As your parents used to say every time you begged for the newest and shiniest toy or article of clothing, “money doesn’t grow on trees.” Now that you own a business, this old adage undoubtedly remains just as true. Incorporating a payment gateway into your business is a necessity in this era of ecommerce because it is an essential means to bring additional customer dollars into your hands.
What is a payment gateway?
The gap between the dollars in your potential customer’s pocket and your merchant account can be a very wide one. Fortunately, the payment gateway is here to help. It functions as an indispensable middleman that safely and seamlessly facilitates the transaction between buyer and seller.
That being said, a gateway is far more than a mindless connector. Not only does it facilitate every step of the purchase process, it also ensures that sensitive cardholder data remains secure and hidden from potential hackers and identity thieves. In reality, it is this added insurance and safeguarding that you are paying for when you sign on with a gateway service.
The functions of a gateway.
Although your gateway is not a huge piece of hardware like those old-school stationary countertop units, it definitely packs a punch. Some of its functions include the following:
- Links all players in the payment process, including the buyer’s and seller’s banks, the acquiring bank, and the payment issuer.
- Authenticates payment details provided by the customer, simultaneously screening for red flags that could indicate fraud.
- Acts as a quality assurance officer to ensure that customer payment details are above board, and that the issuing bank authorizes the transaction after validation. It also enables the acquiring bank to transfer the payment amount to the seller’s bank, while making certain that all components of the transaction occur in a timely fashion.
- Safeguards security by using tokenization and encryption, safely transmitting data, and complying with the data security standards set forth by the Payment Card Industry (PCI DSS).
- Smooths and streamlines the entire payment process so that you can realistically expect to have your funds in a matter of days, if not sooner.
- Insulates you as the merchant from the liability of direct contact with customers’ sensitive payment details.
In addition, your gateway acts as an accurate recorder of all transaction details. As a business owner, having access to a spot-on chronicle of all payment-related information is crucial, particularly if a charge is disputed, or when tax time rolls around.
The payment process explained.
When a buyer chooses to part with their hard-earned dollars to buy your products or services, just a few seconds elapse between the time when the card and customer information is entered and the “purchase” button is pressed. After that a confirmation arrives within seconds. However, a great deal goes on in those intervening moments. Here is a snapshot of what happens when you accept an online payment:
- The buyer chooses what they want to buy/
- The customer enters their payment details, and the information is encrypted and sent to your server.
- Your server combines the transaction details with the customer’s IP address and attaches a digital certificate to verify your identity and that of your gateway. The completed digital order is then encrypted again and sent on.
- After authenticating your store’s identity, the gateway offers the customer a variety of payment options.
- After the customer makes their choice, the information is sent on to the acquiring bank (for card payments) or the issuing bank (for alternative payments).
- The issuing bank makes sure that the payment amount does not exceed the customer’s credit limit. Then they send the appropriate confirmation or declination code to the gateway via the acquiring bank.
- The gateway transmits the response to both the merchant and the seller.
- For card transactions, the issuing bank clears the authorization and settles the transaction with the acquiring bank.
Considering the complexity and number of steps contained in even the simplest payment process, it makes sense to have a reliable gateway to act as your middleman.
What a gateway can bring to your business.
In many respects, the internet is still a place where criminals roam and danger lurks. Fortunately for you, a gateway can shield you from many of these pitfalls. It uses the following cutting-edge tools:
- Secure Socket Layer, a protocol that encrypts all online transactions.
- Payment Card Industry Data Security Standards. Adhering to these protocols (known as PCI compliance) is mandatory for your gateway provider, and helps to ensure that the information you store and transmit is always safe.
- Tokenization to replace customers’ sensitive personal details with a randomized series of characters that are stored on the gateway provider’s server for one-time use.
- 3-D Secure, an additional safety layer that requires your customer to create a password for each card they use for every transaction (Mastercard SecureCode, Verified by Visa, American Express SafeKey, etc.).
- Anti-fraud tools like Address Verification System (AVS), IP checks, geolocation, etc. that confirm a customer’s identity.
In addition, today’s gateways are easy to set up and use, can accept multiple currencies, and are affordable for businesses of any size.
Challenges you may face.
The most pressing concern when it comes to gateways is determining which one will best meet your needs. Competition is fierce in this marketplace, so you are wise to carefully peruse your options. The following criteria can help:
- Is it easy to set up and cancel?
- Identify all costs, including fees for setup, processing, registration, chargeback, and currency conversion, while also inquiring about monthly rates and limits.
- Choose between hosted vs. non-hosted/integrated. In other words, are you comfortable redirecting your customers to another site to make payments, or would you rather handle everything from your purchasing page.
- What is the effectiveness, availability, and efficiency of customer support?
- You’ll want to enquire about data portability, should you decide to switch to a different gateway product.
- What are the average success and failure rates of transactions?
- How long will it take to settle funds into your merchant account after all fees have been taken out?
- Does the gateway you’re considering have a good record for reliability and fast recovery after downtime?
- You’ll definitely want a gateway that is PCI compliant, with tokenization and encryption included, and robust fraud detection tools integrated directly into the system.
- You should also enquire about the capability of accepting recurring payments, something you may want now or in the future.
- Can you customize the customer’s checkout experience to reflect your brand?
- Does the gateway offer support for multiple currencies? If you do business internationally, also look for a provider that offers Dynamic Currency Conversion (DCC) that automatically converts the charged amount to the customer’s preferred currency on the checkout page.
- Finally, you’ll want a gateway that gives you access to all the analytics-based reports you need, including daily transactions, settlements, failed transactions, and so forth.
If this list of specifications seems endless, don’t panic. Take a little time to think about the nature of your business, the products you sell, and the customers you serve. After this period of self-examination, it will be much easier to determine your priorities when choosing your gateway.
As you can see, the gateway functions as a vital conduit in any and all financial transactions between you and your customers. When you choose your gateway product with care, it can serve both you and your buyers in a myriad of ways, making the payment process safe, fast, reliable, and even customizable. With the right gateway on your side, there’s no telling how far you can take your business.