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What is a Payment Gateway? | Everything you Need to Know

What is a Payment Gateway? | Everything you Need to Know

Payment gateways enable online business owners to accept payments from customers across the globe. No wonder payment gateways have become dramatically popular in recent years. 

However, because of too many available options, it becomes hard for business owners to decide which one's the best. If you're going through a similar dilemma, this blog can help. This blog talks about everything from what a payment gateway is, how it works and why you need it to how you can choose the best payment gateway. You can go through the information and make an informed decision for your business.

What is a Payment Gateway?

You can think of a payment gateway as a technology that facilitates the payment from the customer to the business or merchant's (you) bank account.

Everything from securely transferring the payment information and checking if there's enough balance in the customer's account to notifying the payment status and transferring the money into the acquirer's (merchant) bank account is managed by a payment gateway.

How Do Payment Gateways Work?

Here's a step-by-step explanation of how a payment gateway works:

1. Entering the information: Once customers add products to their carts and press the submit button, the website redirects them to a payment gateway. That's when the customer is prompted to enter the payment information like the card number, expiry, CVV, etc.

2. Authorization: After the information has been submitted, the PG takes the customer to a 3D secure page (added layer of security) or the issuer bank's (customer's bank) page for authorization.

3. Ensuring Sufficient Balance: Once the transaction has been validated/authorized, the issuing bank checks whether the customer has sufficient balance to complete the transaction.

4. Displaying Messages: If the balance isn't enough, the payment gateway notifies the merchant (you) with a message, and the merchant, in turn, informs the customer. In this case, the customer can choose some other payment method.

However, a success message is sent to the merchant if the balance is sufficient.

1. Settling the Money: After the success message, the issuing bank settles the payment with the payment gateway, which further settles the money with the merchant (you) within a few days or instantly.
2. Transaction Complete: Once the payment is debited from the customer's bank/card/wallet, the customer is notified with a message indicating the payment has been made and the order has been placed.

Fun Fact: The payment gateway performs all of the above steps in almost real-time within 3-5 seconds.

Why Do you Need a Payment Gateway?

When it comes to physical payment, the customer can offer you cash, vouchers, gift cards, or credit or debit cards that you can use to process payment using a POS machine. However, when it comes to online payment, there's no way for you to confirm if the person entering the payment information is the rightful owner. Even if the user enters the information, the data is always at risk of being stolen. That's when a payment gateway comes into the picture.

A payment gateway is a medium that encrypts and sends the payment information from the customer to your bank and guarantees a safe transaction. Also, it uses OTPs for authentication, which helps ensure the user's identity. In a nutshell, you need a payment gateway to operate an online business regardless of location and ensure secure payments.

Now that you know how vital a payment gateway is, let's help you choose the right one.

Criteria to Look for in Payment Gateway

Here's what you need to look for in a payment gateway:

Criteria to Look for in Payment Gateway

1) Security

Security is one of the most imperative things to consider while selecting a payment gateway. After all, that's how you ensure that you and your customers are protected against fraud. Therefore, make sure that your payment gateway:

  • Is PCI level certified
  • Uses data encryption (HTTPS)
  • Is 3D Secure
  • Uses tools for fraud identification and prevention
  • Offers support if fraud happens

2) Supported Payment Methods

Your payment gateway must support all the payment methods you think your customers will use to pay for your products. For instance, people in some countries like China use Ali Pay which is banned in India. And if you wish to do business in China, make sure the payment gateway supports it.

Common types of payment methods are:

  • Credit/Debit Cards: Mastercard, Visa, Discover, American Express, etc.
  • Wallets: Amazon Pay, Ali Pay, Google Wallet, Apple Pay
  • Net Banking

3) Pricing and other Fee

Yet another essential factor to consider is the pricing and other expenses involved. If too many expenses are involved, chances are you might end up losing money, which isn't good for business. 

Therefore, always check all the expenses you might incur for using a particular payment gateway. Here are some expenses you may need to compare:

  • Setup Fee: This is the amount you need to pay during the integration of the payment gateway and is a one-time payment.
  • Annual Fee: The annual fee is the rent or subscription amount you pay each year for using the services the payment gateway offers.  
  • Refund Fee: When the customer purchases a product and makes the payment but decides to return the product, a refund is to be issued, which is also facilitated by the payment gateway. And the fee charged by the gateway to complete this transaction is the refund fee. Most gateways do it for free, though.
  • Commission Per Transaction: Most payment gateways charge a fixed percentage and tax for every transaction they process on your behalf. And this is the most important expense you need to take care of because it may seem small initially but could add up in the long term. 

4) Reliability

You must go for a reliable payment gateway. Here are the factors that contribute to the reliability of a payment gateway:

  • Payment success rate: If payments on your payment gateway decline or fail too frequently, it'll force the customer to choose your competitor. And that's something you'd never want. Therefore, go for a payment gateway that has a high success rate.
  • User-friendly interface: The UI must be simple and preferably customizable. The simplicity will make it easy for the customer, and the customization will allow you to add your unique brand element.
  • Customer support: How quickly your payment gateway responds accounts for reliability too. The faster they are at providing resolution better the reliability.

5) Ease of Integration

Your payment gateway should be developer friendly, i.e., it should not take forever for your developers to get the payment gateway up and running. You can simply visit the payment gateway website and cycle through the integration steps to check this.

Also Read: Why Do You Need Multiple Payment Gateways?

How Can inai Help?

Now that you know what to look for in a payment gateway, you can make an informed decision. 

However, unfortunately, you might not be able to find all the features you want in one payment gateway. There would always be something you'll have to compromise with. For instance, if one PG offers good technical support, their transaction fee will be higher, and if another PG offers less, you may have to experience poor support. So, how would you deal with that?

Well, that's when inai comes into the picture. inai is a well-known payment aggregator platform that can help you integrate over 50 payment gateways, both domestic and international, on your website, saving you engineering costs and time. Also, with inai, you can improve your customer checkout rate by 60% by allowing the customers to choose/select the payment method of their choice. You can even customize the checkout experience for your customer and direct them to the payment gateway based on several factors such as gateway fee, success rate, etc.

For instance, if PayPal charges a higher fee than Amazon Pay for card transactions, you can enable Amazon Pay for card transactions and use PayPal for all other transactions. And if you find that a particular gateway has a better success rate than others over time, you can make it default. All this with a flick of a button. One of the most amazing things about inai is its near-code-less integration. The only time minimal coding is required is when you're integrating, which takes under 60 minutes. And after that, you can customize anything and everything without touching any code. Now, how can you beat that?

So, if you wish to save heavy engineering efforts, time & money and want to ensure a seamless payment experience for your customers, reach out to inai now.  

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