What are Payment Gateways?

displayed code structure of a payment gateway

What is a Payment Gateway?

To put it plainly, payment gateways are integrations you’ll find on almost every website that accepts credit card payments. Odds are, you’ve used them many times before as a customer; and if you weren’t previously aware you were using one that may be because sometimes, the only evidence you’ll find of one is a tiny logo of the company providing the gateway service to the retailer in the corner of the webpage.

Who Needs a Payment Gateway?

Most business owners looking for a payment gateway are ecommerce merchants with online stores in need of some type of online payment integration. In your case, you may have certain software or shopping carts in mind and are trying to find a way to integrate credit card processing. So, if you already have a website and want to integrate payments, a payment gateway can be the way to go.

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Are Payment Gateways Secure?

Payment gateways are one of the key ways in which merchants can make transactions on their website secure. In fact, people are more likely to purchase from a website that looks secure because it is associated with a payment gateway. According to a Baymard report completed in 2019 and published by Amazon, 19% of customers abandon carts because of security concerns. Equipping your site with a payment gateway gives you more control over the checkout process and helps your customers feel safe.

What is a Payment Gateway Responsible For?

  • Authorizing Transactions
    When a customer makes a purchase, the payment gateway will communicate with the customer’s issuing bank to confirm that the funds are available for the transaction and that the purchase is approved before confirming that the payment has been processed. This is all completed in a matter of seconds so the customer can receive a confirmation immediately after making a payment. If you’re new to credit card processing, you can check out this article on how credit card processing works for additional details on the different steps involved in a credit card transaction.
  • Moving Money Between Customers and Merchants
    Because the payment gateway is facilitating the transaction between the customer and your business, it is responsible for moving the money from the customer’s issuing bank to your business’s bank account. While the funds will be removed from the customer’s bank account immediately, it may take a few days for the deposit to make it to your business’s account. Each payment processor will have their own deposit timelines, and this is something to consider when you are selecting your provider.
  • Communicating the Transaction Details
    The payment gateway will notify the customer that the transaction is approved and has been processed while simultaneously communicating the transaction details to the merchant with the details of the purchase.

How Can a Payment Gateway Help Your Business?

Payment gateways can be incredibly helpful to businesses by helping facilitate the flow of commerce so online businesses can complete more sales and continue to grow. Some of the added benefits of using a payment gateway include:

  • Lessening Security Requirements
    When you’re using a payment gateway, the transaction takes place on your payment processor’s servers, not your own. So, since you are not involved in accessing or transmitting the actual data from the transaction, you will have fewer security compliance obligations then you would if your business had access to the transaction data.
  • Provide Added Security to Your Customers Payment Information
    Because payment processors must adhere to strict PCI-DSS compliance requirements, you can rest easier knowing they will be following best practices for handling sensitive personal information, and that they are not improperly storing your customers’ credit card information. Many payment providers, offer card vaults and tokenization to allow your business to have access to customer credit card information whenever they need to make payments in the future, but without exposing you to the risk associated with directly storing credit card numbers.
  • Easy Setup lets You Start Taking Payments Quickly
    Payment gateways can be quick and easy to implement if you already have a website, shopping cart, or billing system in place. With a minimal investment of time and resources, you can quickly get your payment gateway set up and begin processing payments for your customers.
  • Seamless Customer Experience
    Today’s customers have plenty of choices for where to spend their money online which can mean it doesn’t take much for them to abandon one purchase decision in favor of another. Using a payment gateway can help you deliver the payment experience your customers are expecting so they can check out quickly and easily using their preferred payment method.
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What to Look For in a Payment Gateway Provider:

Selecting a payment gateway for your business requires the same type of evaluation that selecting any piece of software would. Be sure to evaluate features like:

  • Price
    Evaluating the pricing structure and what the payment gateway will cost your business is an important consideration in selecting the right provider for your business. There are many different pricing structures used in the payment industry and some are a better fit for certain businesses over others.
  • Ease of Set-Up
    Each business will have its own threshold for what constitutes “easy to set up” and what moves into the realm of being too complicated for their specific needs. This may also depend on the timeline your business has for needing to get a payment gateway in place. If you’re scrambling to replace a provider and your customers are wanting to make payments today, then you’re going to need a payment gateway that is quite fast and easy to set up. Whereas if you’re launching your website six months from now, you will have more time to work through the steps required to set up a payment gateway with more complexity and a more involved onboarding process.
  • Customer Support
    Deciding what level of customer support will work best for your business is a personal decision, but if you know you prefer being able to get in touch with a real person, then it’s worth looking into what support options are offered by different payment gateway providers before signing a contract. Depending on your level of technical expertise, you may want to be able to get help when you need it from the processor’s support team. 
  • Time to Get Paid
    Different providers will have different timelines for when your business will receive the deposits from the transactions you have processed. These can vary from as quickly as two business days, all the way up to a week. If your business needs to receive the funds from transactions quickly, then you will want to ensure you select a payment processor who can meet your requirements.
  • Reliability
    A conversation that can be well worth having with your payment processor is what their reliability stats are. This means asking if the company has experienced any downtime from their servers, and if so, how frequent or long are the outages. Having a payment processor who is able to provide consistently reliable service is important to your business, so you can consistently deliver the best payment experience and not upset or confuse your customers or lose out on any sales.
  • Security Setup
    As mentioned previously, because the payment gateway is responsible for properly handling customers’ payment information, it is important that they are PCI-DSS compliant and have robust security standards in place to protect cardholder information. Most payment processors will list their security standards on their website, but don’t be afraid to ask them about it if you’re not able to find the information yourself.
  • Additional Features
    Based on your business needs, are there any additional functions or offerings that you would like your payment gateway to provide? Some items to consider include if they offer recurring payments, what the customer experience is like, and can they accept international credit cards.

    Added functionality can also include the integrations offered by the payment gateway, as it’s important to ensure that the payment gateway you select is able to support the shopping carts, billing systems, and accounting software that you may already be using. While it may not be a complete deal breaker if they don’t have one of the items in terms of added functionality that you’d like, being able to use the same provider for multiple functions can help simplify your business processes and save money in the process.

How is a Payment Gateway Different From a Virtual Terminal?

Though they both rely on the internet to work, a payment gateway is not the same thing as a virtual terminal. So what’s the difference? Simply put, one is used by computer programs, the other is used by humans, though both have the same purpose: to accept an incoming credit card transaction.

virtual terminal is a user-interface (often web-based) that allows merchants to log in to enter their customer’s credit card number and manually process a credit card payment. It is great for humans, but not made for programs to interact with.

A payment gateway (sometimes referred to as a payment API or RESTful API) is a specific URL that has no user-interface but is designed to receive an incoming transaction message.

Merchant Account + Payment Gateway = Most Credit Card Processors

Most payment processors, including Helcim, offer their ecommerce clients both the merchant account and the payment gateway service together. The few processors that don’t have their own solution will often resell a third-party payment service as part of their bundle. That’s because an ecommerce merchant account without payment functionality is useless, as the merchant account has no means of receiving transactions. 

Final Thoughts

If you’re looking to add payment functionality to your existing website, shopping cart, billing system, or application, then Helcim can help. Our all-in-one platform includes a payment gateway API that allows you to easily authorize credit card payments in real-time so you can authorize new payments, void transactions, and manage your batches all from one place. Learn more here.

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