As a merchant or a business owner, you know how necessary it is to get access to the payment gateway if you want to accept online payments.
Nowadays merchants and business owners are heavily relying on online payment acceptance and thrive to deliver seamless online payment experience for their customers. Payment gateways undertake the task of operating front end payment user interface and payment processing making it a link between payment acceptance link between merchants and customers.
When it comes to accepting payment online every business owner should know the basics of payment gateways. And if you are keen to integrate payment gateway you have to take the important task of choosing a payment gateway that is tailor-made for your business.
This task can be quite critical, with the sea of knowledge that the internet is, it is inevitable to fall victim to a few misconceptions about payment gateways.
So, before continuing about these misconceptions let’s take a quick tour of payment gateway basics.
What is a payment gateway?
A payment gateway is a third-party software when integrated with the website works as a channel to make and receive online payments. It acts as a link between a merchant that accepts online payments and a customer who wants to make a purchase using online payments. A payment gateway is a platform or a service that helps authenticate cardholder’s details for offline and online businesses.
Know what is the role of payment gateway and how a payment gateway works.
Now, coming back to the main point, here are some misconceptions about the online payment gateway that people have.
Payment Gateways and banking methods –
It is a common misconception that payment gateways offer banking services. The role that payment gateway plays in online payment processing is completely different than that of the bank. Banks are responsible to process online transactions whereas payment gateway is something like a link or interface that connects the merchant and the bank that is handling the payment. Not only the roles of banks and payment gateways are different they also can not be interchanged.
All payment gateways offer same services –
Though the main purpose of the payment gateway is to provide online transaction processing, according to the merchant’s needs and evolution of online payment scenario, many payment gateways provide offer various services and solutions along with the payment gateway. Some payment gateway providers offer virtual terminal account, virtual card swiping, a back-office system, multi-currency management, etc. So, in conclusion, the purpose of all payment gateways is the same, but some may offer extra add ons in order to provide more seamless online payment processing.
Payment gateways and private/sensitive data management –
Another one of the common misconceptions about payment gateway is that it is not responsible for merchant’s and customer’s private data. When it comes to online payments there is a risk of cyber theft. Payment gateways process transactions online and hence are involved in handling sensitive customer information. RBI has made it mandatory for payment gateway service providers to follow the security norms and guidelines. It is also mandatory that the payment gateway framework should cover security, fraud prevention, and risk management framework. According to RBI guidelines,
The agreement with the merchant shall have provision for the security/privacy of customer data. The agreement with merchants shall include compliance to PCI – DSS and incident reporting obligations.
So, in conclusion, payment gateways must provide secured online payment processing in a risk-free manner protecting customer’s and merchant’s privacy.
Payment gateway holds and controls payments done by customers –
Another misunderstanding that is surely untrue is that the payment gateway has the capability to hold and control customer’s money. The payment gateway is an entity that only authenticates and processes online payment transactions between merchants and customers. It does not in any way holds the money that customers pay by using online methods. When customers initiate the online payment gateway stores the necessary cardholder data securely and then forwards this data and transaction information to next entities for approval process. As soon as the other entities in the payment transaction process confirm and authenticates the payment, this information is backtracked to the payment gateway and in turn to the merchant who then informs the customer about the successful payment. This whole process takes place in a few seconds and the payment gateway does not interact with the customer’s money directly.
Payment gateway processing –
There are multiple misconceptions about payment gateway processing, some of them are :
- Only payment gateways offer payment processing
- Lower processing rate is better
- The myth about payment gateway transaction rates
Let’s clarify this one by one.
Firstly, nowadays there are multiple options or alternatives and third party solutions for payment gateways. Small or home-based businesses don’t have business websites or the budget to set up a payment gateway to accept online payments, but there are situations where the inability to accept online payments may end up losing the sale and shop’s credibility. So, NO, payment gateways are not the only ones who offer processing services.
Next is low processing rates. Who doesn’t love discounts? If someone is offering a lower processing rate won’t it be beneficial for the business? Not necessarily, low cost or affordable rates may not always mean quality service. There are other factors that need to be considered from a business perspective while deciding on the payment gateway. So, looking at the big picture, you should never consider lower rates as a criterion while choosing a payment gateway.
The most common misconceptions about payment gateway processing are, that the credit and debit fees for payment processing are similar and all payment gateway transactions are processed at same rate. Both of which are false. Credit and debit card charges are not same and differ according to payment gateway provider. In many cases, debit card processing rates are lower than that of credit card rates.
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