During the 1950's there was a technology which made news in a part of the world which was well known as the great growling engine of change! A technology called MICR. The main purpose of which was to allow cheques to be read by machines and get automated. As a result, people were more convenient with cheques and thus began a new age of cash-less transactions.
Fast forward to 30 years and debit cards were already a talk in the town. Having made handling money even more convenient, debit cards were a boon, especially for businesses. Today, we have multiple payment options and few years down the lane we could be looking at a new way to handle money. We are moving towards a future where smart phones are being used by the people to make payments and this has had a huge impact on services with an ecommerce application service provider. These ecommerce businesses make use of a payment gateway to authorize the payment procedure or the payment processing for their business.
Thanks to the technical changes happening around in the "payment world," payment gateways these days are just not about allowing your customer to make a payment. Payments gateways surely talk a lot more and play an important role in driving success to a business.
What is a Payment Gateway?
It is an ecommerce service which processes, verifies and accepts/declines the payment processing on behalf of the vendors/businesses. These payment gateways ensure that all the transaction info is passed securely between the merchant and the customer. Also, since online shopping involves a lot of transactions over a long distance, anonymity and verification to ensure legitimate transactions, payment gateways these days use special encryption and verification technologies for security.
How does Payment Gateway work?
When a customer places an order from an ecommerce store, the payment gateway performs various tasks to transfer the transaction details and authorize the transfer.
Encryption: The data to be sent is encrypted by the web browser before sending it to the payment processor used by the vendor's bank.
Request for Authorization: The transaction data received by the payment processor is then sent to the card association. The authorization request is then viewed by the bank and the request is either approved or denied.
Filling the Order: An authorization concerning to the merchant and the consumer is forwarded to the payment gateway. The payment gateway then transmits this to the interface to process the payment. This seemingly lengthy process typically takes a few seconds at most.
Deposition: The store owner then submits the approved authorizations in a batch to his bank for the final settlement. The bank then deposits all the approved funds to the owner's account.
Why your business needs it?
Globally, there are hundreds of payment gateways that help companies sell their product online. Ranging from simple solutions for small companies to more complex gateways for for companies with bigger online stores. But the question is, do they really make a difference? Do they play any part in improving the ecommerce sales? The obvious answer is, Yes!
With credit card frauds at a record high these days, ecommerce business are finding it difficult to sustain without proper fraud management. Payment gateways on the other hand help businesses mitigate such frauds and ensure that all the transaction data re safe, secure and encrypted.
Also, besides the credit card and the debit cards, payment gateways provide ecommerce store owners an option to process alternative payments online. This makes it more convenient to the store visitors as most of them are quite familiar with the technology and are happy when provided with an alternate solution. Above all, there are two main factors that influence eCommerce sales trust and preferred payment option. A recent report by PayPal says that these two factors combined account for up to 30% uplift in the ecommerce sales.
Payment methods is not the same across different countries in the world and ecommerce customers around the world do not rely on a single method. With a payment processor with established global ties, an ecommerce business can accelerate its plans to cater the needs of international audience.
The key players
Technological advancements in today's world have played a huge role in the change in customer behaviour. They are more informed than they have ever been and as a result they know what suits there needs the best. Payment gateways with multiple payment methods create a better user experience for such tech savvy customers who are a major part of a business's customer base.
Data security compliance
The new Payment Card Industry Data Security Standard versions more comprehensive and demand lot of validation requirements. For ecommerce business owners, this is a challenging task as they are nowhere near the PCI compliance curve. Thus, tougher security requirements becomes a costly affair for them. In such cases payment gateway solutions could streamline the data security compliance process for them.