Choosing your Payment Gateway

A payment gateway acts as a transitional stage between the merchant and the acquiring bank. The gateway transfers the transaction details from the merchant to the credit card processor, which in turn contacts the card issuing bank for authorization or declination. If you choose not to use a payment gateway, you will need to collect customer credit card information and process the payment yourself. Using a payment gateway is recommended to avoid fraud and helps secure information. Payment gateway allows the sale to go through in about 2 to 3 seconds, giving you and your customer confirmation that the payment was received.

The following are the steps involved in an online credit card payment:

  • The customer fills out the credit card information at your portal.
  • Credit card details are transmitted to your web server over a secure protocol (HTTPS).
  • The above information is forwarded to the payment gateway again over a secure protocol.
  • The payment gateway forwards the information to the payment processor of the acquiring bank.
  • The payment processor contacts the cardholder association (e.g. Visa/MasterCard), which routes the transaction to the card issuing bank.
  • The Bank sends back the accepted or rejected response to the payment processor, which in turn forwards it to the gateway.
  • The gateway forwards the response to your web server based on which you can indicate the status to your customer.
  • You then need to submit the approved transactions in a batch to your bank for settlement.

The following are the steps involved in an online credit card payment:

Gateway Compatibility

  • Your Shopping cart software needsto be compatible with your payment gateway. A payment gateway may offer good deals but make sure to check the range of shopping cart and online store fronts it support.

AVS Protection

  • The Address Verification System (AVS) verifies the card holder’s billing address with the card issuer. AVS reduces the occurrence of accepting fraudulent transactions. The usage of AVS may reduce the fees charged by your merchant account.

Seamless & non-Seamless Payment Gateway

  • You need to have a merchant account for seamless payment gateway. The whole transaction is seamless and takes place in real time. Your credit card company will credit the money after deducting their fees to the merchant account periodically.

    You don’t need to have a merchant account for non-seamless payment gateway. A non-seamless payment gateway such as PayPal, will redirect the purchasing customer to the PayPal website to process the payment and bring the customer back to the online shop once it’s complete. The most popular payment gateways that don’t need a merchant account are Google Checkout, PayPal Express Checkout, and Amazon Simple pay.

List of Some Popular Payment Gateways:

  • Gateway                     Type
  •        Seamless
  • Eway                  Seamless
  • Google Checkout      Non-Seamless
  • PayPal Standard      Non-Seamless

Setting up a PayPal Account

PayPal is a non-seamless method for accepting payments that allows you to collect payments from customers in various currencies. If you choose to use PayPal as your gateway account, you will be required to create a PayPal Business account, which is free of charge. PayPal allows customers to purchase products from your website using money from their personal PayPal accounts. Secure processing of the payment is done through PayPal’s website and the result of the payment is returned. After the customer has finished the payment, they are redirected back to your website. Your website can automatically perform the order, invoice, and e-mail notifications to the customers.