Digitisation has introduced a lot of convenience for making payments online irrespective of your location and the time of the day. An online payment gateway functions as a digital network that enables your clientele to fulfil the payments they owe you. This type of money transfer is made with the help of your debit or credit bank cards. The consistent flourishing of e-commerce has paved the way for many payment gateway providers to facilitate financial transactions online in a seamless and safe manner for all businesses.
This type of digital transactional network is no different from the systems in offline stores where you make your payments at one distinct part of the store. After you place an online order and make a payment through any of your bank cards, the payment gateway authenticates the details of your card. This is done to understand if your account through which you are making the payment has a sufficient revenue balance for your payment to go through flawlessly. Let us understand the various features of this type of payment facility and how commercial businesses stand to gain from it.
Did you know?
That PayPal functions as a payment gateway and a payment processor?
What is the Role of a Payment Gateway?
Payments by cash are being speedily replaced by payments with credit and debit cards. This has reduced the need to carry cash. Let us understand what is a payment gateway. It is an important element of the electronic system that processes payments. All necessary information is exchanged between the portal through which you make the payment. This could be your mobile phone, an e-commerce website, or even a voice response service that is interactive. The details of the purchaser’s cards are validated by the portal with the bank which has issued the debit or credit cards. There are four steps involved in this process:
- The payment gateway procures the commercial transaction of the credit car
- The payment gateway encodes the information of the commercial deal
- The payment gateway channels this towards the processor of the debit or credit card
- The final step involves a return of acceptance or rejection of the same.
- As a buyer, you do not have to interact with anyone or anything. The gateway validates your details, and once approved, your online order gets placed.
- It furnishes the seller with all the requisite information of the purchaser in the transaction process.
Also Read: How Secure is BHIM UPI? | A Complete Guide
Key Considerations for Choosing a Secure Payment Gateway
- At the onset, you will have to determine if the payment gateway adheres to all the rules and norms of the payment card industry data security standard, better known as PCI DSS. If it is, all your monetary transactions are secured by the third party involved in the transaction.
- Does it offer a 3D secure transaction? This involves the usage of a distinct code sent to the mobile of the purchaser, who then confirms the transaction.
- What are the various measures the payment gateway implements to detect as well as prevent fraudulent transactions?
Difference Between Payment Gateways and Payment Processors
- Payment gateway – Obtains all the details of the customer to ensure that the payment is made in a flawless manner.
- Payment processor – Acts as an agent of authority. It validates the details of the buyer’s debit or credit card to understand that the buyer’s account has the necessary funds to make the purchase. It then establishes a connection between the bank of the purchaser to the account of the seller to enable the transfer of funds. This results in the purchaser’s account getting debited with the value of the product purchased and the seller’s account being credited with the same sum of money.
What are the Various Types of Payment Gateways?
There are multiple renowned payment gateways. Some of the more popular ones are:
- Paypal – This is one of the most preferred digital platforms which facilitates the sending as well as receiving of monetary remittances and requires only the email and the bank account details. This payment gateway has a presence in more than 200 countries across the globe and accepts various credit cards. Some of these include American Express, Mastercard, Citibank, and Visa among many others. It adheres to all the norms of the Payment Card Industry (PCI), provides for a superfast checkout system, seamless tracking of product movement, as well as scanning of barcodes among many other meaningful features.
- CCAvenue – This is unique in its offerings of payments in 27 international currencies and content in 18 languages. American Express, MasterCard, Diners Club, and Visa are some of the cards supported by it.
- PayUBiz India – You can make payments in 13 different currencies. Most international cards, net banking, wallets as well as IVR payments are supported by it.
- Citrus Pay – A majority of credit cards are supported by it. Some of these include American Express, Visa, and MasterCard. Its unique features include Citrus Cube, which helps you pay your bills online, and Citrus Cash, which is an online wallet.
- Many consider Razorpay as the best Indian payment gateway.
What are the Limitations of Payment Gateways?
- Security of information is a key issue
- Payment gateways involve step processing costs
- They do not disclose the structure of the fees they charge
- They are not mobile-friendly, not merchant-friendly, and don’t facilitate recurring payments.
- They impose a fee when a chargeback occurs – a dispute for a certain online transaction raised by the purchaser who apprises the bank that has issued the card.
Opening your Payment Gateway for Business
Once you have explored the payment gateway industry in detail and are keen to set it up for your own enterprise, you should consider the following factors:
Understand who your Customers are
You must take into account that the gateway you select supports the methods of payment of your clientele
Also Read: A Complete Guide to NACH e-mandate
Clarification of Payment of Fee
You will have to find out which type of fees you will be liable to pay. Some of these include:
- A fee for registration
- An initial fee to set up the payment gateway
- A connection fee on a monthly basis
- A transaction fee – this would also include fees for transactions that are not accepted
- A fee for the settlement of monetary transfer
- A fee if an unhappy customer asks for a refund after returning a product
- A fee that is maintained as a reserve in case of unavailability of stocks.
- Merchant account: If the payment gateway agrees to your usage of their account, or do you have to use your own? If it’s the latter, you will have to understand the fees charged by a bank for the same.
- Website fees: Understand the integration of a payment gateway with your website.
- PCI Compliance: Compliance with the payment card industry is a prerequisite.
The above details give an insight into the various aspects of a payment gateway, the different types, and how it has come to play a very important role in online transactions.