Payment Gateways Explained
Inovio is the industry’s most intelligent payment gateway – delivering seamless integration and global scalability to business partners of all types and sizes. Since its inception, Inovio has operated on the leading edge of payment technology. How? By for
What is a payment gateway?
A payment gateway is an e-commerce entity that allows merchants to easily and seamlessly connect with their cardholders, as well as with a multitude of MSPS (merchant service providers). Beyond simply enabling payment processing, payment gateways also serve to offer merchants a whole host of valueadded services including: connections to storefront POS software, detailed customer reporting, anti-fraud services, solutions for chargeback management, and more.
How does a payment gateway work?
A payment gateway serves as a centralized entity that bridges the multitude of connections necessary to complete a transaction. This includes connections between the cardholder, the merchant, payment processors, and the card associations. Here’s how it works: a customer places an order, either directly on the gateway or via the merchant’s website or storefront. The gateway encrypts the card, runs business rules, and sends a complex authorization request to the payment processor. Next, the processor connects the merchant’s bank to the cardholder’s bank to get an authorization. The processor then forwards the authorization details back to the gateway, which runs more business rules, and informs the merchant and customer that the sale is completed.
Why use a payment gateway?
One of the main advantages of payment gateways is how convenient they are – they’re able to transform complex technological processes into simple interfaces that are easy to use for both merchants and their customers. In addition to convenience, there are many other reasons for merchants to utilize payment gateways, including: cost (merchants don’t have to spend additional dollars to update networks and software), speed (quick transactions help goods/services go from storefront to customer quickly), and opportunity (merchants can start selling on the same day they get their merchant account). Partnering with a payment gateway is also a cost-effective way for merchants to maintain vital data for back office needs such as fulfillment, billing, accounting, and more.
How are transactions kept secure?
Payment gateways are required to remain PCI Level 1 compliant at all times. As part of that compliance process, payment gateways are subject to extremely stringent, in-depth audits. Furthermore, any and all sensitive cardholder data passing through a payment gateway undergoes an encryption process that keeps that data safe and secure from the point of sale (when the customer enters their card information) through to the merchant’s MSP and the major card brand networks, and back again.
What should a company look for in choosing a payment gateway?
Merchants can’t sell goods/services if their gateway is down. So for starters, they should look for a payment gateway that offers maximum reliability – for instance with a network uptime of 99.99% or more. Usability is also important – in other words, merchants should make sure that the gateway offers services and solutions suited to their specific needs (ecommerce, restaurant, etc.). It’s also essential that a gateway offers merchants the security of fully PCI compliant transactions. An easy-to-use interface (for access to reports and so forth) is also important. Other things to consider are whether the gateway has connections to any specific shopping cart software merchants may be interested in and any banks they may do business with.
What merchant account features are offered?
There are a whole host of features a payment gateway can and should be delivering to the merchants it partners with. These include: robust shopping cart functionality, POS solutions and services, in-depth reporting tools, connections to chargeback tools, and more. That being said, many payment gateways are owned by merchant service providers who may limit the account features those gateways can offer merchants. Therefore it behooves a merchant to partner with a payment gateway that is merchant service provider/psp/iso agnostic so that the limitation of merchant account features is not a concern.
Does an effective merchant account payment gateway allow a business to quickly configure automatic billing and other value-added services?
Without question. Whether it’s automatic billing, subscription processing with recycling, automatic account updaters, upsales, antifraud measures, or chargeback management services, any legitimate merchant account payment gateway should be 100% focused on providing merchants with all the tools they need for business success. This includes allowing for seamless connectivity with any and all third-party entities as well as allowing a merchant’s customers to pay in any currency. It’s all about allowing a merchant to quickly and easily perform transactions in a way that best suits their particular business.
Does a payment gateway support a payment processor and shopping cart?
Yes. A reputable, reliable payment gateway should support as many different payment processors, shopping carts, CRM (consumer resource management) systems, and ERP (enterprise resource planning) software solutions as possible. Again, it’s all about providing flexible, customized solutions for merchants that allow them to most easily and effectively grow their businesses.
How does a payment gateway help a business maintain PCI compliance?
A payment gateway allows a business to maintain PCI compliance by shifting the burden of compliance from the merchant to the gateway itself. This is commonly referred to as PCI descoping. In other words, payment gateways assume a merchant’s burden for PCI compliance. It’s the payment gateway that hosts the card data entry form on a website. Therefore, it is the payment gateway who is responsible for (and expert in) encrypting and tokenizing the cardholder data on that website in a PCI compliant way.
How quickly do merchants get paid?
It is typically a business owner’s merchant services provider who dictates when they will receive the funds for their transactions. However, as cash flow is king when it comes to running a business, one of a payment gateway’s most important functions is to keep the transaction process flowing properly so that merchants can be paid promptly. Payment gateways also have a responsibility to keep merchants informed as to when and how they will be paid. This should be achieved via detailed yet easy-toaccess reports related to transaction batch times and so forth.