Online payment gateways provide online merchants with a convenient and secure way to process their online payments to their customers. Their main function is to act as a bridge between your customers and your processing company. As such, they simplify the online payment process by taking care of all the details from transferring the customer’s money to you to receiving and processing payments from your end. The good news is that many online payment gateways today offer free trials, so you can get your hands on this technology without risking any of your budget. However, there are a number of things you need to consider before you sign up with an online payment gateway. Here are some of them:
How does an online payment gateway work? In simple words, an online payment gateway works like a virtual terminal that allows the online merchant to process credit card transactions. They work best for smaller online businesses as against larger companies that operate solely in the offline world. Payment gateways act as a more secure alternative to physical point-of-sale terminals, you usually find in restaurants and stores. This is because they allow you to accept money payments from your customers through their credit cards, thereby reducing the risk of chargebacks and ensuring safe and timely transfer of funds.
The biggest and the most obvious difference between an online payment gateway and a payment service provider is the amount charged by them for facilitating the transaction between you and your customer. You will obviously have to factor in your cost for accepting the transaction. However, there are other fees that are applicable when you use these online services. The two major fees are the transaction fee and gateway fee.
Transaction fee is the amount of money that is paid to your bank or online payment gateway for facilitating the transaction. This is normally a percentage of your total sales. It is generally set at 0.35 percent for all credit card transactions. The transaction fee can be availed of at any time during the course of your online business if it helps in reducing your overall cost of goods sold. While this transaction fee may not be a huge amount by itself, when you multiply it with the number of transactions you conduct in a day, you will certainly realize the significant impact it makes on your bottom line.
On the other hand, online gateways do charge transaction fees. But the good news is that the transaction fees applied by them are considerably lower than those charged by banks and credit card processing companies. For this reason, many online businesses prefer to avail the services of online payment gateways rather than other third party providers. However, some online businesses still choose to pay the fees demanded by these third parties. If your products or services are unique and cannot be found in the other places, then you would do well to pay their transaction fees since they would be providing a value added service for your company.
Online transaction gateway also helps you in preventing and stopping fraudulent activities. Fraudulent persons create different user accounts in order to carry out card data theft. When a payment gateway is established between your customer’s bank and yours, you can be rest assured that all transactions made will be authentic. This will go a long way in preventing your company from being the next victim in this crime. All transactions made through a payment gateway is secured and encrypted.
Moreover, when your customers make transactions with your hosted payment page, you can be rest assured that the cardholder’s data (such as the cardholder’s name and address) will not be leaking to unauthorized individuals. A payment gateway is hosted either on your website or within a virtual network. Based on the nature of your business and the nature of your customer’s cards, both can be brought under your control. For instance, if you sell physical goods, your customers will be visiting your physical store where they can pay with their credit cards. On the other hand, if your business is based online (virtual worlds) then, your customers will be visiting a secure virtual world that will only allow them to pay using secure and encrypted cards for more visit here
Your online payments solution can bring a number of benefits to your business. In addition to the mentioned three mentioned above, there are other key players in the payments industry such as banks, gateways and card issuers who play a vital role in our lives. The role they play is vital as they form the backbone of our financial system. Therefore, we should take every precautionary step to ensure that our systems are safe from malicious attacks and frauds.
We independently research, test, review, and recommend the best products—learn more about our process. If you buy something through our links, we may earn a commission.
