The capacity to accept payments online is increasingly crucial for businesses as online transactions grow and take on a larger role in the global economy. The gateway for online payments serves as the entry point to the network for online banking. To be executed, every online transaction must go via a payment gateway. Between the user’s website and the financial institutions that handle the transaction, the payment gateways serve as a link. Gateways handle all of the many interactions between a user and a web browser. An E-commerce payment gateway routes and authenticates transactions.
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What is E-commerce Payment Gateway?
The technology that merchants employ to receive debit or credit card payments from customers is known as a payment gateway. The consumer-facing interfaces used to gather payment information are called payment gateways. Payment gateways are point-of-sale (POS) terminals used in physical establishments to take credit card data from customers using a card or a smartphone.
Payment gateways are the “checkout” portals used in online retailers where customers enter credit card information or login credentials for services like PayPal. Payment processors, who use customer information to collect payments on behalf of the merchant, are different from payment gateways. Payment gateways are also available to enable transactions in cryptocurrencies like Bitcoin.
Types of Payment Gateways
A payment gateway is a more practical, trustworthy, and secure alternative to direct bank transfers for many firms as a result of technological advancements. The following are a few of the most typical payment gateway types:
1. Hosted payment gateways:
When a customer uses this payment gateway, the system takes them to the website of the payment service provider once they click the “purchase” button on the merchant website. The customer must now provide the necessary card or bank details. The customer then returns to the store’s website to view their order confirmation message after confirming. Merchants can use their brand on the payment page to boost client confidence.
2. Self-hosted payment gateways:
The customer must enter their card or bank information on the merchant’s website to use this payment gateway, also referred to as a pro-hosted payment gateway. Customers could be required to submit data in a particular format. The information is subsequently sent to the payment gateway’s URL after submission. It enhances the customer experience to have it as it is on the merchant’s website.
3. API-hosted payment gateways:
On the merchant’s website, the customer enters their bank or credit card information through this payment gateway. The payments are processed through HTTPS inquiries or APIs rather than sending users to the URL page. The entire purchasing procedure is completely under the merchants’ control. Merchants must, however, be DSS compliant and have SSL certification to offer this service.
4. Consider the following when selecting a payment gateway:
- Businesses must decide how many currencies and payment methods they want to accept during the payment process. Customers would feel more at ease and happy if there were additional payment choices available.
- The entire transaction process must be completed quickly to give excellent customer service. This covers the transfer of money from the client’s account to the client’s account with the merchant.
- The transaction expenses and service prices should also be taken into account. Transaction volume, frequency, and a variety of other factors all affect fees.
- Some payment gateways demand the use of merchant accounts. They have reduced transaction fees compared to other solutions. Additionally, especially for organisations with high volume, they are far safer and more secure.
- The greatest level of security required for payment gateways is PCI compliance and 3D security.
How do payment gateways work?
The payment gateway process flow is as follows:
During checkout, the merchant’s website transfers payment details encrypted to the payment gateway:
- The customer uses their laptop or phone to browse the website, adds their choice to their shopping cart, and then goes through the checkout process.
- They could be prompted to verify their order and provide their billing and shipping information as part of the checkout process.
- They click “order” or “pay now” to submit the order.
- The payment information is transferred to the web server after being encrypted by the customer’s web browser. Secure Socket Layer (SSL) encryption is used throughout the transaction. Thus as the merchant, one must own a complete SSL certificate.
- The transaction information is subsequently forwarded to the payment gateway by the gateway application on the website, once more utilising SSL encryption.
- The payment gateway now takes control.
Payment gateway contacts customer’s bank to request authorisation:
- The bank’s payment processor (the “acquiring bank”) receives the encrypted transaction information from the payment gateway.
- The card association for the customer, such as MasterCard or Visa, receives this information from the processor.
- The bank that issued the customer’s credit card receives the transaction through the card association.
- When the request is received, the customer’s bank confirms that the customer has the money necessary to cover the desired amount.
- The payment processor receives a code from the customer’s bank that shows whether the request was accepted or rejected (and if it is declined, the reasons why).
