With online retail industry spreading its wings like a rising phoenix, the world is going crazy for the online shopping websites. It really doesn’t matter what the websites are selling in particular. Be it fashion apparels or electronic goods, people just aren’t getting enough of it. Not only girls but even guys are victims of these online shopping trends. Select-Add to Cart-Payment-Done! Sounds great from a customer’s perspective. But have you ever thought about it from a businessman’s point of view? Have you ever wondered how are the payments processed and accepted? Don’t worry we will enlighten you.
The answer to the above question is this- The money you pay on the online shopping websites via your credit/debit cards are accepted and processed by means of a Payment Gateway.
What is a Payment Gateway?
A payment gateway is basically a service that is provided by e-commerce application service provider which enables us to make transactions by means of our credit/debit cards. The transactions are made by authorizing the credit or debit cards & transferring the key information between payment portals.
Not only the online retail platforms but the traditional brick-and-mortar stores too opt for payment gateways as it is a handy tool to make transactions easier and convenient.
Working of a Payment Gateway:
Suppose you are browsing your favorite online shopping website and all of a sudden, you found the shirt you have been craving for. You add it to your cart and proceed to pay. This is where the payment gateway becomes active and comes into play. Here we go-
- Firstly, you are supposed to click on pay and select a payment mode. COD (Cash on Delivery) is an offline mode, so it doesn’t require a payment gateway. But when you choose to pay by credit or debit card, you will be asked to enter the card details.
- Afterward, the payment gateway will transfer the information from your payment portal (be it the website that you are using or any mobile application) to the merchant’s acquiring bank that will process the transaction.
- The information regarding customer’s card is well encrypted by the browser in order to keep it safe from hackers and other threats. It is sent from the browser to the merchant’s web server and is done by the means of SSL (Secure Socket Layer) encryption.
- The acquiring bank then checks the funds in customer’s account to approve the transaction. Once verified, the transaction is processed and you get a confirmation from the payment gateway. This process usually takes around 2-3 seconds.
- As a result, the acquiring bank deposits the fund for the transaction into merchant’s nominated account and this process can be concluded on the same day or the next day. In case of credit cards, the card issuer makes a payment for the purchase as a settlement payment in a day or two.
NOTE: Sometimes, people tend to think that a payment gateway and merchant account is the same thing. But there is a significant difference in both. A Merchant Account is the one where the transaction funds will be held up until they are approved, whereas, a payment gateway online approves or declines a transaction.
Benefits of a Payment Gateway:
Payment Gateway comes with numerous advantages. Here are few of them-
- Safe and Secure Transactions: As the information sent and received is protected by means of high-end encryption, it is very tough for malwares to retrieve information and thus, making it more secure to threats.
- Worldwide Transactions: It helps to expand the customer base around the world as a payment gateway enables worldwide transactions for its customers. So, it really doesn’t matter in which corner of the world you are. You just need a stable internet connection to get started.
- Faster Transactions: As it is done digitally, transactions through payment gateways are way better than their traditional counterparts which were done manually. Hence, saving the time and efforts of the consumers, making the transactions faster.
How to get the right payment gateway for your business:
Now looking at the payment gateway from a business point of view, there are a few points to ponder.
- The cost of the payment gateway: The utmost factor for choosing the Gateway is the cost involved. It can vary from totally free to expensive. While some gateways are willing to waiver off the setup fee, some charge for the services they provide you. Other charges involved are TDR (Transaction Deduction Rate) and Annual Maintenance Charge which may vary from vendor to vendor.
- Setup time: This feature totally depends on the type of services you opt for. There are 2 types- SPP (Second Party Providers) and TPP (Third Party Providers). SPP’s include Banks and offer a low TDR but they have very high setup costs. On the other hand, TPP’s like PayU, Direct Pay, etc. are third party vendors. Some of them are free of cost and others may have a setup and annual fee. They charge around 3-5% TDR and that too is negotiable depending on your business.
- Support: It is very crucial to get the after sale support from your payment gateway vendors as in e-commerce, transactions go wrong may times. So, a vendor willing to give you support in all the tough circumstances can ease the pain you are going to bear. After all, a friend in need is a friend indeed.
- Options of Payment: Again, an important point that cannot be sidelined. The more, the merrier. Yes. The more payment options a payment gateway is going to provide you, the easier and satisfying it will be for the consumer and hence, you will be getting a happy customer base.
- User Interface: The easier, the better. One should realize that not all customers are tech-savvy. So, an easy interface of the gateway will surely ease away the bumps during the journey to complete the transaction.
We hope you have much more clarity now. So, don’t wait up and take the next big step for your business. Get that payment gateway!