For the last few years, the usage of digital payment methods has touched a new high. Things have perked up further for digital payment during the Covid-19 pandemic as well. But, how many of you are aware of the functioning of the payment mechanism? Through this write up we strive to provide a good account of the same.
What do you mean by a Payment Gateway?
It happens to be a merchant service that approves and evaluates debit or credit card or PayPal payments for online traders and old-fashioned businesses. In simple terms, it acts as a mediator between your web store and the payment processor who gets paid by your customer. The digital transactions are enabled by coding sensitive data and shifting it between a payment portal and back/front end processor.
Digital payment process
Gathers info on the credit/debit card;
Encrypts the transaction information;
Sends it to the credit/debit card processor; and
Dispatches an approval or a rejection.
Is the process safe?
Payment Gateway (PG) can easily be merged with the majority of websites and virtual shopping carts to facilitate online credit card processing. This shopping cart is frequently utilized prior to the PG. It enables your customers to select the items they want to purchase, and post checkout, the shopping cart adds the purchased stuff and tax and then gathers the customer’s shipping and billing info.
Once the shopping cart process finishes, the PG encrypts and records sensitive data such as credit or debit card numbers, CVV, and CVV2 information. These are very crucial data and need to be secured from nefarious activities. Security is a critical part of these procedures. The card associations have drafted rules and regulations which should be followed by the person who obtains the card information. These rules are known as Payment Card Industry- Data Security Standard.
To add more layers of protection, online order is concluded with an HTTPS protocol that conveys personal information safely via the parties involved in the transaction.
The Functioning of Payment Gateway
It enables interaction between your website or brick and mortar store, the payment processor, and the bank whose credit or the debit card is used to finish the purchase.
Working Processes
The process starts as a customer places an order on a product from a PG-compliant merchant. The customer then clicks buy or any other similar option via keying in the card particulars on the app or merchant website.
If the order happens through a website, the customer’s web browser codes the information to be sent to the merchant’s web server. In other scenarios, similar action is performed via the Secure Socket Layer.
Following this the information is passed on from Merchant’s site to the PG.
PG dispatches transaction details to the payment processor of the concerned bank of the merchant.
A clearance request goes to the card association, which post examining the request, responds back to the processor. It signals whether the transaction was successful or failure, in the latter case it even provides reason for rejection.
Then the payment processor passes on this info to the PG.
Then PG sends it to the Merchant website. This is known as authorization and it takes 2 to 3 seconds. The merchant then finishes the order, and the above process can be repeated.
Finally, the PG indulges in a procedure called settling. In this it clubs all your transactions and dispatches them to the concerned bank of the merchant in a single batch vis the settlement processor.
It even stores your transactions and permits you to see those via the PG report facilities. This is how the PG process happens.
Advantages of opting for a Payment Gateway (PG)
Utmost Safety
The best part of using PG is the safety it offers to your e-commerce store, which makes sure customers are happy shopping. It efficiently handles all the safety aspects of the transaction and makes sure that the money reaches the destination without any issues.
Smooth integration
PGs can be easily integrated with well-known e-commerce platforms. For example, Shopify has integrations with over 100 PGs. They also possess a unique box payment system, which spares you the process of sign up.
Round-the-clock availability
The other benefit of selling online is that there is no need to be glued to the computer while sales are happening. It operates on autopilot mode. Hence, make purchases anytime you want to.
Several options on offer
The PG is receptive to both debit and credit card transactions at a basic level, however if you require more advanced options that assist PayPal payments and gift vouchers then those can also be availed.
Insightful reporting
It even gives instant reporting, which makes you aware of the health of your business. This is a huge advantage in case you want to learn how to boost sales or something similar.
Conclusion
These apart, there are several functions performed by Payment gateways such as clarifying the limit of merchant’s transactional ability, dispatching payment records, assuring encryption, and safety. These are only the tip of the iceberg; there are many more fascinating aspects of PG.