- The payment processor then relays this response to the payment gateway.
If the transaction was approved, the merchant is paid by the customer’s bank:
- If the customer’s payment is accepted, submit the authorisation to the acquiring bank via the payment processor once more in a batch that is processed.
- All money that has been approved is deposited by the bank either into the merchant account or the combined merchant account held by the payment gateway.
- The payment is subsequently sent into the company’s bank account from that merchant account.
How much does an E-commerce Payment Gateway cost?
The following elements make up the payment gateway fees:
1. Setup Fee:
Some payment gateway providers charge a one-time setup fee to get your e-commerce site connected to their payment gateway. This fee can range anywhere from zero to $200.
2. Transaction Fees:
Payment gateway providers charge a fee for each transaction processed through their gateway. The fee can be set as either a flat rate or a percentage of the transaction amount and could range anywhere from 1% to 3% or more depending on which provider you select.
3. Monthly or Annual Fees:
Some payment gateway providers charge a monthly or annual fee in addition to transaction fees. This fee may range anywhere from a few dollars up to hundreds of dollars, depending on the provider.
4. Integration Costs:
If you need to integrate the payment gateway with your e-commerce platform or website, you may have to pay for development or integration services. The price of integration varies based on its complexity and who you select as your provider.
5. Volume Discounts:
Some payment gateway providers provide volume discounts to merchants with high transaction volumes. If you plan to process a significant number of transactions, ask your payment gateway provider about volume discounts to potentially save on fees.
Top 10 Payment Gateways For Your E-commerce Website
PayPal is the most well-known payment gateway in the world. It has over 375,000,000 active users in over 200 countries. Because of its ease-of-use interface and easy integration, it’s a popular choice among small and medium-sized business owners. PayPal offers many features including seller protection, mobile payment, invoicing, and even seller protection.
Stripe, a payment gateway for developers, provides an easy and powerful API to customize the payment experience. Because of its affordability, ease of use, support for multiple currencies, and the ability to accept payment methods, Stripe is a popular choice among startups and small businesses.
3. Amazon Pay:
Customers can use their Amazon account to purchase items on your website. This is a familiar and trusted payment method. Amazon Pay offers subscriptions and fraud protection as well as recurring payments.
This payment gateway is known for its reliability, security and safety. It has a variety of features including fraud detection and prevention tools as well as support for multiple payment options and customizable checkout pages.
Square is a payment portal that’s specifically designed for small businesses. It offers affordable pricing and an intuitive interface. Square offers a variety of features including support for multiple payment methods and invoicing as well as e-commerce tools.
Braintree, a payment gateway owned by PayPal, offers a variety of features including multiple payment methods, customized checkout pages and fraud detection tools. Braintree is a great choice for businesses that need high levels of security and reliability.
2Checkout, a payment gateway for international businesses offers support for more than 87 currencies and 15 different languages. 2Checkout offers a variety of features including fraud detection tools, customizable checkout pages, and customizable checkout pages.
Payoneer, a payment gateway for international businesses, offers support for more than 150 currencies and multiple payment options. Payoneer offers a variety of features, such as fraud detection tools and e-commerce solutions.
WorldPay, a global payment gateway, supports over 120 currencies and offers multiple payment options. WorldPay offers a variety of features including fraud detection tools and customizable checkout pages.
Skrill, a payment gateway for international businesses, supports over 40 currencies and offers multiple payment methods. Skrill offers a variety of features including fraud detection tools and e-commerce solutions.
Setting up payment gateways can have a lot of strategic value for your business. Choosing the right payment gateway for your online store requires a lot of consideration and expertise. Furthermore, integrating a payment gateway to your e-commerce website requires extensive tech support, for which you would require the help of web developers.
This is where the consultants of Expand My Business can help you find a lot of value by helping you find the best-suited partner agency to work on your payment gateway project.
By integrating a payment gateway into your e-commerce application or website, you can take your business to reach new heights and build trust and credibility with your customers. This will, in turn, encourage them to buy products/services from your e-commerce application.