A payment gateway is a basic component of a payment life cycle required by every business vendor. Every business needs to have a payment process to enable its customers to make payments; the business also needs to ensure that the payment process is simple and convenient for customers, to enhance sales and revenue.
What happens between the moments a customer pays you and when you receive the payment in your account, the entire process of making and receiving the payment is handled by the payment gateway.
Every merchant wants to have smooth and uninterrupted transactions, but with plenty of payment services available, it becomes difficult to choose the best. Besides technical details, a business needs to consider the convenience level of their clients and select a payment gateway that integrates well with their existing platform.
What is a Payment Gateway?
A payment gateway is a piece of software that enables a business to accept online payments from customers. While the majority of payment gateways accept credit cards, the more sophisticated ones can integrate several payment methods such as e-wallets or crypto payments into a single interface. It streamlines the payment procedure and provides a hassle-free payment experience for its customers.
Role of Acquiring Banks and Payment Gateways
The firm or merchant is connected to an acquiring bank, which allows them to take payments through a payment gateway. When a customer purchases a product or service from a merchant, the funds are transferred to the merchant’s account with the acquiring bank; the bank or the card issuer is not linked to the customer.
The role of the payment gateway is that it connects the client to the acquiring bank and holds the funds until the pay-out process is finished and the funds are deposited in the merchant’s bank account, which is the acquiring bank. It offers services to the merchant to receive online payments using methods such as credit cards, debit cards, bank transfers, and e-wallets.
Payment processing can be applied to the processing of any type of payment and is subject to rules and regulations defined by payment networks. It is the online process of exchanging data and money between the consumer, the issuing card, the merchant, the payment service provider and the purchasing bank.
How does it all work?
When a consumer arrives at the checkout page to make a payment, the transaction is initiated by a payment gateway such as PayPound, which is in charge of transaction authorization and encryption of user data to guarantee that it is transmitted safely throughout the process.
After initiating the transaction, the payment gateway communicates the transaction data to the acquiring bank, who then forwards it to the card association (Master Card, Visa, Discover, American Express). Both the issuing bank and the card association verify this information and ensure that the transaction is genuine.
If the data and transaction are authentic, they confirm that the card is valid and the account associated with the card has sufficient funds.
The card association and issuing bank authorise the transaction and send it to the acquiring bank, which subsequently transfers the funds to the merchant’s account. All of this occurs in a matter of seconds, and the user receives confirmation that the payment was made and the transaction was completed successfully.
Risk management tools and services are used by payment companies to protect your business: Chargeback protection, which is the reversal of a transaction processed earlier by the merchant, as well as PCI compliance and tokenization support, which occurs when credit card numbers are replaced with a series of randomly generated numbers and letters known as tokens that cannot be used for fraudulent purchases, are among the services offered.
Security is important
One of the most important considerations when it comes to taking the risk and responsibility of transactions and user data is security. Online transactions are frequently subject to security breaches, putting users’ data and money at risk. Due to these dangers, all parties involved in credit and debit card transactions must adhere to security standards in order to avoid fraudulent activity. These standards are found in the Payment Card Industry Data Security, and are used to guarantee that banks are PCI compliant and regulated.
In the event of a failed transaction, the acquiring banks can also assist with the reversal of funds. As a result, the acquiring bank charges different prices for successful transactions, chargebacks, and refunds.
How to choose the right acquiring bank?
The choice of acquirer should be based on whether the bank supports your business model. But that’s not the only factor to consider. There is also the following:
The card types supported by the acquirer
Make sure that all supported card networks are in your wallet. If necessary, request other payment methods as well.
Locations and currencies accepted by the acquirer
Does the list include the country in which your company is registered? Make sure the acquirer supports the currencies you want to accept on your site.
Average amount per transaction
This is a great way to calculate how much you will be billed for each transaction. Please note that an acquirer may charge the merchant variable fees, which are listed in their contract. Fees are charged to cover network processing and merchant account-related services.
The average number of transactions
Speaking of prices, carefully review fees to make sure you don’t have to pay extra monthly fees, which can be expensive, especially in the early stages. If you have a company that processes multiple transactions on a daily basis, you can also negotiate fees.
Does the acquirer work with the payment gateway you are considering?
If necessary, ask for assistance with recurring payments.
You need to be sure that all payment problems will be resolved quickly.
Now, as you understand, the role of banks and payment services is payment processing, and as payment gateways have made financial transactions really simple, users can take advantage of these services. Although payment gateways and acquiring banks have made the transactions as secure as possible, users should take care of the security of their payments—they should never share the passwords with others and use security measures like strong passwords on their devices.