Selecting and integrating the right payment gateway enhances a brand’s customer experience and thereby profitability. Often, a customer doesn’t get a chance to choose the payment gateway. However knowing the CAT (credibility, accountability and transparency) of the gateway one uses would be all to the good. This article walks through the things to consider while selecting the right payment gateway.
Aditya Gupta, after a busy week, was relaxing at home. He used the net banking facilities to pay rent of his house , paid monthly electricity and mobile bill, paid his annual term insurance premium, ordered breakfast through Swiggy, made payment for Dell laptop for his daughter, brought monthly grocery items from big basket and peacefully took a much needed nap. All thanks to the payment gateways efficiently working behind the scenes.
What is a Payment Gateway?
A payment gateway (PG) is a service provided by an e-commerce application service provider that authorizes credit card or direct payments processing for e-businesses, online retailers & traditional brick and mortar merchants. A PG is the mechanism that reads and transfers payment information from a customer to a merchant’s bank account. It is a software that authorises a customer to conduct an online transaction through different payment modes like net banking, credit card, debit card, UPI or online wallets. The top players offering the services of Payment Gateway in India, that help businesses to collect and distribute payments, are Cash free, Razor pay, CC Avenue & Insta Mojo.
Stakeholders in Payment Gateway Business
The PG involves the following players
- Merchant (1): The business or any person making the sale.
- Cardholder: Customer making the purchase.
- Issuing bank: The financial institution that holds the customer’s account, either a credit card account or a savings account connected to a debit card.
- Card schemes: credit card companies that manage the card, like Visa or Mastercard.
- Acquiring bank: The financial institution that holds the merchant’s account.
Types of Payment Gateways
The common types of payment gateways are:
Self-hosted Payment Gateways– This type of payment gateway (2), involves the client providing card or bank details on the merchant’s website, in a specific format. Upon submission, the data is then transmitted to the payment gateway’s URL.
API Hosted Payment Gateways- In this type of PG the customer inputs their credit card or bank details on the merchant’s website. Instead of directing to the URL page, the payments are made via HTTPS queries or APIs.
Hosted Payment Gateways– Using this payment gateway, when a customer clicks the ‘buy’ button on the merchant website, the system redirects the customer to the payment service provider’s website. Now, the customer needs to enter the relevant card or bank information. Upon confirmation, the customer then gets back to the merchant’s website to receive their order confirmation message
Advantages & Challenges
A payment gateway has the potential to expand reach to more consumers by introducing the option of online sales which enables customers to buy products and services from anywhere in the world. The Payment Gateways offer faster and secure transactions, remote processing of payments using encrypted payment gateway services ensuring that consumer data is always protected. The other advantages are processing time is less, enhanced customer experience, acceptance of worldwide payments & embedded fraud detection tools
Transaction fees, customer service support, and how well the gateways integrate are the things to be considered when searching for the right payment gateway. A seamless checkout and payment system is the crucial part of customer experience in E commerce. The challenges which payment gateways face and have to address are efficient working even in low internet bandwidth condition, ensure card data security by using a payment gateway that is in compliance with Payment Card Industry Data Security Standard (PCI DSS) & be able to handle multi-currency transactions (3). Cart abandonment – a process in which customer adds a product to the online shopping cart of an e- commerce but doesn’t proceed to checkout and does not complete the purchase – is a big challenge for merchants & payment gateways. Complex steps, multiple details, and pages taking time to load distracts the buyers and eventually leads to losses for the merchant.
The Road Ahead
Electronic payment systems have become a crucial part of businesses as consumer inclination towards online shopping is expanding (4). With broadening internet penetration, increasing use of smartphones, and diverse options for e-transactions, most consumers are preferring online channels for shopping. Therefore, businesses are shifting online with an electronic payment solution to maximize their profit earnings. By providing the flexibility for making payments through credit/debit cards, mobile money, e-Wallet, etc., the businesses can expand their customer base. Over a period of time, payment gateways have become extremely imperative for every e-commerce platform online. In today’s time, e-commerce platforms are on the rise in India, payment gateways have become vital for the country. With the increase in demand for advanced technology, digital payments, it is anticipated that the online payment gateway market is expected to grow near to USD 88 Billion by 2027 (5).
Enhanced security benefits, micropayments, mobile payments, and advanced infrastructure is the future of online payments. The implementation and design of a secure payment gateway for better integration and compatibility with large customers make the future of online payment bright.
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What would be your order of preference for a payment gateway? Security > Speed or Speed > Security Why?
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1. Dana Miranda, Rob Watts. Forbes advisor article. (25/03/2022). What’s A Payment Gateway and How Does It Work?
2. Dhruv. PayU blog. (07/07/2022). Payment Gateway: Definition, Types, and All
3. PayTm for business. (30/01/2022). Challenges of Online Payment Systems and Their Solutions.
4. Article in Lyra. (04/07/2019). The future of payment gateways
5. BW Online bureau. (22/07/2021). The Rise of Online Payment Gateways