Online Payment Gateways for Small Business Owners

Have you ever wondered what happens after you enter your credit card information and click the "order now" button when making an online purchase? The answer is a complex exchange of information between multiple stakeholders that takes place in a matter of seconds. This entire process is made possible by a device known as an online payment gateway.

In the world of eCommerce, a payment gateway is a critical service. It exists to allow transactions to take place when a physical credit card is not present and a merchant is unable to verify a customer's identity. Having a good payment gateway for your eCommerce business allows you to accept various forms of payment while also ensuring the security of your customers' personal information.

Payment gateways are a somewhat ambiguous subject because they occur behind the scenes of a transaction. We'll explain what a payment gateway is, how it works, and what it can do for your small business in this guide. We'll also provide some payment gateway options for you to consider in order to provide your customers with the best possible checkout experience.

How Payment Gateways Work

Step 1: The Customer Submits Their Information

The best payment gateway is activated when a customer enters their credit card information on your eCommerce platform. First, the information is sent from the customer's web browser to your eCommerce platform. When your eCommerce platform receives the data, it sends it to your payment gateway via an encrypted connection. Encryption is the process of encoding a message so that it can only be accessed by authorized parties.

Step 2: The Payment Gateway Passes Along the Information

The transaction information will be forwarded by the payment gateway to the payment processor used by the bank with which you have a merchant account. A payment processor is a business that is authorized to handle credit and debit card transactions between buyers and sellers. In this case, the payment gateway serves as a go-between for the merchant and the payment processor.

Step 3: The Payment Processor Verifies the Transaction

The payment processor will then contact the credit card's issuing bank to ensure that the funds are available and the card is valid. When funds become available, the processor will connect with your merchant account to deposit them. The purchase will then be approved or declined by the issuing bank of the credit card. Regardless of the outcome, the information is relayed back to the eCommerce platform via the payment gateway.

Step 4: If Approved, the Sale Is Executed

If the issuing bank of the credit card approves the transaction, the merchant's eCommerce platform will complete it. The funds will then be transferred to the merchant's account by the payment processor.

All of this happens in a matter of seconds. It is important to note that your payment gateway and merchant account can be integrated with a payment processor. Payment service providers (PSP) are companies that provide this service.

Payment Gateways for Small Business Owners

A payment gateway is required if you sell online. But how do you decide which one to go with? A good online payment gateway, on the other hand, provides much more than just the secure transfer of information. Here are some things to think about when making your decision:

Cost

Payment gateways typically have three costs: setup fees, monthly fees, and transaction fees. If you choose a separate payment gateway and merchant account, you will also have to pay fees on the merchant account, such as setup fees, software or equipment fees, monthly fees, early cancellation fees, and processing fees, among other things.

Depending on the type of business you run and your payment requirements, using a PSP may be less expensive. These companies do not charge monthly fees, but they do charge a higher per-transaction fee.

Security

Customers will not provide sensitive financial information if they do not believe your website is secure. You also don't want your website to be hacked and your customers' information stolen. While the majority of payment gateways include a variety of security features, the best include point-to-point encryption and a gateway that meets Level 1 PCI compliance standards.

Accepted Payment Methods

Choosing a payment gateway that accepts a variety of payment methods broadens your sales net and makes your company appear more credible. If their preferred payment method is not accepted, nearly 60% of customers will abandon the transaction. Furthermore, when they see trustworthy card logos (Visa, MasterCard) prominently displayed in an online store, 80 percent of customers feel safer submitting their credit card information.

Do some research on your target market before deciding on a payment method. What is their preferred method of payment? Please keep in mind that if you sell internationally, preferred payment methods may vary by country.

Compatibility

Payment gateways are third-party applications that must be integrated into your current platform. Check that the payment gateway you choose can be integrated without causing too much disruption.

Payment Location

Certain payment gateways will allow you to finish the checkout process on your own platform, while others will redirect you to another site. When choosing a payment gateway, consider the type of experience you want your customers to have. Customers could also be redirected to a hosted platform on your site to complete the transaction.

Customer Service

An issue with your payment gateway means you will not be able to accept online credit card payments, which would probably cause a lot of problems for you and your business. Because of this, make sure you align with a payment gateway service that provides 24/7 support. The eCommerce business never sleeps, so you should be able to get the help you need at all times.