When running an e-commerce site, you cannot manage it without a payment gateway. A payment gateway can be described as the intermediary between e-commerce websites and a payment processor. Payment gateway is required to enable secure payment authorization for your e-commerce website.
What is Payment gateway?
Payment Gateway is a service that enables all of your payments through your credit/debit card provider. Payment Gateway Service is a straightforward programming application. It is essentially a channel between an e-commerce site and the bank that supports customer credit/debit card payment through payment gateway providers. In simple words, payment gateway is the latest advancement in the online selling process on an e-commerce website. Without it, you won’t have the option to charge your customers when they buy things from your website.
Why Do You Need a Payment Gateway?
Payment gateway systems can be thought of as the digital equivalent of credit/debit card processors that you can discover in digital stores. This makes payment gateways important in online retail environments.
You can go through many available platforms of this type.It is important to consider few things while choosing payment gateway, it must ensures consistent and straightforward transactions, and relates sensitive information to combat fraud in payment processing.
The payment gateway is called to authorize transactions between you and your customers. This way, if you own an e-commerce site, which indicates that you are setting up payments online, you should have a payment gateway. This is the best way to acknowledge credit/debit cards online.
Role of a Payment Gateway
Payment gateway services are paramount to take care of all credit/debit cards online. It’s a similar procedure as a point of service (POS) machine does when you pay for your shopping in store. The primary role of a payment gateway is to support the transaction between you and your customers. Remember that without the approval of the payment gateway, the transaction procedure will not complete and you will not get the cash.
The payment processor dissects and transfers transaction data. Payment gateways confirm the transaction of funds between buyers and merchants.
Importance of Payment Processor
When customers visit your e-commerce store, they are looking for a good deal for a product or service and a simple and secure payment process. The payment gateway you select for your e-commerce site should instill confidence in your customers as they make their purchases.
Secure payment processing encourages online payment transactions, customer data and other unsecured data and ensures that there are no extortion and other security issues.
Limitations of Online Payment Processing
Facts confirm that online shopping is becoming increasingly popular due to its ease of use and affordability. Whatever the case, it does not mean that e-commerce is without flaws or defects. There are difficulties small businesses faces while working collectively on the web. While payment systems and e-commerce security can ensure that there are no extortion and security risks, there is still the risk of security breaks for online stores.
Credit and Debit Card Fraud
Online payment transactions are referred to as “card not found” transactions. This type of financial transaction gives a unique opportunity for credit card fraud. Credit card numbers and other stolen individual data can be used to make purchases without the cardholder’s consent.
The ideal way to keep a strategic credit card fraud at bay is to use a payment processor that verifies customer data through fraud filtering technology.
Chargebacks Fraud or Friendly Fraud
Two types of chargebacks can harm a company’s operations: customization chargebacks and shopper chargebacks. In the wholesaler arena, chargebacks happen when your service provider charges you more for an item you’re shipping from a shopper. Loss recovery is a hassle, and the trader regularly takes the misfortune out of going after a provider.
Shopper charge refunds can happen to any seller that accepts credit card payments. At the time when a counterfeit customer makes a purchase with a taken card or when the original customer does not receive goods or services, the bank that gave the customer his credit card gives a company a purchase discount.
Shopper chargebacks can do real harm to your business, and you may be required to pay higher amounts, set up prices and expenses or face the prospect of losing your merchant account. Great payment processor protects your business from false transactions and attacks.
How Payment Gateway Works?
Now you know the definition of a payment gateway, but how does it work? This process can be broken down into a few simple steps as follows and explained below;
- The customer enters the payment details at checkout and presses submit.
- The payment gateway securely transmits the transaction to the processor to the merchant’s bank.
- The processor sends the transaction to the credit card network (such as Visa or MasterCard).
- The bank then forwards the transaction to the bank that issued the customer’s credit card.
- The issuing bank will approve or reject the transaction based on the funds available in the customer’s account.
- The results are then returned to the credit card network which sends this information to the payment gateway.
- The payment gateway receives this message and sends it to the site. If the transaction is approved, the merchant can deliver the goods or services to the customer.
- On the financial side of things, the issuing bank sends the money to the network which passes the money to the merchant’s online account.
- The bank then deposits the money 1-4 days later, into the merchant’s banking account.
Understanding the correct payment end of the online store will be the path to the long-term achievement of your online business. Unfortunately, the main obstacle in the rise of Pakistan e-commerce industry is the limited or not easy payment gateways available for payment processing.