Payment gateway definition:Payment gateway is the type of technology that was introduced by Jeff Knowles that helps to accept payment from the buyer. In today’s world, it is used by many merchants to accept payment. The payments accepted by the gateway are normally processed by debit card or credit card. There are other modes of payment in which there is no need for a physical card and the payment is being processed via mobile phones directly. Those types of payments are known as brick-and-mortar payments. These payments are being conducted via NFC (Near Field Communication) or QR (Quick Response) codes. A payment gateway is one of the best modes of medium for online payment. It has recently been mostly used as a mode of payment for online transactions. There are 4 different types of payment gateways. These are:-
- Hosted Payment Gateway
- API-hosted Payment Gateway
- Self-hosted Payment Gateway
- Local bank integration Gateway
Hosted payment gateway definition
These types of payment gateway are being hosted via third-party service providers that help to receive payment from the customers. These types of payment gateways are generally seen in the businesses like Flipkart, Amazon, etc. When the customer is ready to buy the item and hence proceeds to pay then these types of payment gateways are known as hosted payment gateways.
Pros-Payment gateway definition
- These gateways are user-friendly.
- A hosted payment gateway makes it easy to engage with the website
- They are very reliable and are managed by the service provider itself.
- These gateways have very low technical faults or downtime.
Cons -Payment gateway definition
- Less branding options
- Redirecting to another page of the payment can reduce the customer experience.
API-hosted payment gateway definition
API-hosted Payment Gateways are the gateways that accept payment through API only. API stands for Application Program Interface fully customizable and provides the support of accepting payment via the website by staying on the same page for example Razorpay. This type of gateway helps in the optimization as well as improves the customers’ experiences.
Pros:
- Payment details and processing are being handled by Merchert itself
- Customer experience increases
- Scaling up the business increases as the operation scales up
- A wide range of currencies is being accepted
Cons:
- A dedicated team is required to handle these types of gateway
- The cost of using an API-hosted payment gateway is quite high
Self-hosted payment gateway definition
Self-hosted payment gateway is the type of gateway that has full access to the payment. This type of gateway consists of numerous things like managing merchants, executing the payments, ensuring the safety of the payment, etc. Self-hosted payment gateways have the potential to create brand campaigns and also help to increase the user experience.
Pros:
- Business controls the complete gateway
- These gateways can be customized according to the business
- These are economical
Cons:
- Expert technical required to run these types of gateways
- The burden of data protection increases significantly as the business grows
- The initial cost is quite high
Local Bank Integration Payment gateway definition
Local Bank Integration Gateway is the gateway that works with the business with the integration of the local bank that has the facility to generate a payment gateway. These type of gateway are used by a business that has recently started or they are in the initial stages. The more simplified way to put together is that the business is using these gateways and they currently do not have the potential to create recurring customers for the time being.
Pros:
- These gateways are region-specific
- This gateway has low transaction fees
Cons:
- High technical skills for the integration of the bank API
- Limited payment options.
Summary of All the types of payment gateway definition
| Hosted Payment Gateway | API-hosted Payment Gateway | Self-hosted Payment Gateway | Local Bank Integration Payment Gateway | |
| Flexibility | Limited | Customizable | High | Limited (Certain Bank) |
| Integration | Easy | Medium | High | Complex |
| Security | Reliable with PCI, DSS, SSL | High | Challenges Potential | Compliance Complexities |
| Cost | Low | No Cost | High | High (Usable of Multiple APIs) |
| Speed | Fast | Depends on website (Merchant) | Depends on server (Merchant) | Depends on Bank |
| Success Ratio | Reliable | High | Moderate | Inconsistent |
| Customer Support | Limited | Inconsistent | Inconsistent | Inconsistent |
Working on payment gateway definition
Payment Gateway depends on two things. Those are:-
● In-store Gateway
● Online Payment Portal
In-store Gateway
These gateways are being used when the customer walks into the store to purchase an item. In those situations, POS is being used. These POS are the terminal that helps to connect customers’ transaction details to the merchants’ details to the bank. These type of payment is being connected via a phone line or internet connection.
Online Payment Portal
Online Payment Portal is used in website or app-based shopping. These APIs are being used in the website that helps to conduct transactions. These gateway types are being used in online business or shopping only.
The working of the Gateway Pay ment is via providing the customer’s information to the merchant’s bank and then the transaction proceeds. This is the backend workflow of the payment gateway. In the front end, various payment gateway has different interface some use a third-party website, and some use API to generate the payment but the key feature is the same to collect the customers’ information and connect it via the merchant’s bank. Once the connection is made and data is connected there are two ways to complete the transaction.
