Payment gateways are at the core of online business, whether selling widgets or making charitable donations. A payment gateway enables safe payments between buyer and seller across distances that would not have otherwise been possible otherwise – but how exactly does it work?
An order goes through several steps in order to be fulfilled successfully. When customers select one of your payment methods on your website, your payment gateway sends encrypted card data directly to either Visa or Mastercard or an acquirer processor on behalf of merchant’s bank for validation. Visa/Mastercard then verify if there are sufficient funds in their account to cover the purchase and authenticate them, before either approving or declining it with an associated response code back to both customer and merchant.
Once a merchant receives authorization, they can process a card payment and transfer funds directly into their bank account. They then can deliver merchandise directly to customers or issue refunds when applicable – typically taking only seconds thanks to payment gateway technology.
Some companies that claim they provide free online payment gateways actually charge hidden fees with each transaction that passes through. You should anticipate per-transaction charges, monthly usage fees, setup and cancellation fees and even chargeback fees from these providers.
As you evaluate potential online payment gateway providers, keep the number of payment methods they support in mind when making your selection. More options at checkout may increase conversion rates and revenue growth. It is also essential to look for solutions capable of handling international transactions so you can sell products and services to people worldwide.
Choose a payment gateway that can integrate seamlessly with all of the software platforms and tools your business uses, for an ideal customer journey and to help meet sales targets.
Finally, when choosing a payment gateway solution, pay special attention to data portability and settlement time/payout policy. Will they allow you to switch vendors without incurring massive switching fees or long wait times after deduction of transaction fees or charges? And finally – once funds have actually reached your bank account after deduction of fees?