Do you operate an online business? If so, you will need a payment gateway. In this post, I will explain what a payment gateway is and how it applies to your payment processing.
What is a Payment Gateway?
Definition: a payment gateway is a software service that transmits sales information between your website and merchant account provider.
Authorize.net, Network Merchants (aka NMI), USA ePay, Stripe, and PayPal are all examples of payment gateways.
A payment gateway and merchant account are two different things. It is very common to mix them up. Payment gateways are equivalent to credit card terminals, but for e-commerce businesses.
Some mobile applications require payment gateways too, so it just depends on the software you chose to use.
How Does It Work?
Payment gateways connect to your website’s shopping cart. When your customer hits the charge button, the transaction information gets sent to the issuing bank first who will either approve or decline the transaction. The payment gateway will give you a response within seconds.
At the end of the day, the payment gateway will submit your approved sales to your merchant account provider. Your merchant account provider will then deposit the funds into your bank account.
Are They Secure?
Yes, payment gateways are extremely secure. First, they meet all the PCI requirements, so they satisfy the basic credit card security standards. Second, credit card information is either encrypted or tokenized, so it is nearly impossible for a hacker to intercept this information. Third, gateways do not store full credit card numbers. Fourth, you can set permissions and restrict access to individual employees. The bottom line is that you and your customers should not have to worry about security.
Make sure you subscribe to my blog because I will share some tips on how to set up automatic fraud filters in your payment gateway, for FREE!
How Much Do They Cost?
Unfortunately, payment gateways are not free. Every provider has different prices, but they typically charge a monthly fee, transaction fee, and sometimes a batch fee.
Who Sets Them Up?
Payment gateway providers are independent companies. Many merchant account providers do not have their proprietary payment gateway. Therefore, they are resellers. As soon as underwriting approves your merchant account application, your merchant account provider will set up your payment gateway.
In my opinion, it is easier to have the merchant account provider set this up. If you have any issues with your payment gateway, then your merchant account provider can handle it for you. Also, merchant account providers usually resell multiple payment gateways so they can help you find the best one for your business. Just like merchant account providers, not all payment gateways are created equal!
Conclusion
Payment gateways are critical for accepting credit cards online. They serve as the communication link between your website or mobile application and merchant account.
I have worked with many payment gateways myself so if you need advice feel free to leave me a note in the Contact Me page. Thanks for reading!