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Payment Gateway Providers 101 – Why and How They Matter in Online Payment Processing

August 16, 2018

The stiff competition in the online ecosystem calls for innovative strategies to stay ahead of your competition. One of the easiest ways to do this is by offering a seamless customer experience.  A payment gateway comes in handy in helping you offer a smooth user experience by allowing easier processing of payments on your ecommerce store. If you plan to set up an online business or if you have problems with billing, it is crucial to learn how to get these payment gateways working for you. Here are the main points you need to know about payment gateways. Keep reading.
How the Payment Gateway Works

To make things clearer, you need to understand what a payment gateway does. Now, in an online payment transaction, there is the merchant/business, the online customer, and the technology. In the part of the technology, you have the payment gateway (linking your site’s shopping cart to the card processor) and the payment processor.

During a transaction, a payment gateway encrypts credit/debit card data and keeps it private before sending it to the payment processor. The processor then sends this encrypted information to the issuing bank which accepts or declines depending on availability of funds and other factors.

In the simplest understanding, the payment gateway is a software integrated into your ecommerce website to send all of your credit card transactions to your credit card processors. At the same time, it also sends a message back from your credit card processor letting you know if a particular transaction has been authorized.

The Crucial Role of Payment Gateways

To fully understand the reason as to why you need the best payment gateway for your ecommerce store, consider the following:

  1. Serves as the middleman: The payment gateway reduces the temporal distance and makes payment possible in a matter of seconds. This software connects the customer’s bank, your bank, the acquiring bank, and the issuing bank.
  2. Authentication: Online transactions are fraught with risks and many businesses lose billions each year. An efficient payment gateway authenticates the card information and Okays the transaction to continue. There are no fears about losing money on your end.
  3. Security/Minimizing risk: In an ecommerce environment where risks are high, you need a system that mitigates such risks through encryption. You don’t want to lose your customers’ sensitive data when processing payment as this can ruin your business. The east payment gateway ensures compliance with security standards including Payment Card Data Security Standard among others.
  4. Hassle-free payment transactions: When you have an effective payment gateway, your payment transactions will flow smoothly and this boosts customer retention. The software makes the process hassle-free for both the merchant and the buyer.
  5. Reporting tool: All information collected during a transaction is crucial for your business and as such the payment gateway shares this to the parties concerned.

In essence, payment gateways are convenient, user-friendly and they have low commissions. They reduce the risk of theft and loss, which could tarnish your company’s reputation. Whatever the industry you are in, a good payment gateway is a handy tool in providing a seamless customer experience.

When shopping for a payment gateway, consider your business needs first. Look for multiple features such as encryption, recurring billing, virtual terminal, PCI Compliance and ease of integration with other tools such as Quickbooks. Payment gateway charges also vary and include setup fees, monthly fees, registration fees, payment processing fees, transaction fees, refund fees, and chargeback fees, limit fees, batch processing fee, termination fees and fund transfer fee among others.

You must also consider data security among other features. The gateway should be easy to set up and user-friendly. You should also compare the benefits of hosted vs. integrated gateways before picking one of them. Using this information, go ahead and leverage the best payment gateway to stay ahead of the pack in your industry.


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