What is a Payment Gateway?
Why your business needs one
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In the dynamic landscape of modern business, the concept of a Payment Gateway stands as a technological beacon illuminating the path to streamlined transactions and enhanced customer experiences. As businesses navigate the digital realm with increasing agility, understanding its pivotal role becomes paramount for success.
In this blog, we explore the essence of Payment Gateways and unravel why your business can no longer afford to overlook this fundamental tool in today’s competitive market. Join us on a journey of discovery as we explore the significance, benefits, and indispensability of integrating a Payment Gateway into your business framework.
What is a Payment Gateway?
A payment gateway is a merchant service that verifies the cardholder’s details and allows the transfer of funds from the customer. It serves as an interface between merchant websites and payment processing banks. Gateways can be used for multiple types of payment. It encrypts customer details in online and offline transactions. In stores, payment gateways consist of point-of-sale (POS) terminals that accept credit card information by card or smartphone. There are exclusive gateways to facilitate payment in cryptocurrencies like bitcoin.1
Payment gateways differ from payment processors. Payment processors process customer payments sent to use customer information to collect payments on behalf of the merchant.
Online trading has gained a new perspective in today’s business world due to e-commerce. The use of credit cards, QR codes, and other online transactions led to discrepancies in slower fund transfers. In the next few decades, a drastic fall in cash usage will be observed. In 2022, it is estimated that more than 80% of U.S. purchases will be accomplished using a method other than cash. Additionally, from 2020 through 2025, online payment transaction values will likely grow more than 15%.2 Businesses must be aware of gateway operations that serve as the key to online payment systems.
This blog post will clarify the significance and the components of a payment gateway and its common use cases.
This blog post will clarify the significance and the components of a payment gateway and its common use cases.
How does a Payment Gateway work?
A payment gateway’s operation can be categorized as two separate entities depending on whether it is an in-store payment or an online payment. The following stakeholders are involved in transacting payments from the customer account to the merchant account.
The payment service provider/payment processor serves as a pivotal third-party intermediary in the transaction process. Their primary function encompasses a range of services, such as providing the payment gateway itself, overseeing payment processing, and offering supplementary services relevant to transactions. Beyond this foundational role, they meticulously manage the intricacies of payment processing, ensuring seamless and efficient transfer of funds from the customer’s account to the merchant’s account. Additionally, they extend their expertise to offer a spectrum of supplementary services tailored to enhance the transaction experience, covering aspects like fraud prevention, dispute resolution, and transaction analytics.
A merchant is any individual or organization that sells goods or services.
A customer is an individual who purchases goods and services from the merchant.
Issuer and issuer’s bank is a financial institution that processes payment on behalf of the customer.
Acquirer’s bank is a financial institution that processes card payments on behalf of the merchant
A payment gateway is a service used by merchants and customers to check and transact funds and their related data among each other.
How does a Payment Gateway process a transaction?
The merchant initiates a transaction by filling in the customer’s required details on the payment page – such as the cardholder’s name, card number, card expiration date, and the Card Verification Value (CVV) code. The gateway encrypts the customer’s details and performs the required security checks. Payment processors redirect the request to the issuer bank (customer’s bank). The issuer bank validates the customer data and decides whether to approve or decline the transaction. The information is sent back to the payment processor to the payment gateway and back to the customer to confirm the payment. The issuing bank releases the funds to the acquiring bank, and the acquiring bank transfers the funds to the respective merchant account, completing the settlement process. These processes might seem overwhelming, but these transactions happen within 30 seconds. The payment is transferred to the merchant account within 48 hours.
How does a payment gateway benefit business?
- High-quality customer experience – Today’s customers expect an ultra-fast transaction for their day-to-day needs. Payment gateways supply rapid transaction processes, which benefits both the customer and the merchant.
- Secure data encryption – Payment gateways provide first-hand protection with rigid security measures to guard sensitive customer information. Multiple gateways employ complex fraud detection tools that screen suspicious activity in customer transactions.
- Faster payment processing – Gateways process the funds in the blink of an eye. It handles transactions quicker than manual processing. As a result, they provide an effective checkout experience for customers.
- Global outreach – Expanding businesses must utilize the payment gateways for reaching a wider audience across the globe.
Valor Payment Gateway: Setting the Standard
While researching payment gateways, explore the possibilities provided by Valor PayTech’s payment gateway. Here are some highlighted features that set Valor apart from other gateways:
- Valor’s payment gateway uses state-of-the-art encryption and anti-fraud technology to keep transactions secure.
- With a focus on user experience, Valor makes payment processing simple for merchants and customers with a user-friendly interface.
- Valor accommodates various payment methods, ensuring that virtually every customer can transact smoothly for optimal versatility.
- With impeccable uptime stats, Valor ensures that your ability to process payments is there when you need it most.
- Understanding that payment issues can arise at any time, Valor provides 24×7 support.
Our payment gateway at Valor processes transactions while enhancing the buying and selling experience with its robust and reliable infrastructure. It’s a significant element that can influence consumer trust and satisfaction.
Conclusion
Payment gateways are more than a technical requirement in the online payment industry. They are one of the main arteries in ecommerce. Their ability to protect sensitive data, facilitate international sales, and improve the overall user experience makes them indispensable. They enhance the overall business operations by providing safe and secure transaction processes and help businesses grow across the globe.
As businesses continue to expand their online presence, choosing the right payment gateway—like Valor—becomes a strategic decision. It’s not just about accepting payments; it’s about creating a seamless, secure, and satisfying experience that could define the success of a growing enterprise.
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- What Is a Payment Gateway? How It Works and Example (investopedia.com)
- https://www.researchgate.net/publication/228280377 Online_Payment_Gateways_Used_to_Facilitate_E-Commerce_Transactions_and_Improve_Risk_Management
- https://financesonline.com/online-payments-statistics/
- https://www.abzer.com/how-digital-payments-can-transform-your-business/
- https://stripe.com/in/resources/more/payment-gateways-101
- https://www.bigcommerce.com/articles/ecommerce/payment-gateways/