Payment Gateway Technology: What Is It and How Does It Work?

A payment gateway provides businesses a secure way to accept payments from customers, making paying online more enjoyable for customers.

17:15 29 April 2022

Running an online business is challenging in more ways than you can imagine. There’s a dozen different things to take care of and business owners always find themselves busy juggling between multiple things. Certain things, such as keeping inventory, could be really hard to tackle if you don’t know what you’re doing. But there’s one thing that has left even the most experienced guys in this space perplexed- choosing the right payment gateway for your business. 

 

This term might come across as a bit of a jargon to those just starting out, so here’s a good chunk of information on what a payment gateway is and how it works, and things to keep in mind before choosing one for your business.

 

Let’s get right into it.

 

What are Payment Gateways?

A key cog in the wheel of an eCommerce business, payment gateways automate the transaction between a merchant and a customer. In plain terms, a payment gateway allows sellers to accept payments in a secure way from their clients for the purchases they make online or at the store.

 

These gateways are indispensable to any business - both brick and mortar companies and their online counterparts- that wants to take payments from its customers. The whole payment gateway technology underpinning the payment management system revolves around moving sensitive financial data from and to different stakeholders (which we’ll go over in the next section) to authorize payments and send money from a customer to a merchant.

 

Besides, a payment gateway can do a variety of other tasks, some of which are: transmitting payment related sensitive data using advanced levels of encryption and connecting the website to a payment processor for it to process the transaction. A key difference between a payment gateway and a payment processor is that the former authorizes the transaction and communicates whether or not the payment goes through between the merchant and customer whereas the latter simply facilitates the transaction.

 

How does a Payment Gateway Work?

To understand broadly how the gateway works, let’s consider a real-world example. When the customer clicks a buy now button and enters their credit card information on a product checkout page, the website server sends out a call to the payment gateway pressing it into action.

 

Once invoked, the payment gateway initiates its series of checks, starting with ensuring funds are available with the cardholder’s bank account (issuing bank). In addition, it verifies the availability of credit if it’s a credit card payment or ensures there is enough balance to cover the transaction.

 

If everything is in order, the payment gateway, using advanced modes of encryption, sends critical credit card data to the card schemes to initiate processing of the transaction. After the card schemes have approved the transaction, the payment gateway kicks into action to relay the information back to the website where the buying request came from to complete the transaction.

 

Rounding off its sequence of tasks, the payment gateway forwards information to the merchant’s bank to move funds from the issuing bank account into the seller’s account.

 

Choosing the Right Payment Gateway

A wide range of payment gateways from leading global brands means you’ll be spoilt for choice. It helps to figure out exactly what your business requires, or else you’ll either make the wrong choice or end up paying more than you need to. If you’re looking for the right payment gateway technology for your business, here’s a rundown of some of the key things you should consider before making a final decision.

 

• Widely Used: Do your own research and identify the most trusted, widely accepted, reliable and popular payment gateway in your country.

 

• Easy to Set Up and Operate: It’s important that the payment gateway is straightforward and simple to set up an account with.

 

• Fees: Typically, all providers make you pay a monthly fee and a set per transaction percentage fee. However, what you pay for the payment gateway differs based on your business requirements, particularly the volume of transactions handled, as well as several other factors. Some providers are flexible enough to put together a completely customized plan and throw in some nice volume discounts if the number of transactions handled is significant.

 

• Multi-payment Support: Any payment gateway is worth looking if it supports a range of relevant payment methods including credit/debit card, digital wallets, check, and other commonly used modes of payment. With a range of payment schemes at your disposal, you get unparalleled flexibility and scale to grow your business and take it further.

 

• Integration: Narrow down on those payment gateway options which have built a bit of reputation for being customizable and easy to integrate with your site either on their own or through extensions and a plethora of APIs.

 

• Superior control: Feature-rich payment gateways come with a cockpit view with all the consoles, giving access to key reports filled with business-critical information for owners to glean valuable insights from.

 

• Global reach: If your store or business has wider reach and caters to a global audience, having a payment gateway that supports multiple currencies is key.

 

• Relatable: Map out your business requirements with the features of the payment gateway and pick one that has the best match. A lot of payment gateways have an extensive suite of features which in addition to being less relevant to your business may not add any real value, so lay out the criteria for choosing the payment gateway clearly to be able to pick the right one for you. For instance: a payment gateway having built-in capabilities for accepting recurring payments and invoice generation might be a great choice for a subscription-based business but simply too much for a run-off-the-mill eCommerce store.

 

In summary, modern day technology has opened up a whole host of marketplaces and digital payment options, and, as a result, customers find it a lot more safe and convenient to make a purchase online. Unsurprisingly, the demand for online shopping among Gen Z customers, in particular, continues to surge ahead, meaning merchants cannot help but keep up with the trend and cater to this growing demographic if they really care about leveling up.

 

Setting up a secure, dependable and fail proof payment system to get money from customers has got to be one of the key challenges facing any ecommerce business owner no matter where they are on their entrepreneurial journey. Therefore, it is important to invest in a good payment gateway technology or partner with someone who can take care of putting in place a strong payment system end to end.

 

If you’re still unsure about picking a payment gateway for your business and want expert assistance, contact the Centi team today. Having helped several companies establish a robust payment solution, Centi’s highly experienced team of professionals are on hand to help you deliver a seamless, friction-free and enjoyable shopping experience for your customers too.

 

Take the leap and pick a simple, secure, feature-rich platform that makes it a whole lot easier for businesses to accept purchases from customers. And, give them a hassle-free shopping experience, which they rightfully deserve.