Payment gateway’s importance in this digital era

by Sahil Verma SIFIPAY

People nowadays live in a digital era, with technology being used in almost every aspect of their lives. Doing business has become more difficult and demanding than ever before.

The goal of this article is to teach you about online payment gateway and to make you realize the importance of payment gateways and eCommerce applications in this new era so that you can create a new effective plan for your business.

What are a payment gateway and its application?

Payment gateway software provides users (sellers and buyers) with a secure payment method in which payment can be processed completely online from buyer to seller instead of traditional cash payments or physical cards processed by POS terminals. In other words, the best online payment gateway functions as an online POS terminal.

Payment processors, in this sense, are the final decision-makers in completing a full online payment circle. A payment gateway enables payment processors to authenticate customer information online in the same way that point-of-sale terminals do with physical cards.

With these features, payment gateways are now widely used in both eCommerce platforms and brick-and-mortar stores, as people now carry less cash and prefer digital payment for all purchases. However, due to the nature of online business, payment gateways are obviously more important.

So, how do you go about selecting an eCommerce platform with a built-in or easily-integrated payment gateway? Nowadays, this is very simple because there are numerous eCommerce platforms to choose from.

For creating your own online store/eCommerce:

Shopify and Magento are two common eCommerce platforms that integrate with a wide range of payment gateway solutions. However, if we must draw a comparison, Magento is more open to integration. If you accept credit card or e-wallet payments through a third-party payment gateway, Shopify may charge a 1-2 percent transaction fee, whereas Magento does not. Magento has recently received a lot of attention because it provides a wide range of compatible payment gateways for users to choose from when creating online stores or conducting online transactions at a low cost.

For product shows in available online marketplace:

Amazon, Alibaba, Etsy, and other well-known and trustworthy all-in-one online platforms with payment gateways are available for you to start your online business. The marketplace differs from an eCommerce store in that it involves a third party, the marketplace owner.

Why is it important in this new era?

The Covid 19 pandemic has had a significant impact on all businesses over the last two years and will continue to do so in the coming years. Because people spend more time at home and avoid direct communication with other people, the shift in purchasing behavior from traditional shopping to online shopping or using mostly digital payment instead of cash payment creates a significant boom for eCommerce or online selling platforms.

The demand for an efficient eCommerce system, as well as secure payment gateways, is enormous. Without a doubt, the global adoption of eCommerce and digital payment trends will result in significant changes in business models. It represents both an opportunity and a challenge for all businesses.

Furthermore, statistics from a recent study show that the average abandonment rate for an online shopping cart is around 69.8 percent, with 28 percent of people stating that there is a problem with the online payment gateway and they are unable to complete the purchase. As a result, a good payment gateway can either reduce this number or increase sales for your company.

How to use a payment gateway online? How does it work?

Payment gateways and payment processors are two critical components of online payment. So, how do these two elements work together to complete the payment?

1. Customers visit an online store to order or purchase an item. To purchase the item, they will enter their credit card information on the checkout page.

2. The payment gateway will receive transaction details via the checkout page and then have a function to authenticate all of the customers' information before transmitting it to the payment processor.

3. The payment processor receives the transaction details and sends them to the buyer's bank, as well as checks the legitimacy and credit limit of the buyer's card.

4. The transaction is accepted or rejected by the card-issuing bank, and the information is transmitted to the payment processor.

5. The details are returned to the payment gateway by the seller's payment processor. As a result, if the bank approves the transaction, the seller will receive the approval information via the payment gateway and proceed with the purchase.

6. The card issuing bank transfers funds to the seller's bank, and the money is deposited into the seller's account.

Conclusion

In general, different payment gateways charge different fees, offer different services, and accept different types of payments. However, it is clearly a factor in determining whether you can make a sale or not because buyers may have to cancel their purchase and look for other options from other stores simply because your store does not offer their preferred payment gateway. As a result, a payment gateway that accepts all payment types is always a better option.

Second, it is critical to consider payment gateway integration; the best payment gateway that is easy to integrate with any eCommerce platform is the next option.

Third, customers are the ones who decide whether or not to buy your products, so a payment gateway with high credibility and secure elements is another good option.

It is preferable if you know which payment gateway is the best and most widely used, as well as which eCommerce platform provides that payment gateway.