securely, checking for fraud and passing encrypted information between customers, merchants and banks.
They’re an essential for any eCommerce vendor who wants to offer a range of secure payment methods. Equally, they promote a better user experience by notifying customers if anything goes wrong. This provides added assurance for banks and vendors, as well as buyers.
Customers are forever seeking faster, more secure methods of online payments. They also seek flexibility – so the best Payment Gateways can accept multiple payment options across different currencies. Even better, Trust Payments is a payment services provider, meaning we can offer a merchant account and Payment Gateway in one.
The type of online Payment Gateway you need will depend on your business. You may be pushed for time, have more discerning customers, or high-profile security needs. Trust Payments can allay all of these concerns with one integrated API.
If you have any more questions about what a Payment Gateway is, or if you just want to know more about our services, get in touch.
