Download Guide. You can unsubscribe at any point. This website uses cookies to improve your experience. We'll assume you're ok with this, but you can opt-out if you wish. More information. Now Trending. How Can Direct Debit be Improved? Could the move towards Direct Debit as a primary payment method for road tax provide a major boost to What is a Payment Gateway? As the name suggests, payment gateways are like bridges between merchants and customers. When a customer makes an online purchase, information is exchanged between their bank accounts and your merchant account.
The payment gateway software communicates back and forth between sellers, buyers and financial institutions, eventually determining whether to accept or decline the transaction. This virtual payment process occurs in seconds and is now one of the most common methods of accepting payments in the retail industry.
Virtual payment gateways work in tandem with payment processors, which transmit the data gathered by payment gateways between businesses and customers. Payment gateways are typically protected by layers of encryption, ensuring that payments are legitimate before they ever reach the acquirer , which in many cases are banking institutions. This process verifies that personal customer data, like credit card details and addresses, are kept safe and protected from fraud.
Yet not all payment gateway providers are created equal. As we know, payment gateway solutions are far more complex than they may seem from the outside. These solutions can become even more complicated depending on what service you use and how you organize your virtual store. Typically, this option is best for large businesses with a high volume of daily purchases. With a local gateway, a business owner is completely responsible for processing customer payments.
This can be costly to implement and maintain, but gives you the most control over your payment system. Online payments systems like PayPal and Stripe are good examples of this kind of gateway. When a customer makes a purchase, they are redirected to a payment form on a third-party server.
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Develop and improve products. List of Partners vendors. A payment gateway is a technology used by merchants to accept debit or credit card purchases from customers. The term includes not only the physical card-reading devices found in brick-and-mortar retail stores but also the payment processing portals found in online stores.
However, brick-and-mortar payment gateways in recent years have begun accepting phone-based payments using QR codes or Near Field Communication NFC technology. The payment gateway is a key component of the electronic payment processing system, as it is the front-end technology responsible for sending customer information to the merchant acquiring bank , where the transaction is then processed.
Payment gateway technologies are always evolving to reflect new consumer tastes and technical capacities. In the past, terminals would accept credit cards using magnetic strips and required paper signatures from the customer.
With the development of chip technologies, the signature phase could be removed in favor of a personal identification number PIN entered directly into the payment gateway hardware. Today, contactless purchases are also available, with many customers now using their phones as a payment device instead of plastic credit cards. The architecture of a payment gateway will differ depending on whether it is an in-store gateway or an online payment portal. Online payment gateways will require application programming interfaces APIs that allow the website in question to communicate with the underlying payment processing network.
In-store payment gateways will utilize a POS terminal that connects to the payment processing network electronically using either a phone line or an Internet connection. A payment gateway is distinct from a payment processor, a service that connects the customer's bank to the merchant account and facilitates the actual movement of money.
You can think of these like two halves of the transaction: a payment gateway collects customer information for payment, and a payment processor uses that information to contact the customer's bank and the merchant account, debiting one account and crediting the other.
A payment gateway collects customer card information and encrypts it for later processing. A payment processor uses that information to charge the customers' bank or credit card provider. Then, the customer has to fill and submit the payment form with the credit card information. The collected encrypted data goes to the payment network, where it is handled by the bank and then directed to the processing center. At this stage, the processing center authorizes the payment and checks with the corresponding credit card issuer to make sure that everything is in order.
Then, the payment gateway receives a response for transaction approval or decline. The payment gateway informs the merchant about the outcome of the transaction. Take your time and review the features that can be valuable to your business. For some merchants, the cost may be the highest priority. For others, it may be specific payment methods or currencies. Make sure to check at least several options before you choose the final provider.
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