If you ever issued an eCommerce payment or accept payments online, then that payment went through something called a payment gateway. A payment gateway is used to capture and transfer all data associated with the payment from the customer to the business, and then sends back information on whether the payment was accepted or not back to the customer. In other words, it鈥檚 the virtual version of a credit or debit card reader that you use in a store.
These gateways are an essential part of online direct to consumer and B2B payments, as they keep the data secure and encrypted throughout the entire process. Learn more about payment gateways and why owners of any types of ecommerce businesses would need to know about their main functions.
eCommerce Payment Gateway
You may be wondering just why exactly you鈥檇 need a payment gateway. For eCommerce especially, it鈥檚 an essential piece of the process. When a customer pays in-store, it鈥檚 easy to verify whether or not the card they鈥檙e paying with belongs to them. Online, however, is a different story. There鈥檚 no physical terminal for them to swipe a card, so you鈥檙e relying on them to accurately enter their card information.
A payment gateway will go over their information and verify that everything was entered correctly. It also helps to protect against fraudulent transactions. This payment gateway for your website will help your business process reputable transactions and protect you and your customers. Think of it as a middleman performing the transaction and verifying data so an eCheck payment or other payments don鈥檛 bounce.聽
Credit Card Payment Gateway
Keeping card information secure and protecting your business from fraud is the key function of a payment gateway, especially when working with credit cards. An online credit card payment is conducted as a card-not-present transaction since there is no cashier physically present to verify that the credit card is being used properly and by the right person. This gateway between you and the customer keeps both of you protected whenever someone is choosing to pay with a credit card.聽
It also helps in debit card transactions too. Customers can feel secure paying on your site with a debit card knowing that you鈥檙e giving them a truly secure and encrypted payment experience. If that wasn鈥檛 the case, you could end up losing sales and trust as people would go elsewhere to find a secure payment process.
Maintaining PCI Compliance
Once the customer proceeds to your website and chooses the product they want, they then go to the checkout where they are presented with options to buy. It could be聽 recurring credit card payments, ACH payment, credit card payment, or others. In order to maintain PCI compliance, you need this step within the purchase process. Any company accepting credit cards should be adhering to all the rules for PCI compliance, as it can end up hurting you if you don鈥檛. If you鈥檙e using a product like Bluecart, then all of this is automatically set up for you and you don鈥檛 have to worry about any of it.
Payment Gateway vs. Payment Processor
While you may hear the terms payment gateway and payment processor often as a business owner, it鈥檚 important to understand the difference. In every transaction, four parties are involved: you, your customer, your customer鈥檚 bank, and your bank. Processing these transactions involves both a payment gateway and a payment processor.聽
A payment processor鈥檚 role in a physical transaction is to transmit the data between your bank and your customer鈥檚 bank. They usually also provide the credit card machines or a point of sale () terminal you have at your register. A payment gateway is used to securely transmit online payment data from your customer鈥檚 bank to your bank and to authorize eCommerce transactions. Payment gateways use SSL encryption to successfully and securely deliver the customer鈥檚 credit card information to the issuing bank. Once it arrives at the bank, the gateway then decodes the data so the bank can either approve or deny the transaction. Many times, the gateway will also look at the physical location of the computer and the customer鈥檚 recent activity in an attempt to detect fraud.
Essentially, if you鈥檙e going to operate both brick-and-mortar facilities and an eCommerce site, then you need both a payment processor and a payment gateway for secure transactions.
Merchant Account vs. Payment Gateway
Another necessity for any business selling online is a merchant account. You鈥檝e likely heard this term mentioned in conjunction with payment gateways and payment processors. When you use a payment gateway, the gateway deposits your payments into that merchant account. A merchant account is not your business bank account, though. It鈥檚 actually considered a sort of holding place for eCommerce deposits.聽
Money made when you sell online is not automatically deposited into your bank account because sometimes a customer requests a return. When that return is processed, the funds are pulled from that merchant account. Whatever is left is then deposited into your account. Additionally, you may be getting deposits from several sources, and rather than make multiple deposits at a time, the merchant account will assemble all the funds and deposit them at once for you.
Getting a merchant account is best done through a full-service online payment solutions provider, although some will not give you that option and will have you try to seek it out on your own. Instead of doing that, it鈥檚 recommended to find one that will give you all the elements needed for successful online transactions so that your business can continue running smoothly without any issues.
How to Get a Payment Gateway Set Up
If you are trying to set up eCommerce on your own, then there are several third-party providers who will offer you a payment gateway. This will be an extra monthly fee on top of everything else you鈥檙e already paying for your online business. An easier way to obtain a payment gateway is to go with a payment processing provider like 好色TVt who will provide everything you need in a secure environment with one easy fee. Set up a free demonstration today.
好色TVt is the best subscription billing and subscription management software platform. We have some of the industry鈥檚 lowest fees and bank-level security all integrated into a wholesale, eCommerce, and subscriptions platform. You can even set your invoices to net 30 terms or allow prepayment right in the platform.