What Are Credit Card Merchant Services
Credit card merchant services provide every payment component that a merchant might need to accept non-cash modes of payment online and offline. Offline, they offer POS infrastructure, merchant accounts, and check support. Online, they offer internet merchant accounts, chargeback support, and various kinds of online payment processing credit and debit cards, e-checks, ACH payments, e-wallets and mobile payments.
Can The Payment Gateway Be Used With Your Existing Or Planned Integrations
Consider whether the payment gateway integrates with your current billing, shopping cart, and accounting solutions you are using. Ideally the payment gateway you choose will be integrated with software you already have. If not, you should still look for a service that is integrated with software providers, because it increases convenience and saves you time, as well as signals that the provider has an API that is easy to integrate against, saving you development time down the road.
If after asking all of these questions you still haven’t found a payment gateway which meets your requirements, there are some other options you can consider. Our guide to recurring payments compares each of the main online payment options on costs, ease of access, international reach, timings, support, and more.
How To Choose A Payment Gateway
When youre choosing a payment gateway or payment service provider, ask yourself these questions:
- Is it available in your country and those of your customers?
- Does it keep financial information secure through encryption and other methods? Is it payment card industry compliant for online payments?
- Do you prefer a hosted or self-hosted payment gateway?
- Which payment methods does it accept? Does it cover your customers needs?
- Does it easily integrate with your website, financial software and POS?
- Does it offer features your business is looking for?
If youre just getting started with a small business, the simplest option is to go with a payment service provider like PayPal, Stripe or Square. They handle the process all the way through, so you dont have to worry about setting up an additional bank account or custom software.
You forfeit some control over the customer experience by using a third-party service, but you also dont have to worry about handling security yourself.
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Example Of A Payment Gateway
Merchants can gain access to payment gateway systems through merchant acquiring bank partnerships, or else they can select their own payment gateway system. Large banks such as Bank of America and JPMorgan Chase have sophisticated payment gateway systems that they offer to customers along with their own merchant acquiring bank services. Ultimately, merchants can choose a variety of payment gateway technologies as long as they are compatible with the merchant acquiring bank that is being used for payment processing.
One recent example of a payment gateway is Square , which emphasizes flexible mobile payments for retail businesses. The companys Square Reader technology allows customers to easily accept payments at ad-hoc locations such as conventions or farmers markets, or through roaming storefronts such as food trucks.
With the Square Reader payment gateway technology, a merchant can attach a small piece of hardware to their mobile phone which allows the customer to swipe their payment card for processing through the mobile phones electronic connection. The Square Reader sends the payment information to a merchants acquiring bank which then processes the information for the merchant momentarily.
It is likely that new products will continue to increase the versatility and speed of payment gateways. In recent years, blockchain startups have even introduced payment gateways for cryptocurrencies.
How Does A Payment Gateway Work
In every online transaction, there are four key parties. Besides the buyer and the merchant, theres also the issuing bank and the acquiring bank .
Though there are a lot of steps, digital transactions usually take minutes.
Once a customer is ready to proceed to checkout, the website will direct them to a payment gateway to enter credit card information or bank details.
The next step is encryption. The payment gateway will then encode exclusive data to use between the buyer and the seller.
Additionally, the gateway will perform fraud checks with built-in security protocols, namely TLS .
After ensuring a safe connection, the issuing bank will then check if there is a sufficient balance in the account.
The payment processor will contact the merchant account. If authorized, the acquirer collects and then settles the balance into the merchant account. The customer will finally receive a notification of their successful transaction.
If the merchant account denies the transaction, the seller will ask the customer to opt for another payment method. Some of the factors that influence the approval include network errors, the upper limit on the merchants transactions, and bank-related issues.
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How To Choose The Right Payment Gateway
Choosing the right payment gateway is an important decision for your business. Consider the following when shopping around:
- Hosted or IntegratedDo you want customers leaving your website to complete their payment? Hosted gateways are often free and can be set up in minutes. But you run the risk of shopping cart abandonment. Integrated gateways are more complex, but keep customers on your site.
The Critical Role Of Ssl Encryption
Fortunately, payment gateway technology has enabled an impressive rate of success at the speed that customers expect.
