The third-party agent who secures the transaction between merchant and the customer is known as payment gateway. They are a service provider in online to authorize and process payment. The process of this is to collect money securely from the customer and give it to the owner’s bank account.
Payment gateway providers should satisfy the needs of both the customer and business owner. From customer side the payment gateway provider should make the transaction safe, quickand also they should feel easy and comfortable while transaction. Payment gateway providers should provide multiple payment methods like debit card, credit card, net banking, and other payment methods. They should also protect customers from fraud. Payment gateways are used only in case of electronic transaction.
The selection of payment gateway providers depends on the transaction fee for each transaction made by the customer, method of integration, payment methods, product permission by both physical and digital and also based on the time taken to deposit the money to the merchants account once it is collected from the customer end.
The selection of gateway provider also depends on the procedure for paying and it is said that 23% of customer quit their online shopping because of the complexity of payment or plenty of information needed to finish their payment. For the purpose of safety, they encrypt the data which are to be transferred and also secure the protocols.
A payment gateway can be used in 5 major types of transaction. They are authorization of funds before making actual payment. This type of transaction is generally used in case where it takes time to manufacture and ship the product. In this type the provider actually checks the ability of customer for paying the money for the selected item.
The second type of transaction provided by the payment gateway is the capture in which the actual amount is taken from the customer account and then transferred it to the merchant’s bank account.
The third type of transaction is a sale, it is a combination of both authorization and capture. This type of transaction is used for immediate purchases like e-tickets and subscription for any magazine or channel.
The fourth type of transaction is a refund. This type of transaction happens when the customer cancels the order in this situation the provider give the money back to the customer account.
The fifth type of transaction is void, this situation is similar to the fourth type of transaction but in this type the money is not yet collected from the customer.
Even if the payment gateway provider makes the transaction comfortable and easy for customer, the process behind the screen is very complex. After collecting information from customer the service provider should perform several tasks within a few seconds.
In the transaction process first the customer purchase things and while checkout they enter the card details or the required transaction details. The data provided by the customer will be encrypted for safety purpose and it will be sent to the merchant’s web through SSL connection. After receiving the encrypted data the merchant passes all the data to payment gateway through another encrypted SSL connection.
Once the data is received by the payment processor they transfer it to the card network. Payment processor transfer data between the merchant’s account and the payment gateway. After receiving information the card network verifies the encrypted data and transfer it to the issuer bank.
The bank can accept or deny the request and their response will be sent to the payment processor from there the information is passed to the gateway from where it is transferred to the website. Next the customer receives information about the transaction status finally the bank transfer the correct amount to the merchant’s account in next two working days.
There are multiple steps to integrate payment gateway and website. There are four main methods to integrate a payment gateway. Each methods has its own advantage and disadvantage.
The first method of integration is hosted method in which the customer should leave the website to complete their purchase payment. In this type the payment process is handled by the gateway provider and this type of integration is very easy to use. Since the customers are redirected to another page for the transaction the trust on this type of integration is very less in customer side and there is a lack of control over the gateway. This type is best suited for local and small business.
The second method of integration is a direct post method in this the customer will not be redirected to another page. The data entered by the customer will be directly transferred to the gateway and processor without even storing in your own server. But the disadvantage of this method is the lack of security. Vendor needs API connection to post the data. It can be used for all size of business.
The third type of integration is non-hosted type or integrated type. The purchase can be done on the same page using this type of integration and it is integrated via API. The advantage of this type is that you can customize your payment and you have good control over the transaction.But the maintenance cost is very high and this type of integration is very tricky to use. This type of integration is suited for medium to large size business.
While selecting the best online payment gateway provider we should first know about the price details. Every online payment gateway provider has its own fee structure for gateway set up, monthly maintenance fee for the gateway, for initial set up of merchant’s account and transaction fee for each transaction.
The transaction fee is based on the verification charges. Selection of the payment gateway also depends on the payment method and also based on the currency that is accepted for the payment. The product type should also be considered while selecting the online payment gateway. Online payment provider gateway should support both physical and digital products.
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