(payment gateway definition)
One is via using plastic money for example debit cards and credit cards. By providing the details of the cards then OTP (One-time Password) is generated by the bank to authenticate the payment and once it matches the payment is done. The second way to complete the payment is by using a mobile phone as a payment device. When the customers’ information is being collected the payment gateway is in the form of UPI. Then the payment gateway redirects to the UPI app platform to provide the PIN (Personal Identification Number) in order the complete the transaction. Once the PIN is provided by the customer, the funds are transferred to the merchant’s bank.
The work of the Payment gateway is to collect the necessary information store it in the database and ensure that the safety is encrypted on both ends. If in any of the steps, the data is not appropriate or an improper network connection is present, the whole transaction will be declined by the payment gateway. In other to make the payment, again start the payment process.
Benefits of using payment gateway
There are various benefits of using different payment gateways. The general benefits of using a payment gateway are:-
Nowadays, people tend to use online transactions and the use of cash has reduced significantly. Customers need something fast, tension-free, and safe, and a payment gateway is the perfect example. With the use of a payment gateway, customers have the freedom to generate payment at any time, on any phone, and at any place. From the business point of view, if the customers are happy and recurring at the same time then the net profit of the company increases as customer LTV (Lifetime Value) increases hence payment gateway is the best way to replicate it. With such a positive response loyalty and long-term relations are being generated by the business with the customers.
Security
All the payment that is made without the use of a payment gateway has a high risk like the use of cash, dispensing cash out of the ATM, etc. With the use of a payment gateway, the problem is security is being erased majorly. Not only that payment gateway also helps to hide customers’ data. Newer technologies and high-level encryption make the payment gateway the safest mode of payment. Information like card details, and potential threats of fraud are all nullified with the use of a payment gateway. The most advanced payment gateway has fraud detection tools when any suspicious activity occurs while completing transactions and the response is positive that malpractice is occurring, the payment gateway declines the payment and provides safety to the customer as well as the merchant’s bank.
Response Time
The response time generated by the payment gateway is way less than any other mode of payment. Payment gateway has the potential to create fast check out hence providing best-in-class experience to the customer. With the least response time, the cash flow increases significantly, and hence growth of the business elevates.
Availability
Initially business tries to get its grounds firm and after that expansion of the business comes into the picture. A payment gateway is one way to make it possible. It is one of the most used tools by global businesses as it uses different currencies and builds customer relations with the business. With the help of a payment gateway, one can sell a product into the world with no issues at all. This step-by-payment gateway has provided the best customer experience and with this business has now an issue in expanding globally.
Technical Aspect of the payment gateway definition
Payment Gateway is rather a deep topic that needs special knowledge and study to understand and for that, we are the one who has the technical background in that field. We have reviewed most of the payment gateway and hence seen that the workflow of all the types of payment gateway are pretty similar. The workflow of the payment gateway goes like this”-
● Sending Payment Gateway to the sender/customer
● Sending request to the sender’s bank for the license
● Checking the status of the payment
These are the main three points from which we can analyze the workflow of the payment gateway. Let’s discuss them each in detail.
Sending Payment Gateway to the sender/customer
The mode of payment is one of the main stages. Most of the customer uses online mode of payment but some of the customer likes to buy in cash. For the customer buying in cash does not need any payment gateway as it is the direct conversation between both the party. Now we are left with online payment users. Online payment users are the users that need a payment gateway for the merchant has the responsibility to provide the payment gateway. Once the payment gateway is provided it asks for all the details that are necessary for the merchant to verify that the payment is being made by the customer in order the fetch the product or service.
Sending request to the sender’s bank for the license
Once the sender has provided all the details regarding the payment to proceed, then the payment gateway sends the request to the sender’s bank for authorization to make the payment to the merchant. In all of this, the sender has signed an agreement that the money sent by the sender to the merchant is reliable and the sender knows about this payment. Then the payment gateway checks the details provided by the sender with the bank. If all the information provided by the sender is correct then we proceed to the next page in which OTP or PIN is being provided by the sender and if the information is incorrect then the payment gateway declines the transaction stating that the provided detail is incorrect. All the checking work is being done within a few seconds.
Checking the status of the payment
Once the payment is authorized by the sender then the payment gateway proceeds to the next page that states that the payment is being made to the merchant. If the payment is being stuck then the waiting page is being provided to the sender stating that the funds will be transferred within some time. On that page, the payment gateway refreshes in real time to check the status of the payment. Once the payment is made, the payment gateway checks the status of the merchant’s bank to see that the payment has occurred successfully.
