What’s a Online Payment Gateway and How Does It Work?

A payment gateway is the front-end technology that reads credit and debit cards and transfers customer data to the merchant-acquiring bank for processing. A payment gateway in Credit card Processing secures the cardholder’s information, guarantees that money is accessible, and allows businesses to be paid. It connects a trader’s webpage to their payment gateway. It secures essential cardholder data and guarantees securely sent from the customer to the acquirer through the retailer.

The Payment Gateways Provider acts as a go-between for your customer and the Credit card Processing merchant, ensuring that the transaction is completed safely and quickly. An online payment gateway may make integrating the required software easier for businesses. The Payment Gateway Provider handles the customer’s sensitive card information between the acquirer and credit card processing gateways as a mediator during payment processing.

How Does it Work?

Why do you need a payment gateway if it’s only a middleman, you may ask? A merchant solution should note that online transactions are monitored by card-not-present transactions. The client’s credit card cannot be on a P.O.S. terminal physically,  as it would be if the price were totaled in an actual store. As a result, credit card processing gateways may only depend on the card details provided by the client on the payment page. The fraud risk is much greater with card-not-present transactions, and this is where credit card processing gateways come in handy

Fraudsters would have easy access to the credit card processing Payment Gateway Provider Merchant Solutions handle, putting your company at risk of fraud and chargebacks. Furthermore, criminals would discover new methods to start unauthorized transactions, making you even more vulnerable to fraud and harming your brand’s image.

Different Payment Gateway Types

Let’s take it a step further and look at how payment gateways work throughout the payment process now that you know why businesses need one. Merchant Solutions payment gateway performs the following functions throughout the online payment process using a credit or debit card:

Credit Card Processing Gateways Operations

The fundamental operation of payment gateways may be summarized as follows:

• When a client makes an order on the website, they click the “Submit Order” or “Checkout” button to start the process.
• The merchant provides the payment gateway with the information of the customer’s transaction in a secure manner. The payment gateway sends the transaction to the issuing bank for approval.
• The issuing bank approves or rejects the transaction once it has been verified (depending on the money available in the customer’s account). The merchant solution receives this notification from the payment gateway.
• The Payment gateway services, settle the transaction amount with the bank and pay the money with the merchant.

Do you wish to create your payment gateway and offer payment services? Perhaps you have a novel payment model and none of the current payment gateways match your needs. In both circumstances, developing a bespoke payment gateway is the natural option. Still, it is risky to begin payment gateway development without understanding all of the nuances that might make or destroy your enterprise.  In this post, we will walk you through everything you need to know about payment processing software development, from must-have features to law and security if you opt to outsource your payment processing software development.

Who Needs Payment Gateway Development?

Before we answer, let’s be clear about what we’re talking about. What exactly is a payment gateway? A payment gateway serves as a middleman between a client (and an issuing bank acting on their behalf) and a merchant (and the acquiring bank acting on their behalf). A payment gateway allows for safe online payments from one bank account to another. Fraud protection and PCI DSS compliance are two critical parts of payment gateway operations. These will be discussed more below. A payment gateway is a system that receives a customer’s billing information, encrypts it in a format understandable by a payment processor, and transports it through the payment network. It also delivers alerts to the merchant’s online or mobile app when payments are authorized or rejected. 

There are two reasons why you would wish to build your payment gateway:

• If you have specific needs, such as processing a certain currency, enabling specific payment methods (such as QR code payments), or dealing with a specific payment processor, that aren’t addressed by existing payment gateway solutions.
• If you wish to start providing payment services,

How to Choose the Right Payment Gateway for Your Business

Building a bespoke payment gateway may be a difficult undertaking since you must strike a precise balance between your company’s needs, existing technological capabilities, and security and regulatory compliance. Conducting research and speaking with your selected development team will be required to determine the entire list of features to deploy. Here’s a list of typical features you’ll need to communicate with payment systems and fulfill security standards to get you started.

• Fraud prevention:

Card-not-present fraud is always a concern when making online credit card payments. Because creating a fraud protection solution from scratch is a difficult task, it’s recommended to start by partnering with a fraud prevention and risk mitigation platform. Future integration will be much easy this way.

• Tokenization:

 Tokenization substitutes an IBAN and other sensitive credentials with random alphanumeric tokens as part of the payment data encryption procedure. With tokenization, only the payment processor can handle the transaction, and no client data is lost if the payment gateway is compromised. This decreases your assault surface and limits your liability.

• Recurring payments:

If you offer a subscription service, a payment gateway can provide a scheduler to facilitate recurring payments. Dashboards, APIs, and virtual terminal commands can all be used to set up this capability. Ensure you have a mechanism to obtain consumer authorization for recurring payments and that they are not enabled by default.

• Easy integration:

Your (or your customer’s) CRM system should be able to communicate with your payment gateway easily. Make sure your APIs are clean and strong to integrate with popular business software solutions.

