If you are just starting an online business, you are learning about a lot of things you have probably never heard of, and one thing every online business owner should familiarize themselves with is what exactly a payment gateway is and what it does.
Because you’re gonna need one if you expect to succeed…
When we talk about a payment gateway, we are referring to a very important piece for the E-commerce businesses out there. If you own an E-commerce (or even a brick and click business) this information is very important for you because it directly affects your bottom line.
E-commerce is blowing up as of late. The statistics are staggering when you take a moment to look at them. Just in 2015 alone, online shoppers spent 1.67 trillion dollars .
Globally in 2013, shoppers spent almost 840 billion in U.S. dollars and this figure is expected to increase to 1.5 trillion U.S. dollars by 2018.
You wouldn’t mind being on the receiving end of at least part of this revenue, am I right?
Since you are here seeking out this information, we are guessing you have already made the decision to build an online business or are, at the very least, considering it.
And chances are if either of those scenarios fits your current position, you probably have at least a beginner’s understanding of E-commerce trends and the implications for your business. Why else would you be considering an online business instead of a traditional brick and mortar business?
You’re obviously smart enough to see the direction things are heading.
These trends will only continue to increase over the next several years too. And with companies like Amazon developing newer, faster ways of delivering goods to their customers (have you seen the new drone delivery method they are trying to develop?), it will only gain more popularity with customers.
If you have made it this far in your online business, this means you probably have at least a general understanding of how online payments are processed.
But let’s answer, “what is a payment gateway and how it works”… and how does it fit into the whole concept of online payments?
The payment gateway definition is: an E-commerce application service provider. This application service provider works directly with your payment processor, your bank (or ISO), and the credit card companies associated with the card payments you accept.
When a customer comes to your website to do their online shopping, the process is typically the same. They peruse through all of the awesome gear or merchandise you offer, selecting the ones they wish to buy and adding it to their virtual shopping cart.
This cart allows them to add as many items as they wish and then calculates the total for their purchase, including tax and shipping cost once they’ve entered their address (if the item is physical and not purely digital).
Once they have entered all the pertinent information, they get to the “submit payment” button. As soon as they hit this button, the job of the payment gateway begins.
The customer’s web browser encrypts their information in order to securely transfer their information to the merchant’s web server.
(Some gateways can pass the information directly from the web browser to the gateway without ever reaching the merchant’s web server. This move greatly reduces your PCI/DSS compliance obligations and can make life a little less stressful and complicated for you.)
The next step is forwarding information from the merchant to the payment gateway. The same encryption is used (SSL or Secure Socket Layer) for this transfer of information.
The gateway then sends information to the credit card company or bank associated with the card being used to verify if those funds or credit are available.
Once the verification is processed, the issuing bank or credit card company notifies the payment gateway with a simple approval or denial message.
The gateway then transfers the approval code (or denial code) to your website and confirms the purchase with the customer.
Once all of this is done, the transaction is complete. The funds are transferred from the customer’s account to your business/merchant account within a few days.
This is it! It sound like a lot, but you really don’t have to do anything beyond setting up your payment gateway. It does the rest. And it only take 2-3 seconds for the entire process to happen.
Payment gateways make authorizing most online payments possible. Each service provider has their own pricing scheme, so do your business a favor and do some comparison shopping. It will save you time and money in the end.
Give us here at RedFynn a call anytime to ask about our stellar payment gateway solutions and equally outta this world customer support team.
We’re here to answer any questions you have! (888) 510-9871 or www.redfynn.com.