Nowadays, more and more people prefer not to waste time when making physical purchases. Instead, they opt to buy things or services online from the comfort of their homes. This is understandable and also a benefit of modern life. e-shopping means everything can be bought online, not just seen or enjoyed. Then, every merchant wishing to increase their sales should also consider integrating an online payment gateway.
What is a payment gateway?
This is a service provider that provides payment authorization.
In principle, it is a software application connecting a website to the bank, so that customers can pay you directly on the spot without leaving their apartment.
This type of service can be used by anyone, including e-commerce sites, other service providers who want their users to pay online, and even non-profit organizations that collect donations online.
Nowadays, online payments have become more and more popular. Even older people now use digital banking and pay for many services online. According to Statista, the value of transactions is also growing rapidly.
Let’s look at several issues that need to be considered before integrating a payment gateway. Understanding how everything works can assist you in selecting the best option.
It also helps in choosing the best system for your business. This is an important step because the convenience of the solution you choose can influence the purchasing decisions of your potential customers.
How does the e-commerce payment gateway work and why do you need it?
In general, online payment systems can be compared to the point of service that can be successfully used for any type of payment using your bank card.
In this case, its main role is to authorize and approve the transaction, the only difference being that you don’t have to use a physical point of service.
If you have an e-commerce site but are still wondering if you should implement a payment gateway, the answer for you is definitely yes.
You will need to implement it to have the ability to get payments directly from your customers. Even if you have a brick-and-mortar store, it’s still a good idea to add a payment gateway to your website to generate more customers and increase sales by serving people who could never get to your physical location.
All payments processed online are made in such a way that the transactions are without the actual presence of the bank card. This means that you don’t have access to the customer’s card, only to the information your customer enters in the suggested fields.
Without the physical presence of the card, it becomes a little easier to commit fraudulent actions at both ends. This means that the online payment system you use must be reliable and offer a high level of security.
All payment systems use approximately the same mechanisms. These are made up of several steps, most of which are hidden in the background.
There is a whole lot of “communication” between different facilities, rounds of approvals, complex remittance processes, etc. In short, the whole process is a bit like this:
- Confirm the order and provide credit card information.
- Encryption of information for security reasons.
- Information sent to credit card associations: Visa, MasterCard, etc.
- Transaction approval or refusal.
- If approved, the transaction changes to authorized status.
- Approval from the seller/merchant side.
- Payment is received by the card issuing company.
- The payment is sent to the relevant bank.
- The transaction is confirmed by the bank and added to the cardholder’s statement.
Some of these steps happen almost simultaneously, although the funds may take some time to appear in your account.
Modern gateways comply with all the operations and permissions mentioned to protect both parties and then let them finalize their transactions.
Now you see that the question is not whether you need a payment system, but how to include a payment gateway in a website and how to make sure you have chosen the right one.
How to choose the right gateway for your e-commerce site?
First, the choice is between integrated and hosted payment gateways.
Integrated payment gateways
The built-in options allow users to establish a connection with them through the API they provide for your e-commerce site.
In clear terms, you serve the customer directly on your site without sending them back. On the one hand, it’s great because it can’t hurt your conversion rates. On the other hand, it makes you responsible for the security and protection of your customers’ data. Most likely, you will need development from a professional programmer to handle most built-in gateways, as this is a do-it-yourself endeavor.
Hosted payment gateways
Hosted payment gateways take the transaction itself off your website to take place on a payment gateway’s processor.
In this case, you are not responsible for private data or PCI compliance. For example, PayPal works this way.
There are downsides to this type of gateway too, as some customers don’t trust third parties and you probably don’t want your customers to leave your website to make a payment. Indeed, it reduces the conversion rate.
To make the best decision, you must examine the e-commerce platform you are using.
If you’re using Shopify, there are special requirements to make sure your chosen gateway is compatible.