What is a payment gateway?
According to BigCommerce, a payment gateway is a merchant service that enables a business to process credit card payments either online or in-person.
Merchant services include all hardware, software, services and financial relationships needed for businesses to accept payments from their customers. Like a cash register, the payment gateway needs to be secure and efficient to use.
How does a payment gateway work?
To be secure and also convenient to use, a payment gateway has the following features.
Encryption
A payment gateway encrypts the data for exclusive use between the seller and buyer, in between the user’s browser and the server of the retailer. This ensures that the customer’s information is kept private and secure.
Authorization request
The authorization request occurs when a payment processor receives approval from the customer’s bank to proceed with the transaction. If a customer’s card declines, you can read the decline or error code to understand why it happened.
Check out this latest blog post on credit card decline and error codes to see how you can deal with them, and stop them from happening.
Fulfillment
Once the payment gateway has authorization, it will proceed to the next action. This will look different for every business.
Payment gateways vs payment processors
People may use the terms payment gateway and payment processor interchangeably, but they have some key distinctions.
A payment processor’s job is to analyze and transmit the data from the transaction. The processor will transmit information directly to the customer’s issuing bank.
A payment gateway can do the same thing, but it also authorizes the transfer of funds between the customer and seller.
It may help to think of the payment gateway as the entire system for a point of sale, while the processor just checks the customer’s information with their bank.
Types of payment gateways
When choosing a payment gateway is crucial to choose a company that will keep your customer’s information secure, as well as offer an enjoyable experience. The online retail industry has a 75% rate of cart abandonment, so ensuring that your customers enjoy the checkout process should be a priority.
Redirects
A redirect gateway offers ease of use and simplicity for a business owner because it takes the customer directly to the payment gateway. For example, a customer is purchasing an item online, to check out they will get taken to PayPal to enter their card details and complete the transaction.
However, this means that there will be a second step for customers. But it makes it easier for the seller, as it will redirect to a payment gateway that will take care of the transaction.
Checkout on site, payment off-site
In this scenario, the checkout will happen on your website, but the payment processing happens on your gateway’s back end.
On-site payments
On-site payments are taken care of by their servers. The checkout and payment processing goes through the system of the business. This gives you more control, but also more responsibility.
Penni Payments can help improve your customer experience by providing a simple and secure payment processing system for your online checkout. You can reach out to our team for more information and start saving on transactions fees today.
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