All these steps occur in just a few seconds. More traffic the server can control, less time and more payment is made at that current period.
Forbes Best Payment Gateway List of 2023
Forbes is one of the organizations that is trusted by most people and has a unique brand value because the data provided by Forbes is unbiased and hence the editorial has full authority. The list goes by:-
- New to the e-commerce game? Shopify could be your best bet.
- For merchants, the square is the perfect option. Personalization is made easy with Stripe!
- Flexible payment options? PayPal’s got this.
- Eateries find Clover to be an ideal choice.
- POS systems have the best compatibility with Elavon.
- Retailers that operate on a sizable scale may find Helcim to be an excellent option.
- Expensive transactions are best suited for Stax.
- Preventing fraudulent activities can be done effectively by using Authorize.net.
Red Flags for the Gateway Pay ment
Various software and spoof applications in the world help the sender to believe the merchant that the payment is made but still no payment is made. This is a fraud and to be safe from all those kind of scams, there are some red flags that the sender as well as merchants has to keep in mind for the future. Those are:-
● SSL (Secure Socket Layer) Certification
● PCI DSS (Payment Card Industry Data Security Standards) Certification
These two are the certifications that every merchant and sender should look into. Let’s talk about them in detail.
SSL (Secure Socket Layer) Certification
It is a type of certification that the merchant is responsible for. There are many payment gateways available in the world that do not have any SSL certification. SSL certification is the certification that lets us know that the payment is encrypted and secure at the same time and any hacker cannot use your personal information as well as your information for its own sake. Every payment gateway has its website that collects the data and all the renowned website has the badging of the SSL certification that can be found in the help section or you can ask for the help desk to provide the SSL certification of the website as its the right of the customer that uses the website for making payment. All the websites that are not secured use non-SSL-certified websites.
PCI DSS (Payment Card Industry Data Security Standards) Certification
PCI DSS stands for Payment Card Industry Data Security Standards certifies that the data contained in the card does not leak in any case. It is the surety provided by the bank with the certification of PCI DSS. These certificates are more reliable when you provide the information to the website but still, the data is not leaked by any mode of medium. When the information is being provided to the third-party website, still the data is encrypted. With all the data protection PCI DSS certification helps to keep the data secure.
With all the certifications, it helps to keep the data safe and secure for both the merchant and sender. Apart from these, if the website or the payment gateway does not provide certification, then the sender as well as the merchant has the power to case on the company of the payment gateway. The payment gateway is both safe as well as unsafe at the same time. Yes, it is a contradicting statement but to be in a safe position customers as well as users should look into the website and track record of the payment gateway.
Conclusion
A Payment Gateway is one of the most essential tools in the business format. These gateways have the potential to increase the business by providing best–in–class features to the business holder as well as increasing the customer’s experience as well. With the help of a gateway, business can be expanded globally and hence one of the most important components of digital increasing. As the security is best-in-class it helps businesses as well as customers to rely deeply hence making it a safe choice.
Customers, as well as merchants, use a payment gateway for the online payment mode. We have talked about various types of payment gateway for various types of business. The working of the payment gateway is transparent as one can question it at any point hence making it the safest option for expanding business. The world is growing with new technologies and a safe way to grow business altogether.
FAQs
1} Why use the mode of payment as a Payment gateway?
A payment Gateway is one of the advanced modes of payment that helps to reduce the use of cash and increase the use of plastic money. Due to this initial, the fraud has been reduced to a significant number. Although payment gateway has the potential to use plastic money as well as phones as a mode of payment device.
2} Which is the best payment gateway among all the 4 types?
All the payment gateways have their pros and cons but still in our opinion hosted payment gateway will be ranked as number one and after that, we provide number two to the API-hosted payment gateway. For any issue refer to the table provided above.
3} Why payment gateway is a reliable source for the mode of payment?
Payment gateway are encrypted by both ends means that the data cannot be recovered from one end. In simple words, the consent of both the part is needed to get the data (from the sender’s and receiver’s consent). Moreover, the payment gateway is encrypted via PIN (Personal Identification Number) or OTP (One-time Password) that is generated by the sender or by the bank from which the payment is going to be made.
4} Is it possible to conduct more than one payment at the same time?
This is a very tricky question as the answer lies in two parts. The first part is that the merchant has access to the payment gateway and has provided access to the sender to send multiple payments at the same time. The other part is that the payment is being made and the receiver has not received the payment, at that time receiver can review his bank account or the payment gateway passbook so that a clear is being provided to the the party.
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