What Is An On-Line Payment Gateway?

When asking what is an online payment gateway, think of it as a virtual service used to process credit cards for your business through an internet connection rather than a traditional phone line dial-up system. It acts as the electronic communications link between your ecommerce business, your bank and the cardholder’s bank to process real-time credit card authorizations.

In other words, an on-line payment gateway is used to submit and process your credit card payment requests. It functions much like a point-of-sale terminal used to swipe and transmit card-present credit card transactions. It collects your buyer’s credit card information and transmits it for processing. This process takes just seconds, depending on the speed of the internet connection, and provides a secure way to transmit credit card data.

Who Should Use An On-Line Payment Gateway?

When considering what is an online payment gateway, remember that it will allow you to integrate your online shopping cart with the payment gateway to connect with the processor. Online payment gateways are typically used for e-commerce merchants which allows them to integrate their online shopping cart in to their payment gateway to connect to their processor. The online payment gateway can store customer data in a vault for future billing, can offer recurring billing features, and provide different levels of risk mitigation when accepting credit cards online. An on-line payment gateway is a good alternative for start-up or small on-line businesses because it can provide a cost effective alternative to purchasing equipment. In addition, some businesses integrate an on-line payment gateway into their traditional merchant account and use both the online gateway and point of sale equipment to collect credit card data. This is useful if a business accepts orders over the telephone or uses subscription billing models.

On-line payment gateways make processing credit cards quick and easy:

  1. You, or your customer, will input the credit card data.
  2. Your payment gateway accepts your customer’s card information and sends it to your bank.
  3. Your bank sends the information to the credit card association for authorization.
  4. The card association forwards the information to the issuing bank.
  5. The issuing bank determines if there are sufficient funds to cover the transaction.
  6. The issuing bank sends an authorization code or decline code to the payment gateway.
  7. The payment gateway sends the response code to you, and if the transaction is approved, you send your customer his merchandise.
  8. After batching out, your payment gateway transmits your daily receipts and receives payment from the issuing bank and sends it directly to your bank.

Merchants asking what is an online payment gateway should realize that it is a quick, convenient and safe method that allows customers to buy from your ecommerce site from anywhere in the world, 24 hours a day, 7 days a week, and get almost instant confirmation of their purchase!

When shopping for an on-line payment gateway service, ask about all the features available with their plan. For example: some payment gateways have an integrated shipping program; some have an integrated tax calculation program; some offer smartphone processing; some restrict the products you can sell on-line; some require you have a traditional merchant account as well; most offer detailed reporting services and customer confirmation emails; and all the gateways should offer fraud screening tools so your transactions are safe and PCI compliant. The plan that’s best for your business should provide your customers with a fast, secure checkout experience with minimal risk, time, and cost to you.

What Does It Cost?

There are cost considerations when asking what is an online payment gateway , as it is a service that charges a fee per transaction. Fees vary. Some gateways deduct a percentage of each sale and others charge a flat fee for every purchase. You may also be charged a set-up fee, charge-back fees, even a customer complaint fee. Be sure you read your quote carefully and ask questions if you don’t understand what a fee is for, when it’ll be charged, and most important, if it’s negotiable.