ONE payment gateway is a technology tool used by retailers to accept debit or credit card payments from customers. The term includes not only physical card readers found in brick-and-mortar stores, but also payment processing portals found in online stores. However, in recent years physical payment gateways have begun to accept phone-based payments using QR codes or Near Field Communication (NFC) technology.
- Payment Gateways are consumer-facing interfaces used to collect payment information.
- In brick-and-mortar stores, payment gateways are point-of-sale (POS) terminals used to accept credit card information via cards or smartphones.
- Payment gateways are the “checkout” portals used in online retailers where customers enter credit card information or login information for services such as PayPal.
- Payment gateways differ from payment processors, which use customer information to collect payments on behalf of the merchant.
- There are also payment gateways to facilitate payments in cryptocurrencies like Bitcoin.
How the payment gateway works
An electronic payment processing system payment gateway is a critical component because it is the front-end technology responsible for transferring customer information to the merchant-acquiring bank where the transaction is processed.
Payment gateway technologies are constantly changing to match new consumer preferences and technological advances. Previously, terminals accepted credit cards with magnetic stripes and required a paper signature from the customer. With the development of chip technologies, the signature step can be entered directly into the payment gateway hardware in favor of a personal identification number (PIN). Today, contactless shopping is also available, with many customers now using their phones as payment devices rather than plastic credit cards.
Whether it is an in-store gateway or an online payment portal, the structure of a payment gateway is different. Online payment gateways would require an application programming interface (API) that enables the relevant website to communicate with the underlying payment processing network. A POS terminal that electronically links to the payment processing network over a telephone line or an Internet connection will be used by the in-store payment gateway.
Payment Gateway vs Payment Processor
A payment gateway differs from a payment processor, a service that connects a customer’s bank with a merchant account and facilitates the actual movement of money. You can think of these as two parts of a transaction: a payment gateway collects the customer’s information for payment, and a payment processor uses that information to contact the customer’s bank and merchant account. crediting one account while debiting the other.
Example of payment gateway
Merchants can access payment gateway systems through merchant bank partnerships or they can choose to have their own payment gateway systems. Major banks such as Bank of America ( BAC ) and JPMorgan Chase ( JPM ) have sophisticated payment gateway systems that provide customers with their own merchant shopping banking services. Ultimately, merchants can choose from a variety of payment gateway technologies as long as they are compatible with the merchant-acquiring bank they use for payment processing.
A recent example of a payment gateway is Square (SQ), which emphasizes flexible mobile payments for retail businesses. The company’s Square reader technology allows customers to easily accept payments at ad hoc locations, such as conventions or farmer’s markets, or through roaming storefronts such as food trucks.
With the Square Reader payment gateway technology, a merchant can attach a small piece of hardware to their cell phone that allows a customer to swipe their payment card for processing through the cell phone’s electronic connection. The Square reader sends payment information to a merchant’s acquiring bank, which then processes the information momentarily for the merchant.
New products are likely to continue to increase the versatility and speed of payment gateways. In recent years, blockchain startups have also introduced payment gateways for cryptocurrencies.
How can a payment gateway benefit my business?
Facility: When you integrate with a payment gateway, it means that your customers can shop at any time, regardless of whether you see the store or not. Allowing your customers to shop at their leisure adds convenience for them and you.
Fast payouts: As a business owner, you know that getting paid is downright difficult. Instead of going through the hassle of agreeing to pay on a certain day and then forgetting to do it, many customers prefer to pay right away and get it done. Payment gateways allow them to do so, making it a win-win situation for both you and your customers.
Better protection: Customers’ biggest concern with online payments is security. As of 2017, credit card fraud losses in the United States totaled $2.5 billion.
Using a payment gateway critically reduces the risk of credit card fraud for three main reasons:
The payment gateway receives the customer’s credit card information securely. This means that only the customer and the bank that issued them have access to their information.
Any payment gateway must comply with PCI DSS standards, which means that they adhere to specific security standards to ensure that your customer’s card details are treated securely.
An additional security standard known as 3-D Secure is offered by card services. This requires the customer to create a password for each card used for online payment.
How do I integrate with the payment gateway?
You have a few options to integrate with a payment gateway depending on how you want to receive payments from your customers.
- The first integration category redirects your customer away from your company’s website to make the payment. It is suitable for businesses that do not receive a lot of online traffic. Once your customer has clicked on the payment link, they will be taken to your payment processor’s page to enter their card details and make a payment, after which they will be redirected to your website. An example of such a payment gateway is PayPal. These payment gateways can be customized – for example by adding your company name or logo to the payment page. The downside to this approach is that your company cannot control the entire user experience because the gateway is external.
- With the next category, your customer remains on your website throughout the payment process and the payment is handled by a payment gateway. When your customer enters the details on your business website, the information is sent to the payment gateway URL where the actual transaction takes place. Since your customer stays on your website during the purchase and is not redirected, this type of payment gateway is better for businesses that get most of their revenue through online payments, as it provides a better customer experience. do. However, since you will be asking for your customer’s payment information through your website, you must take the necessary precautions to ensure that their information is secure.
- The next type of payment gateway makes use of an API (Application Programming Interface). This type is similar to the previous type in that customers enter their card details directly on the company’s online payment page, but here their payment is processed using an API. These payment gateways can be customized with your company name and logo and provide full control over the user experience. Companies using these must arrange for PCI compliance and SSL certification themselves.
Overall, payment gateways make online payment processing easier for your business and help you receive payments faster, more conveniently, and with better security. If you want to receive payments online or want to improve a method you already use, you are looking for a payment gateway.