Payment gateways have made the e-commerce revolution possible, but how exactly stick around to find out. Over the last 25 years e-commerce has radically transformed how we shop for and buy things today we can shop online from almost anywhere and paying with credit cards is usually convenient and secure of the many software applications that make this possible none are more important than the payment gateway in this video i'll explain what a payment gateway is how it works where you can get one what features to look for and how much you can expect to pay
but before i get started don't forget to click the subscribe button click that alert button so you know when we publish new content here on the merchant maverick youtube channel so what is a payment gateway well it's an application that connects an e-commerce merchant's website with the bank that will authorize or decline a customer's credit card payment payment gateways can also process direct transactions using alternate payment methods like e-checks or debit cards regardless of the payment method used the primary function of an online payment gateway is to securely transmit payment information from the customer to the customers issuing bank and all other parties to the transaction and to securely transmit the acceptance or denial of the payment back to the merchant and customer
when it comes to a payment gateway versus a merchant account you might be wondering what the difference is and whether you need one or both of them so a merchant account is an account that accepts payments from your customers after the payments have been processed your merchant account basically allows payment card funds to be sent by the acquiring bank and processing charges to be deducted by the processor before sending the funds to your checking account on the other hand a payment gateway is simply a web service that allows credit card transactions to be processed over the internet just think of it as a digital pipeline between two parties just keep in mind that if you're an e-commerce you'll need both a merchant account and a payment gateway to accept credit cards online
but if you run a physical store and are just using a credit card terminal to accept credit cards you can have a merchant account without needing a payment gateway even then you'll need one if you want to use a virtual terminal to process keyed in transactions for example if you take an order over the phone or something like that and what's more is that some point of service software requires a payment gateway to function so here's a list that shows the parties involved in payment processing and the roles each party plays a payment gateway transmits funds between your merchant account and your customers card account a payment processor is the financial institution that processes your payments an acquirer is the financial institution that manages your merchant account and a merchant account is the intermediary between your business and your customers card issuing bank a lot of parties involved in a complicated process
but you get the idea another thing to note in the payment gateway versus payment processor discussion is that because not all merchants need a payment gateway they usually aren't a standard feature of a merchant account instead merchant account providers will offer them as an optional feature when setting up your account alternately with third-party processors such as paypal or square a gateway is a core part of the product offerings while you might pay a separate monthly gateway fee and a per transaction fee with a merchant account the cost of a gateway is built into the processing fees
if you use a service such as square or paypal here's a condensed explanation of how payment processing works so the customer visits your ecommerce website places an order and provides a credit card number or another payment method the customer's payment information is then securely uploaded to the payment gateway the gateway encrypts this information and sends it to your merchant account or a third-party processor the transaction data is routed to your credit card association think visa or mastercard which then charges the processor an interchange fee
if the transaction is approved which then gets passed on to you the transaction is then either approved or declined by the customers issuing bank after authorizing or declining the transaction the issuing bank transmits this information back to the credit card association from there it goes back to your merchant account and processor then to your gateway then to your website where you and your customer learn whether the transaction has been approved or denied assuming the transaction is authorized the issuing bank releases the funds to the acquiring bank to cover your customers order and the fees owing to all parties to the transaction the acquiring bank then sends the funds to your merchant account and alerts your processor and that's when your processor actually processes the transaction the processor credit card association acquiring bank and the issuing bank all get a cut of the processing fee the remaining funds get deposited into your business's bank account and merchants usually receive their funds within 24 or 48 hours
if the transaction is declined your funds might be held while the processor investigates an internet payment gateway can be offered in one of three ways a redirected gateway is the simplest and least expensive solution for a merchant to implement a redirect is when a customer is sent to a separate site like a paypal page to complete the transaction a redirect is convenient for the seller as the redirected gateway lets another platform handle the task of processing the payment however it also leaves the merchant with less control over the process additionally the customer may not want to complete their purchase on another site or may lose trust in the payment process both of which can result in lost sales with this kind of payment gateway the customer checks out on your site
but the gateway directs the payment to be processed off-site this is what happens when you use stripe as your online payment gateway off-site processing allows the merchant to avoid having to process payments on-site and doesn't fluster the customer by taking them to another website completely to complete a purchase however the seller is still relinquishing control to the off-site gateway you may get blamed for gateway problems over which you have no control onsite processing is the preferred solution for larger well-resourced businesses in this setup the gateway and the payment processing all occur on your server essentially you handle everything this kind of gateway setup ensures that you retain control over each step in the checkout process you won't be reliant on another service to provide a good experience to your customers however you'll be responsible for any problems that arise and
