What to Consider When Choosing a Payment Gateway?
Integrating a payment gateway into your process can be simple, but knowing more about it can provide the confidence you need to help you identify a trustworthy provider.
What Is a Payment Gateway?
A payment gateway is a technology merchants use to accept customer credit and debit card payments. The term payment gateway is broad and covers point-of-sale (POS) terminals in brick-and-mortar stores and online payment portals for e-commerce.
As modern consumers, most of us know what it’s like to interact with a payment gateway. Whether we’re buying groceries or ordering clothing online, we interact with these gateways to securely pay merchants with our cards. Many consumers expect these payment gateways as cash and checks slowly become a thing of the past. Businesses must keep up with consumer demand and provide payment gateways for greater customer satisfaction.
How Does a Payment Gateway Work?
Payment gateways act like bridges between merchants and financial institutions. When a payment gateway plays a role in a transaction, it passes credit card information from the merchant to the bank with the help of the credit card network. The general process follows these steps:
- A buyer uses a credit card to purchase a product from a merchant.
- The payment gateway pushes the transaction information to the merchant’s bank.
- The gateway also identifies the credit card network and routes the transaction information to the right payment processor.
- The payment processor sends the payment request to the bank that issued the credit card.
- The issuing bank uses fraud detection to determine whether the transaction is legitimate and confirm that the buyer has enough credit to complete the transaction.
- The issuing bank approves or rejects the transaction and sends the decision to the payment gateway and the merchant’s bank.
A payment gateway is responsible for supporting an issuing bank’s payment authorization. When a transaction is authorized, the issuing bank puts the required funds on hold. On the cardholder’s end, this hold looks like a pending transaction. The merchant must reconcile payments and send a batch capture for all pending credit card transactions to gain access to the funds.
It’s essential to note that a payment gateway is not the same as a payment processor, though both play a role in a transaction. A payment gateway is responsible for collecting customers’ credit card information and encrypting it for processing later. A payment processor takes this information and charges the customer’s financial institution or credit card provider.
Main Types of Payment Gateways
Payment gateways include three types—on-site, redirects and front-end checkout. Each of these types offers benefits and challenges, and one may be better suited to your needs than the others.
With an on-site payment gateway, checkout and payment processing occur on the merchant’s site. The on-site approach gives you extensive control but requires more responsibility. When a merchant is solely responsible for the front and back end of payment processing, the company must consider security features, system updates and user experience.
Complete customization is one of the most notable benefits of an on-site payment gateway. Merchants control the user experience, so they can create a seamless payment process for buyers. However, upkeep will require regular attention, and businesses should be prepared to provide that effort.
On-site payment gateways are not an accessible option for every business because of the resources it takes to maintain them. Larger enterprises usually have access to this type of e-commerce payment gateway, but it may be out of reach for small and medium-sized businesses.
With redirect payment gateways, customers are taken to a new page to complete their transactions. Redirects can be ideal for companies that lack the time or resources to manage on-site payment processing. Merchants have no obligation to keep up with updates or user experience metrics. However, businesses also have no control over the purchasing experience.
With front-end checkout, buyers work through the checkout process on the merchant’s site, but the payment processing occurs through the gateway’s back end. Checkout will include reviewing items for purchase and entering a shipping address. Payment processing includes entering credit card information and waiting for transaction approval.
This payment gateway option is the moderate option among the three main types because it gives the merchant some level of control through their checkout process and eliminates back-end processing responsibilities. However, merchants should be aware that a gateway’s back-end process will influence user experience even when it’s out of their control.
Choosing a Payment Gateway for Your Business: What to Consider
Integrating a payment gateway into your checkout process can offer a boost to the customer experience and make it easier for your team to manage payments. Plenty of payment gateways are available on the market, but not every provider will offer the best solution for your investment. When exploring your options, consider the following questions to make an informed decision about the payment gateway for your business.
1. How Much Does Your Business Want to Spend on a Payment Gateway?
Cost is one of the most significant considerations when implementing a payment gateway, especially if you run a small or medium-sized business with limited resources. When researching payment gateways, you’ll want to look into a provider’s fee structure. There are three main cost areas to learn more about—setup costs, transaction fees and administration expenses.
While credit cards are a popular payment method, they also come with higher transaction fees. If you’re not prepared to take on these fees for the volume of purchases on your site, you may want to consider ACH debit transfers. This payment method has lower transaction fees, making it easier to manage financially.
2. How Secure Is the Payment Gateway?
Security when moving money back and forth should play a major role in your payment gateway selection. While you want to trust you’re getting the money you earned, you also want to protect your customers when they make purchases on your site. Fraudulent activity connected to your business can detract from a positive reputation.
During your payment gateway research, look for providers who comply with Payment Card Industry (PCI) data standards. This compliance is essential when working with credit and debit cards because those methods require data encryption. When a customer enters their credit card information, the gateway should encrypt the data to prevent hackers from accessing it during the transaction.
Another aspect of payment gateway security is tokenization. This practice creates a unique token with no intrinsic value for every set of sensitive information to make it inaccessible to outsiders.
3. What Level of Support Does the Payment Gateway Offer?
While payment gateways can be valuable tools for businesses, they can also pose challenges. If your gateway creates issues for your customers, this impact on the buying experience can influence your company’s reputation. Access to reliable support from your gateway provider helps maintain those positive customer experiences.
Support for your gateway can take many forms. Strong customer support offers various resources and methods of contact for troubleshooting needs. Considerations for support include:
- Self-service troubleshooting
- Over-the-phone customer support
- Platform resources for updates and bug fixes
- General guides for working with the gateway
4. Does the Payment Gateway Offer Automatic Recurring Payments?
Every payment gateway is built differently, and some will have more functions than others. Handling recurring payments is a notable benefit for companies that offer subscription models for their products or services. If subscriptions are a part of your business, your payment gateway should provide recurring payment capabilities.
A payment gateway that supports recurring payments will store buyers’ credit card numbers to charge on a regular basis. Many gateways offer this feature, but you will need an online merchant account to access it. You may consider the flexibility of payment options. For example, ACH debit capabilities can be an ideal option for some customers, and they may support a higher volume of recurring payers within your customer base.
5. Can You Use the Payment Gateway With Your Existing Systems?
Using a payment gateway that doesn’t integrate with your other systems can complicate the administrative side of your business. When searching for a payment gateway, look for a provider that will help you integrate the gateway with your existing billing and accounting software for greater ease of use.
Integration support is an excellent way to improve your overall efficiency. When your applications work well together, you can automate more processes and reduce administrative burdens for your team.
How Can CSG Forte Help You?
CSG Forte is a payment gateway that offers the payment flexibility consumers want. With the ability to take card payments online, at the point of sale and over the phone, every consumer can complete purchases in a way that’s comfortable for them. Our payments platform offers impressive capabilities, including tokenization, user-friendly bill presentment and many other features.
With CSG Forte, your business can join the modern world. Our solutions support large enterprises and small to medium sized businesses. With recurring payment capabilities, our platform also supports subscription-based services. See what our platform can do, and get started today.