Payment Gateway Solution
What is payment gateway?
Payment gateway is the ecommerce service which processes the payments through credit card and debit card for the traditional physical stores as well as the online stores. It basically facilitates the transactions by simply transferring the key information between the payment portals like web-enabled mobile devices or websites and the front end bank or the processor.
Payment gateway helps in fulfilling the important role in ecommerce transaction procedure, authorising the payments between the customer and the merchant. Some of the most popular payment gateways are Braintree, PayPal, Square and Stripe.
Difference between Payment gateway and Payment processors
The payment processors analyse as well as transmit the transaction data. The payment gateway mainly authorises transfer of funds between the sellers and the buyers.
How does the payment gateway work?
When the customer places his order from some online store, gateway performs multiple tasks for finalising the transactions:
- Encryption- the web- browsers encrypts this data which needs to be sent in between it and the web server of the vendor. The payment gateway sends this transaction data to payment processor employed by the acquiring bank of the vendor.
- Authorisation request- the processor sends the data of the transaction to the card association. The issuing bank of credit card views the request for authorisation and either approves it or denies it.
- Filling order- the processor forwards the authorisation pertaining to consumer and the merchant to payment gateway. Once the payment gateway obtains the response, it then transmits it to the interface or website for processing the payment. It is then interpreted and an apt response is created. This might look like an extremely lengthy and complicated process but it actually takes just a couple of seconds. This is where the merchant fulfils the order.
Clearing the transactions
The steps which have been outlined above maybe repeated for clearing the authorisation through the consummation of transactions. However, clearing is triggered only when the merchant actually completes the transactions. The issuing authority changes “Auth hold” to debit allowing the settlement with the acquiring bank of the vendor. The processor then settles all the authorisations of the vendor with acquiring bank by the end of the day.
Other functions of the payment gateway
The payment gateway even screens the orders with multiple tools. This process of screening filters out the fraudulent data.
Payment gateway also calculates the tax amount for authorising the requests which are transmitted to processor.
Role of the payment gateway
The payment gateway service is important for all types of online transactions. It is exactly the same process as the Point of Service device does while you pay at the merchant store.
The payment gateway works with the purchase items from the physical locations. Thus, the role of the payment gateway is mainly to authorise the transactions between you and the customer.
You need to keep in mind that without payment gateway’s approval, the transaction can’t move forward and you would also not receive the money.
Setting up the payment gateway
Before you set up the payment gateway, you will have to legally set up the business. You will have to take a tax identification number which is called EIN. You will have to open a bank account in the name of your business, buy a domain name and also have a website which is working.
Then choose a 3rd party processor like PayPal or Due so that you may accept payment online.
In case you have your merchant account, try to look if your business bank offers merchant facility. This would help the payment gateway in connecting directly to the bank account. Then the funds are deposited into the account from the orders which are processed through the website.
You would also like to speak to the payment gateway so that it can help you set up your account properly. They would help you mainly by linking your account with their software and would show you the ways of using this software.
When all of these steps have been completed, you may integrate your payment gateway into the ecommerce website. This process might require some technical knowledge. You may either outsource or hire some experienced developer for ensuring that the payment gateways are running properly and are secure.
The payment processors are typically the 3rd party companies which are appointed by the merchant for handling the payment transactions. The processors execute the transactions mainly by transmitting the data between you and your customer.
There is a bank which issues credit card and debit card to your bank. The payment processor even offers credit-card machine for accepting the credit-card payment personally.
Occasionally the payment processor is not the safest and you are responsible for per transaction percentage fees. You need to check on the fee as it might end up higher than dedicated merchant accounts.
Even though the payment gateway and the payment processor are a little different, a lot of online services provide both these features.
Why hire us
We would help you integrate with the payment gateway. We understand all the technicalities and the whole process.