you'll need to have the capacity to handle that payment gateways and processors typically charge you in some combination of the following ways a monthly gateway fee a membership fee a batch fee a setup fee a pci compliance fee and chargeback fees it's instructive to look to authorize.net the largest provider of standalone payment gateways their payment structure uses a 25 per month gateway fee 10 cent per transaction processing fee a 10 cent daily batch fee and no setup fees or other fees merchant account providers and other processors that include a payment gateway with their other offerings may advertise a free credit card payment gateway of course those gateway costs get absorbed by the fees you'll pay for the company services and regardless of the processor 5 to 10 cents of every credit card transaction
typically goes to the online payment gateway one way or another gateway credit card processing takes a slice out of the pie not all website gateways are created equal let's go through some of the options you may be looking for in a gateway depending on your business needs subscription-based pricing is more popular than ever and a recurring billing feature can allow you to automate this process with this feature you can also customize billing intervals and set up trial periods for your subscriptions while many payment gateways and processors offer support for recurring billing quality can vary be aware that the subscription management system may not allow for easy pricing changes reporting may be too basic to be useful and there may be other limitations as well in some cases you may need to use specialized recurring billing software instead of your gateway but check out our guide to recurring billing for more information on the subject i've dropped a link down in the description below
if you're running an eCommerce business, you'll certainly want to be able to accept credit and debit cards, however as the payment universe expands you'll probably want to consider accepting other forms of payment like PayPal venom apple pay click to pay and or e-check or ach payments, that means you'll need to research different gateways and processors to make sure you choose one that offers support for the payments you want to accept
if you intend to sell solely to the domestic market and don't anticipate expanding internationally this may not concern you but if you intend to sell outside the us you'll need a gateway with international capabilities that means support for multiple currencies and international credit cards but it doesn't end there different markets have different preferences for payment types you may need support for handling foreign tax systems such as value-added taxes or vats
if you intend to sell internationally research the features you'll need then make sure your chosen gateway provides everything required to succeed one of the best features of payment gateways is that they're generally plug and play meaning you can set them up on your website without having to do any coding but some merchants will need a higher degree of customization than that thankfully most gateway providers offer a number of apis or application program interfaces that let you customize how the gateway functions on your website such apis can help you manage your customer data track inventory and much much more these features may require a pricier gateway though you'll also need to hire a developer
if you don't have the skills but for the right kind of business the payoff is well worth it you may need functionality beyond what the gateway itself provides for that you'll need a gateway that integrates with other payment and e-commerce services accounting wise most major payment gateways will integrate directly with quickbooks potentially saving you many hours of manually entering transaction data you might require a shopping cart integration as well the payment gateway integration process can be easy or difficult depending on how you integrate for instance if you're using a popular shopping cart like shopify or magento you can use pre-built payment gateway modules that make the integration very very easy but if the shopping cart doesn't have a pre-built module you'll have to do a custom integration which requires a developer and it can get expensive
if you find a gateway that provides most of what you need but doesn't support all the payment methods you want to accept you can integrate with additional payment gateways that accept those payment methods many merchants do this by offering paypal checkout as an option for their customers though there are other options as well for modern e-commerce outfits pci compliance is a must several gateways on the market today simplify pci compliance for e-commerce merchants transactions are conducted on the gateway provider servers not the server hosting your website because the gateway interface is integrated into your website the customer never needs to leave your site to complete an order and with this arrangement you don't need to maintain a secure network to be pci compliant though it's still a good idea all payment gateways encrypt sensitive credit card information before they pass it along to the processing bank it's a bonus
if the gateway also offers tokenization a complex process that further protects your customers credit card information payment gateways perform the basic function of facilitating the process of credit card transactions over the web they bring a host of security and fraud prevention features that protect you and your customers you want those in your payment gateway integrations with online shopping carts and accounting software like quickbooks will help you run your business smoothly and efficiently e-commerce businesses will be well advised to look for those integrations when shopping for a gateway they'll make your life much easier while not every business needs a payment gateway every business can usually benefit from one since there are gateways that come with little to no additional cost it makes sense to consider using one even
if it's not absolutely necessary for you and that's it for our video today if you need help choosing a payment gateway setup check out the helpful resources that i've linked in the description below and if you like this video don't forget to hit that like button comment down below we answer every comment and until next time thank you
No comments:
Post a Comment