What is an Internet Payment Gateway?
An internet payment gateway is a technology that enables online merchants to securely process and accept electronic payments from their customers. It acts as a middleman between the merchant’s website and the financial institutions that issue credit and debit cards, as well as other payment methods like e-wallets and bank transfers.
Internet payment gateways are essential for online businesses, as they provide a convenient and secure way for customers to make payments without having to worry about fraud or identity theft.
They also allow merchants to expand their customer base by accepting payments from customers all over the world, regardless of their location or preferred payment method. However, not every internet payment gateway can accept international payments, so keep an eye out for this.
How Does an Internet Payment Gateway Work?
While it is important to understand that an internet payment gateway acts as a middleman between the customer’s bank and the business’s bank, there is more to the process than the money just moving from point A to point B.
An internet payment gateway works like this:
- The customer decides which product or service they want to purchase from the business’s website or app and puts the item in their online cart.
- The business website or app sends the payment information, including the customer’s credit card number, expiration date, and security code, to the internet payment gateway.
- When the internet payment gateway gets the customer’s information, it encrypts the payment data and sends it to the acquiring (business’s) bank, which is responsible for processing the payment.
- Next, the acquiring bank sends the transaction information to the customer’s issuing bank to confirm that the customer has sufficient funds to complete the transaction.
- When the request is received, the issuing bank either approves or declines the transaction based on the customer’s available funds and any other fraud protection measures.
- Next, the issuing bank sends a response back to the acquiring bank, which is then sent back to the payment gateway.
- When the payment gateway receives the response, it sends it back to the business, letting them know if the transaction was approved or declined.
- Finally, If the transaction is approved, the business completes the transaction and the funds are transferred from the customer’s bank account to the business’s account.
Throughout the entire process, the internet payment gateway uses encryption and other security measures to protect the customer’s payment information and prevent fraud. By using an internet payment gateway, businesses can offer their customers a convenient and secure way to pay for their products and services online.
Different Types of Internet Payment Gateways
There are several types of internet payment gateways available, each with its own unique features and benefits. This means the business needs to do research with their needs in mind to determine which type of payment gateway is best.
Hosted Payment Gateway
With hosted payment gateways, the customer is redirected to a third-party website to complete the payment process. The payment gateway is hosted by a third-party service provider, who handles the payment processing and security.
Self-Hosted Payment Gateway
Self-hosted payment gateways allow the customer to stay on the business’s website throughout the payment process. The payment gateway is integrated into the business’s website, giving them more control over the checkout process.
API Payment Gateway
API payment gateways provide a more customizable payment processing solution, allowing developers to integrate payment processing into their own applications and websites.
Mobile Payment Gateway
Mobile payment gateways allow customers to make payments using their smartphones or other mobile devices. These gateways can be integrated into mobile apps, mobile websites, or other mobile-based payment systems.
Why is an Internet Payment Gateway Necessary?
An internet payment gateway is necessary for all businesses that want to have an online presence and accept payments from their customers. Without an internet payment gateway, customers can’t pay and businesses won’t make money.
In addition to helping businesses make money, there are several other reasons an internet payment gateway is necessary. Including the following:
- Secure and safe from fraud. It encrypts sensitive information such as credit card details, ensuring that hackers cannot steal the information.
- Increased Sales. By accepting electronic payments, businesses can increase their sales and revenue. Customers find it easier and more convenient to make payments online, which can lead to increased customer satisfaction and loyalty.
- Cost-Effective. An internet payment gateway is a cost-effective alternative to traditional payment methods such as checks and money orders. It eliminates the need for businesses to maintain physical payment infrastructure, reducing overhead costs.
Faster Payments. With an internet payment gateway, businesses can receive payments faster than traditional payment methods. This ensures that businesses have a steady cash flow, which is crucial for their financial stability and growth.
Features to Look For in an Internet Payment Gateway
When selecting an internet payment gateway, there are several important features to consider.
One of the most important parts of accepting online payments is the security offered to customers to protect their information. Make sure the gateway uses advanced security features such as encryption and tokenization to protect customer’s sensitive financial data.
Also check out the payment gateway’s fraud prevention. Payment gateways that offer fraud prevention tools and chargeback management can be a valuable asset for businesses.
It’s essential to choose a payment gateway that is compatible with the business’s existing website or e-commerce platform. Make sure the gateway can integrate seamlessly with the website, shopping cart, and other payment systems that might be used.
Mobile compatibility is also important. With more and more people using their mobile devices to shop online, it’s essential to choose a payment gateway that is mobile-friendly. The gateway should be compatible with mobile devices, allowing customers to make purchases easily from their smartphones or tablets.
A good payment gateway should be easy to use and provide a smooth checkout experience for customers. Look for a gateway that offers a clean and intuitive user interface and offers various payment options, including credit cards, debit cards, and digital wallets. Or, consider a customizable gateway such as self-hosted or API.
Different payment gateways charge varying fees for their services. Research and understand the different fees structure different gateways charge, including transaction fees, setup fees, and other hidden charges.
Choose a payment gateway that offers reliable and responsive customer support. In case of any issues or concerns, the business should be able to contact customer support and get prompt assistance.
International and Recurring Payment Support
If the business operates internationally or accepts payments on a monthly basis, it is essential the internet payment gateway can handle that. Not all payment gateways have the security necessary for recurring payments or the ability to accept multiple currencies.
Different businesses have varying needs when it comes to payment gateways. Look for a gateway that offers customization options, allowing the business to choose how their payment gateway looks with the ability to match it to their brand.
Benefits of Using an Internet Payment Gateway
Using an internet payment gateway has several benefits including:
- Increased Security. Internet payment gateways offer advanced security features, such as encryption and fraud detection, that can help protect both the business and the customer from fraudulent transactions
- Convenience. Internet payment gateways allow customers to make payments online from anywhere, at any time. This convenience can lead to increased sales for businesses, as customers are more likely to make a purchase when the payment process is quick and easy
- Faster Payments. Internet payment gateways allow for almost instant payment processing, meaning that businesses can receive payments quickly and efficiently
- Reduced Costs. Internet payment gateways can help reduce transaction costs associated with traditional payment methods, such as credit card processing fees or the need for manual processing
- Improved Cash Flow. Faster payments and reduced costs can help improve a business’s cash flow, allowing them to reinvest in their business or make other financial decisions
Happier Customers. By offering a secure way to make payments, customers will be happy and keep coming back to shop with the business. Payment gateways also offer many different payment methods, making it easy for customers to pay with their preferred payment method
Start Using an Internet Payment Gateway with Bankful Right Now!
Is your business ready to start accepting payments online with an internet payment gateway? Head over to Bankful now and start selling on any platform!