Once you find a credit card processor or open a merchant account, you have the option to be equipped with an online payment gateway.
A payment gateway is the virtual device through which credit and debit card payments are securely passed and authorized. It can also authorize a host of other payment types.
Without this gateway, you would not be able to accept credit cards online.
You surely do not want to miss out on online payments and the ability to accept as many of the 3,000 different types of payment cards available. Yes, this is the actual number.
Online purchases have made a huge jump in the last few years. Did you know online E-commerce in 2015 amounted to 1.67 trillion dollars? This figure is expected to jump to 3.55 trillion by the end of 2019.
There’s a lot of revenue up for grabs!
But let’s focus on an actual measurable we know for a fact. Did you know in 2015 online shoppers spent on average nearly $2000? Think about this figure for a minute. It’s just an average.
Obviously the more quality the product being sold represents and the more presentable and friendly the user experience is, the more people spend. Creating content to go along with your products has proven to be a growing trend and resonates with online shoppers.
Of course, none of these statistics matter unless you equip yourself with the proper online tools and support to accept your online shoppers’ payments.
Let’s talk a little more about what an online payment gateway really is, shall we?
An online payment gateway is an E-commerce application service provider. Sounds complicated doesn’t it? It’s really not too scary, don’t worry.
Essentially, what the application service provider does is it authorizes credit and debit card payments from not only online retailers, but E-businesses, bricks and clicks, and also traditional brick and mortar retailers.
It does this by facilitating the transfer of the customer’s credit card information from the payment portal to the front end payment processor or the acquiring bank.
Once the online shopper has initiated the online sale, the payment gateway performs a variety of tasks in order to authorize it.
The process basically goes as follows:
- The customer adds all of the items they wish to purchase to their “virtual shopping cart” and, once they have entered all of their personal information including their credit/debit card info, they hit the “submit payment” button.
- All of their information is then encrypted by the user’s web browser to be transferred to the online merchant’s web server. This encryption is, among others, an SSL (Secure Socket Layer) encryption. An important piece of information for you to know about this, and something which could work to your advantage, is some gateways can and may pass the customer’s information directly from their web browser to the gateway, bypassing the merchant’s web server completely. This reduces your PCI/DSS compliance obligations without the need to redirect the customer away from your website.
- Once this occurs, the merchant then forwards the payment information to their payment gateway, using the same SSL encrypted connection to protect the payment information.
- The gateway then sends the information to the card association for approval (or denial) of the payment. In cases where an Amex card or Discover credit card was used, the credit card association acts as the issuing bank and provides either an approval or denial message to the payment gateway. If the card used is a Visa or Mastercard, the information is transferred to the card issuing bank for approval.
- Once the transaction is processed, the card association or issuing bank sends a notification back to the payment gateway with either an approval or denial code.
- The gateway then forwards the message to your website to let the customer know their payment was received and processed.
- Once the payment has been fully consummated, the merchant takes all of its approved transactions and submits it in “batch” form to their bank for settlement via its processor.
- The bank makes a “batch” settlement request for the credit card issuer.
- The card issuer sends a settlement payment to the acquiring bank (usually within a day).
- The bank then deposits those funds to the merchant’s (your) account (usually the day after).
All of this, up until the “batch” settlement occurs, happens in a matter of 2-3 seconds! Seems impossible right?
Nothing really seems impossible with the Internet anymore though, does it?
The entire process from the click of the “submit payment” button to the deposit into your merchant account takes typically 2-3 days. Pretty awesome right?
Online payment gateways, as you can see, are an integral part of the online payment process. The world of online payments wouldn’t be the same without this very important application service provider.
For questions on payment gateways or related topics, give us a call here at RedFynn. We have dedicated representatives ready and waiting to answer all your questions. (888) 510-9871