What Is a Payment Gateway?

A payment gateway is a system for accepting credit card transactions that works between the retailer and the customer. The gateway facilitates the card payment and ensures the funds are transferred between the two parties. The system requires a complete process to help manage the payment and to transfer the funds as necessary. Gateways are useful for helping transmit and protect data, but they may not work in all systems.

Gateways will require proper safety measures to stay functional. They can manage many solutions to keep data secure without risk and to ensure all actions work well.

The General Idea

A payment gateway is like a virtual card reader. It moves the data it collects from a point of sale or POS transaction to a payment processor. The process will continue the payment transaction by confirming all data with the appropriate banks. The effort is about providing the most accurate possible transaction.

A payment gateway can work for both in-person and online transactions. An in-person deal will entail a card reader or kiosk. An online effort entails the customer entering one’s data into a network, meaning the retailer will not have direct access to the customer’s card.

The Main Steps

Here are a few steps for how a payment gateway can work:

  1. The customer provides one’s credit or debit card for payment.
  2. The payment data is encrypted and then goes to a payment process through a gateway. The gateway will ensure the encryption of all data, protecting the customer.
  3. The processor will contact the card-issuing bank to either approve or reject the transaction.
  4. The processor will move the request to approve or reject the deal back to the gateway.
  5. The gateway sends the signal to the person who started the transaction. It can be the customer in many cases, although the retailer may also get this info for physical POS transactions.
  6. The customer’s funds will be deducted from one’s account if the transaction is approved. The funds will go to the merchant’s account.
  7. The merchant can then upload the payment data to settle the transaction. The merchant can do this at any point, although batch processing usually works after the business day ends.

The gateway ensures proper communication between all parties. The gateway will encrypt the data and send the necessary signals to each party.

How Is This Different From a Processor?

While a payment gateway has functions that make it feel like a processor, the two are separate entities. The gateway is responsible for encrypting and delivering the data to the processor. The process will complete much of the work, but it will need the gateway to collect the encrypted data it needs for operation.

What Features Can a Gateway Include?

A payment gateway can include various useful features that keep transactions safe:

  • Omnichannel support is available through many gateways. An omnichannel gateway will feature support for online, in-person, and mobile payments. These solutions also reduce the need for multiple vendors for each transaction process being managed.
  • A system should be compatible with many apps, platforms, and other systems. The setup can even work with some accounting programs like QuickBooks to transfer payment data to keep it organized.
  • Tokenization can replace account numbers and other sensitive bits of data with randomly generated tokens that are only useful to the processor. The system keeps a business from having to store as much data, thus helping reduce liability issues and to maintain PCI compliance.
  • Some gateways can support recurring payments. The gateway can schedule these payments at the right times based on what the customer wants to manage.

All gateways provide unique solutions for work, so proper controls and support will be critical for success in any situation.

3D Secure Support

Many gateways can also manage 3D Secure systems. 3D Secure is a system that uses a few steps for online deals:

  1. The cardholder provides one’s info to the gateway.
  2. The 3D Secure system will review the card data and move the customer to the necessary payment page.
  3. The client must enter a unique password. The password may include an authentication code that will be necessary for confirming one’s identity. It can include a code through an email or text.
  4. The customer is then redirected to the merchant’s website to confirm the payment.

The 3D Secure system checks the customer’s identity and ensures the customer is the one who owns a credit card. A typical customer needs an online account with a bank that issues a credit card. The buyer will provide this info in the purchase to confirm one’s identity and improve one’s ability to complete a sale. The setup provides a better approach to the sale by ensuring the customer can handle one’s funds right.

Concerns To Watch With a Gateway

Although a gateway can provide many solutions for business needs, it isn’t always perfect. There are many issues to note when looking for a gateway, although many of these problems can be resolved with the right work:

  • Some gateways may not accept all card payments. These include payments from cards associated with certain networks. But some gateways can be adjusted to be compatible with different networks when necessary.
  • Not all international transactions can work on a gateway. Every country uses unique authentication rules for handling transactions.
  • Some gateways might not work well with one’s POS software or online system. A business could change its POS or online setup, or it could look for a gateway that can be reprogrammed as necessary. Compatibility issues could be worrisome for businesses that have already spent significant amounts on accounting programs and shopping carts.

The payment gateway is a critical aspect of all transactions a business will handle. Every business that wishes to plan a suitable gateway should review what works. The gateway process provides a good system that ensures a business can manage its funds and that it will have all the control it needs when managing payments.

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