According to Digital Commerce 360, consumers spent $861 billion online with U.S. merchants in 2020 and this number is expected to increase much more in 2021. An online merchant seeking to grow their revenues should consider adding an online payment gateway service to their eCommerce store. Online payments have become safer and more convenient via new technologies that facilitate credit card transactions. Globally, 53% of the consumers use credit cards as their preferred method of payment, followed by 43% who use digital payment systems and the remaining 38% uses debit cards.
What is an Online Payment Gateway?
A payment gateway is an online payment software or service that securely captures payment data from an online customer’s credit card, verifies, authorizes, and processes the card or electronic payment to make payment to the online merchant. You can think of it as a virtual point-of-sale terminal.
Benefits of Using an Online Payment Gateway
- The ability to accept online payments is a primary way for an eCommerce business to grow and expand its revenues.
- The fraud risk is significantly higher in an online transaction because neither the customer nor the card is physically present. You can only rely on the card or electronic data the customer enters on the merchant’s order page. A payment gateway securely encrypts the card or electronic data to prevent fraud or theft.
- A payment gateway verifies that the card has enough funds available to pay for the customer’s order.
How Does an Online Payment Gateway Work?
Payment gateways facilitate communication between your website, the payment processor, and the bank that issued the credit card to complete the purchase.
- The process begins when the customer places the order online. The customer is then transported to a secure payment page to enter the credit or debit card details.
- The transaction data is securely encrypted to be sent between the internet browser and the online merchant’s web server. The merchant’s web server sends the transaction’s details through the payment gateway, which is securely encrypted, to the payment processor’s server. Every transaction between the merchant and the issuing bank is encrypted to protect sensitive financial information.
- The payment processing service forwards the transaction details to the card association (Visa, Mastercard, etc.), who then forwards it to the bank that issued the credit card for authorization and verification. The issuing bank responds to the payment processor with an approval or denial code.
- The payment processor then forwards the authorization response through the payment gateway to process or decline the payment.
- The total authorization and verification process happens within a matter of seconds. The merchant fulfills and ships the order, clears the transaction, and the issuing bank settles (deposits the funds) with the merchant’s bank.
How Do You Choose the Right Payment Gateway for Your Online Store?
By doing just a little research, you should be able to make a payment gateway comparison that will help you choose the service that’s right for your business. Compare the following 5 factors when choosing the right payment gateway for your online business.
Your customers must trust that the payment gateway will safeguard their personal and financial information while transacting with your online store. The payment gateway you use should be able to demonstrate that their security is compliant with PCI standards.
Primary Methods of Payment Used by Your Target Customers
A payment gateway must offer multiple payment options. A customer should choose a payment method they are most comfortable with, be it Credit cards, Debit cards, Mobile wallets, or any other payment method.
A payment gateway should provide swift payment processing and customization. A payment gateway should be mobile optimized, secure, and convenient providing customers with a seamless shopping experience.
Integration With Your Back-End Operating Systems
An online payment gateway that quickly communicates and integrates with your technology and servers makes payment processing faster for the customer.
Cost of Using the Payment Gateway
Charges for a payment gateway generally depend on many elements like:
- Your Business type.
- The features and services your online store requires from a payment gateway.
- Setup fees.
- Maintenance fees.
- Per-transaction discount rate according to the payment mode.
Payment gateways charge a setup fee and a monthly rate as well as a per-transaction fee. You want to make sure your budget will cover their fees and rates. You also want to ensure that the processing fees for every transaction don’t eat into your profits. Be sure to ask for a full disclosure of all of their costs.
The Finical Difference
At Finical, we make sure when you choose us to handle your credit card processing, you know you’ve made the right choice. We can handle all of your Internet processing needs via an E-Commerce solution that connects your website directly to various online shopping carts and payment systems.
Our online credit card processing systems are designed to operate safely and securely in support of your small business. Finical provides innovative credit card security technology (EMV), offering PCI-compliant end-to-end encryption to protect your customer’s credit card data.
Whatever transaction you process, your payments get deposited into your bank account automatically without any delays. The Finical payment gateway allows small businesses to accept all major credit, debit, and protect against fraud while offering the best rates and lowest fees in the country. Get in touch for a free consultation!