Doing this job securely â or, without exposing the customerâs personal information to potentially malicious third parties â involves a specific type of encryption called secure socket layer encryption. That means that the customerâs sensitive data is undecipherable as the payment gateway forwards it from the customerâs computer to the issuing bank.
Once the data arrives at the issuing bank, the payment gateway decodes the encrypted data and presents it to the bank in a usable format. The issuing bank then authenticates or declines the information as entered by the customer. Other information, such as the physical location of the requesting computer and recent activity of that particular customer is sometimes considered by the bank before authenticating the customer and payment card.
Once the issuing bank has confirmed the authenticity of the customerâs request, the payment gateway uses SSL encryption to securely deliver the transaction details to the payment processor, which then completes the transaction in the same way as described above.
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How Soon Do You Need To Receive Funds From Your Sales
While you will usually know that a payment has been approved straight away it typically takes a few days for a payment to be settled. Payment timings vary significantly from provider to provider.
Some gateway providers hold onto your funds for up to 30 days while others can settle your funds as quickly as the next day. Some providers may also only pay out funds on set days. Ideally you should look for a provider that pays out every day.
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Payment Gateway Tips To Create A Seamless Shopping Experience For Your Customers
Based on the reviews above, you may notice that each payment gateway comes with some limitations. Despite so, there are ways to minimize and even eliminate these weaknesses.
Such as using multiple payment gateways for redundancy. This ensures you have a failsafe, not needing to worry if one stops working.
Remember to consider your customers preferred payment methods, the overall fees, and the services security measures and reputation.
Lulu Nurul Janah is a web hosting expert who strives to create quality content to help businesses grow. She loves spending her spare time accompanied by sitcoms and her little brother.
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What Is A Credit Card Processing Service
While consumers are using more and different ways to pay for goods and services, especially via fast-growing mobile payments, stodgy old credit cards remain the most popular payment method in use today across any channel, whether in physical retail operations or in e-commerce settings. But taking a payment from a customer this way requires any business to route the transaction through a credit card processing service, typically a merchant bank. As competition in this sector has grown, these services have become much more complex and fraught with hidden fees and limitations. Small business owners in particular are often the targets of such practices, and the fact that some predatory salespeople take advantage of new business owners’ lack of knowledge makes things even harder.
Luckily for merchants, fair-minded processors are emerging that offer transparency, fair fees, and good customer service. This is true especially for online “e-tailers,” but also for small brick-and-mortar operations. There are Point-of-Sale systems, such as Square Point of Sale, and subscription services such as Helcim, and even retailers such as Sam’s Club that are getting involved.
Additional Payment Gateway Features
In addition to accepting online payments, payment gateways are also capable of helping you with the following:
- Payment Information StorageStoring payment information so that the customer doesnt have to constantly re-renter their information. This information is encrypted so it ensures that the information is securely stored.
- EncryptionAll payment gateways encrypt sensitive payment information prior to them transmitting it to the processing bank.
- Recurring BillingSubscription-based pricing is becoming increasingly popular payment gateway. The subscription offers a recurring billing feature so that you can automate this process.
- Virtual TerminalA virtual terminal is a browser-based version of a physical credit card terminal. This terminal allows you to input a customers credit card information. The virtual terminal will then process the transaction directly through your computers web browser. It is even possible to use a mobile device through an online web form. Processing rates will always drop when the card is present.
- PCI CompliancePayment gateways must be PCI compliant so that you can accept payments securely, while avoiding costly fines.
- API Tools and Developer InformationOn the technical-side, most payment gateways give you the ability to customize it to fit your specific needs.
- IntegrationPayment gateways generally integrate with other tools, such as your accounting software like Quickbooks. You can also use your online shopping carts like Shopify.
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Why Should I Use A Payment Gateway
Payment gateways secure your transactions so you can stay PCI compliant. Any business that handles cardholder data needs to be compliant with PCI Data Security Standards. Using a gateway is the best way to do this for your online store. The gateway encrypts the cardholders data so the information stays safe and secure.