• Online payment gateways:

No secure information is passed via the consumer’s cart when your merchant app redirects to a hosted gateway. This is another excellent method for reducing the assault surface and limiting your liability.

• Virtual terminal:

Some clients choose to pay by phone rather than by credit card online. You may convert a PC into a virtual POS terminal by connecting to a cloud-based service, which requires no installation. As you can see, cybersecurity and regulatory compliance are critical needs for payment gateways, so we’ll move on to that.

How Can a Payment Gateway Help My Company?

Convenience

If you interface with a payment gateway, your consumers can make purchases whenever they want, whether or not you are managing the store. Giving your customers the freedom to shop whenever they want will make both of you and them more convenient.

Faster payments

You are aware, as a business owner, that being paid at all is difficult. Many clients would rather pay right away and be done with it than deal with the headache of committing to pay on a specific day and then failing to do so. They can do that thanks to payment gateways, which benefit both you and your clients.

Information Security Laws and Regulations

Secure payment gateways build customer confidence and help merchants avoid chargebacks. The following is a list of the cybersecurity requirements and regulations that your payment gateway system must meet to be registered.

1. PCI DSS adherence

Every organization that has access to its clients’ cardholder information must comply with the Payment Card Industry Data Security Standard (PCI DSS). Failure to comply with PCI DSS exposes the merchant to insecure transactions, a high chance of fraudulent chargebacks, higher payment processing fees, and potentially account cancellation. You should also review the legal requirements of the nations from which you will accept transactions, even though PCI compliance is required. There are four levels of PCI DSS compliance. The levels you must achieve are determined by how you conduct your transactions.

• Collection: Do you gather cardholder data on the payment gateway server, the customer’s browser, or the merchant’s app server?
• Storage: Will the data be kept on the merchant’s or the payment gateway’s server? 
• Transmission: How will you provide the information to the payment processor?
• Processing: The merchant or the payment gateway will process the data.

You must additionally examine the cybersecurity standards and practices indicated below to completely comply with PCI DSS criteria. 

2. 3-D Secure EMV

EMV stands for EuroPay, Mastercard, and Visa and is a global credit card transaction standard. Using chip technology prevents card-present fraud by transferring hundreds of different bits of data between the card and the POS terminal. EMV 3-D Secure means “three-domain” secure, which indicates that each transaction is protected by three domains: the domain of the card issuer, the domain of the payment acquirer, and the interoperability domain—the infrastructure used to transfer payment data. EMV 3-D Secure, which is protected by SSL (TLS) communication and XML messaging, permits responsibility shift for chargebacks, which means that when a fraudulent chargeback happens, culpability passes from the merchant to the card issuer. 

3. Tokenization

As previously stated, replacing sensitive credit card numbers with tokens is a great practice for limiting the scope of potential attacks and securing a customer’s payment data.

4. P2PE

Peer-to-peer encryption (P2PE) enables businesses to create secure communication channels between specific devices to avoid sending secure data across an open network. Another best practice guideline is to reduce the potential attack scope. Now that we’ve covered security and compliance, let’s look at how to create a payment gateway and link it with your existing systems.

Comparing Best Payment Gateways in the USA

Choosing the right payment gateway can make a big difference when making payments online. There are several payment gateways available in the USA, and it can be challenging to know which is the best for your business. 

• Stripe is one of the most popular payment gateways in the USA, and it’s easy to see why. Stripe also offers a variety of features, including recurring payments, split payments, and the ability to accept both credit and debit cards. The fees for Stripe are also competitive, with a flat-rate fee for each transaction. 

• PayPal is an excellent choice for businesses that need to process payments quickly and securely. It’s also one of the most versatile payment gateways, as it supports a variety of payment methods, including bank transfers, credit and debit cards, and PayPal Credit. There are also various fees associated with PayPal, including a flat-rate fee for transactions and fees for international payments. 
• Authorize.net is a trusted payment gateway with a long history of reliable service. It’s also one of the most secure payment gateways, with advanced fraud protection and a system that encrypts all payment data—the fees associated with a flat-rate fee for each transaction. 

• Amazon Payment is an excellent choice and one of the most popular payment gateways internationally, as it can process customer payments worldwide. The fees associated with Amazon Payments are also competitive, with a flat-rate fee for each transaction.

How Do I Integrate with a Payment Gateway?

A payment gateway may be obtained in three ways: by purchasing an off-the-shelf solution, building it yourself, or outsourcing the process to a reputable payment gateway software development business. Relevant has vast experience developing payment gateways for mobile and online. Our payment solution development services cover the following:

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Final words

If you opt to create your payment gateway, the following will be your key challenges:

• Addressing compliance and cybersecurity issues.
• Implementing a variety of features ranging from fraud prevention to recurring payments.
• Ensuring on-time product launch.
• Providing dependable post-release support with the option to alter the platform if necessary.

Unsurprisingly, errors at any point are costly. To ensure the greatest results, you must have access to individuals who understand how to build a payment gateway system from the ground up.