A payment gateway software is an application that serves as an interface between a seller’s website and a customer’s bank that will process the credit or debit card transaction. In today’s age of cybercrime, online businesses need to process payments in a secure and reliable way. Although the details are more complex, this is what payment gateway software does.
Details of Payment Gateway Software
When you buy something online, the transaction seems rather simple. This is largely thanks to payment gateway software in the background that’s doing a lot of the heavy lifting. Here’s a simplified version of the somewhat convoluted process from start to finish:
Let’s say you buy a laptop online with a Mastercard issued by Wells Fargo. You submit your payment details, which typically include the card number, the expiration date, your name and address, and maybe the CCV code.
When you submit that information, it is sent directly to the payment gateway. The transmission usually occurs over a secure network, such as a TLS (Transport Layer Security) or SSL (Secure Sockets Layer). When the payment gateway software receives the payment details, it encrypts them and sends the data onto the next link in the chain, which is the merchant’s processor.
Eventually (we’re talking about seconds or less), the transaction is approved or rejected by the issuing bank. If it’s approved, the transaction is sent back to the payment gateway, which transmits it back to the website.
Besides transactions involving credit and debit cards, payment gateway software can process ACH transactions.
Examples of Payment Gateway Software
There are several different types of payment gateways. Here are a few examples:
- Platform-based payment gateways. With this type of software, a merchant can sell straight from its server.
- Hosted payment gateways. An alternative to the platform-based software is to use a gateway on someone else’s server. Under this framework, customers who click on a payment button will be taken to another website whether they can enter their payment details. When this task is completed, they’re redirected back to the merchant’s website.
- Local bank system. Similar to the hosted payment gateway, buyers are sent to the website of the payment gateway. After completing payment, they are redirected back to the seller’s site. Notification data accompanies the redirection.
Transform the way
your finance team works.
Bring scale and efficiency to your business with fully-automated, end-to-end payables.
Benefits of Payment Gateway Software
On top of the obvious benefits of transmitting and receiving data, online payment gateway software can also provide several other advantages. These include:
- Virtual terminal. A virtual terminal is simply a cyber version of a brick-and-mortar store’s physical terminal. Without this interface, customers wouldn’t be able to enter their credit card details and make purchases. Besides computer websites, virtual terminals can also be set up for mobile devices, including both phones and tablets. A virtual terminal could also be used in a physical location by linking a small credit card reader to a computer with a USB cable.
- Encryption and tokenization. As cybercrime becomes a more challenging problem to solve, payment gateway software applications offer the ability to encrypt and tokenize data. These processes make data more secure, and in the event that sensitive information falls into the wrong hands, it cannot be misused.
- Storage of payment information. A great service that e-commerce sites can offer their repeat customers is the ability to store payment information so that they don’t have to re-enter their details every time they make another purchase. With payment gateway software, buyers can store multiple cards at a single site and choose any one for a purchase. Multiple addresses can be saved as well. These sensitive details are encrypted and stored separately from the e-commerce site.
- Payment Gateways are PCI Compliant. Because a payment gateway lies on a different server than the one the e-commerce site uses, online merchants don’t have to maintain secure networks to be compliant with Payment Card Industry (PCI) standards.
- Quickbooks. A lot of payment gateways today are compatible with Quickbooks. This helps online businesses to quickly transfer data into the accounting software, a process that would take much longer with older technology.
- Customization. Payment gateway software generally offers multiple application program interfaces (API’s). These supplemental software packages can help customize a specific payment gateway.
- Global payments. Some service providers will offer multi-currency and even multi-language functionality with their payment gateways. There could be additional fees for this capability, however.
- Customer service. E-commerce payment solutions usually come with adequate customer support. Before choosing a payment gateway software application, do your homework and make sure the company has a history of backing up their products and servicing its customers.
- Multiple forms of payment. A payment gateway application will usually accept several forms of payment. These include the usuals like Visa, Mastercard, Discover, and American Express. They may also include less common forms of payment like PayPal or JCB.
Payment Gateway Software and Merchant Accounts
Before the Internet, a brick-and-mortar store needed just a merchant account to process payments. But with an online space, a business needs a virtual payment solution. This need is filled by payment gateway software.
It’s possible today to bundle payment gateway software together with a merchant account. This may be the ideal payment solution for some retailers.
Adding Payment Gateway Software to an E-commerce Site
Setting up a payment gateway on an e-commerce site for online payment processing isn’t that difficult. Many shopping carts come with the software already installed. It’s also possible to integrate a discrete payment gateway application onto a website, although this will of course entail more work on the part of the merchant.
When looking for the best payment gateway software, many of the characteristics mentioned above should be at the top of your list. PCI compliance, API functionality, tokenization and encryption, and global payment capability are some of the features many businesses will want. Most payment gateway software providers offer some or all of these necessary features. Authorize.net is one common example.
Be sure to research the fees charged by the payment gateway software provider. These can vary based on several criteria, such as the type of business and the number of expected transactions.