Payment gateways also give your customers a quick checkout experience. Adding too many steps, like creating an account to check out, can bring down a customers experience. This can make them less likely to want to shop at your store again and less likely to finish their transaction. But payment gateways dont disrupt the checkout process. Instead, they allow you to seamlessly accept payments and encrypt the information so checkout is easy and secure.
Other Payment Gateway Features
Choosing the right gateway can give you the features you need to a well-rounded business, including:
- Multiple Payment OptionsThink about the types of payments you want to accept, including international, AMEX, and PayPal.
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Examples Of Payment Processors
Payment processing companies come in different varieties that can be a little confusing to know. First, there are card companies that are not card issuers, but they facilitate and process transactions between the other players. Second, there are banks that coordinate with merchants as well as banks that issue credit cards to their customers. There are also processors that offer services to sellers and also transfer funds between banks. Many large companies have entered the payment processor market and offer a full stack of services.
Other Payment Gateways To Consider
While we’ve mentioned some of the best merchant gateways, there are a number of others worth considering. This is especially as many are available to integrate with existing ecommerce platforms using nothing more than an easy-to-install plugin. Here, therefore, we’ll list some additional merchant gateways that are well worth considering, according to the differing needs of online businesses.
2Checkout is another payment provider that is commonly used by online merchants, not least because as well as one-off purchases it’s easy to set up subscriptions. This makes it especially useful for online businesses selling digital services such as web hosting or web design companies. It’s also commonly available as a plugin for major ecommerce platforms, and can process a wide range of global currencies.
Opayo, offers not just a merchant gateway, but the ability to directly record all sales and transactions directly into your Sage accounting software. This makes it especially invaluable for efficiency purposes, not least because it means you can see your costs and income in real-time. However, while there are different plans available for Opayo, it’s best to have a merchant account to get the most out of the software, not least for reducing transaction fees in the first place.
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How Payment Gateways Work
The payment gateway is a key component of the electronic payment processing system, as it is the front-end technology responsible for sending customer information to the merchant acquiring bank, where the transaction is then processed.
Payment gateway technologies are always evolving to reflect new consumer tastes and technical capacities. In the past, terminals would accept credit cards using magnetic strips and required paper signatures from the customer. With the development of chip technologies, the signature phase could be removed in favor of a personal identification number entered directly into the payment gateway hardware. Today, contactless purchases are also available, with many customers now using their phones as a payment device instead of plastic credit cards.
The architecture of a payment gateway will differ depending on whether it is an in-store gateway or an online payment portal. Online payment gateways will require application programming interfaces that allow the website in question to communicate with the underlying payment processing network. In-store payment gateways will utilize a POS terminal that connects to the payment processing network electronically using either a phone line or an Internet connection.
Payment Gateway Vs Payment Processor
A payment gateway is distinct from a payment processor, a service that connects the customer’s bank to the merchant account and facilitates the actual movement of money. You can think of these like two halves of the transaction: a payment gateway collects customer information for payment, and a payment processor uses that information to contact the customer’s bank and the merchant account, debiting one account and crediting the other.
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Payment Card Industry Compliance And Support
Merchants must adhere to the Payment Card Industry Data Security Standard and most providers include PCI compliance as a basic feature of their services . However, it’s important to note that this isn’t a government regulation. It’s actually overseen by a private, self-funded organization. Some of the requirements are onerous for small, inexperienced businesses, and some processors charge a compliance fee , even though they don’t even help the merchant become compliant. Using an aggregator, such as Square Point of Sale, is helpful, as Square is responsible for maintaining its merchant account, including compliance overhead.
Firms such as ControlScan and TrustWave can help if you don’t have onsite tech support for your provider or payment gateway however, most of the providers featured here offer 24/7 tech support, though some use call centers. Even if these resources are offered, you should still be sure to ask about getting a dedicated account manager when signing up for the service. Try calling at off hours to see how easy it is to reach a human and how long the wait times are. Stay away from companies that don’t have support details on their website or ones that shunt your call into a neverending phone menu.
Have any questions about how credit card processing services work? Join the discussion group on LinkedIn and you can ask vendors, other professionals like yourself, and PCMag’s editors.
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