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 payment process needs to be 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 software that enables a merchant to receive online payments from clients. While most common payment gateways refer to the processing of credit cards, the advanced ones can combine various payment methods like e-wallets or crypto payments into a single interface. It makes the payment process seamless and offers their clients a hassle-free payment experience.
Role of Acquiring Banks and Payment Gateways
An acquiring bank is connected to the business or merchant and enables them to accept payments through a payment gateway. When a customer buys a product or service from the merchant, the money is deposited into the merchant’s account with the acquiring bank. It is not the bank or card issuer that is tied to the customer.
The role of the payment gateway is to connect the consumer to the acquiring bank, and it holds the customer’s money until the payout process gets completed and the money is deposited in the merchant’s bank account that 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 customer arrives at the checkout page to make a payment, the transaction is initiated by a payment gateway like Paypound that is responsible for transaction authorization and encryption of user data to ensure its safe transmission during the process.
Once the payment gateway initiates the transaction, it sends the transaction data to the acquiring bank and passes it on to the card association (Master Card, Visa, Discover, American Express). Both the issuing bank and card association verifies this data and checks the authenticity of the transaction. If the data and transaction are authentic, they confirm that the card is valid and the account associated with the card has sufficient funds.
Once the transaction is approved by the card association and issuing bank, they send their approval to the acquiring bank, which then transfers the funds to the merchant’s account. All this happens within a few seconds, and the user gets a confirmation that the payment has been made and the transaction is successful.
Payment companies work to protect your business with risk management tools and services. The services include chargeback protection, that is, the reversal of a transaction processed earlier by the merchant; and 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.
Security is important
Security is one of the primary concerns assuming the risk and responsibility of transactions and user data. Online transactions are usually vulnerable to breaches that put user’s data and money at risk. Due to these risks, all the parties involved in financial transactions using credit and debit cards need to follow the security standards to prevent fraudulent activities.
The acquiring banks also help with the reversal of funds in case of failed transactions. That’s the reason the acquiring bank charges various fees for successful transactions, chargebacks and refunds. These standards are found in the Payment Card Industry Data Security to ensure that banks are PCI compliant and regulated.
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.
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. Now, as you understand, the role of banks and payment services is payment processing,
Disclaimer: The views, suggestions, and opinions expressed here are the sole responsibility of the experts. No Economy Prime journalist was involved in the writing and production of this article.