If you run an ecommerce site, then you’re going to need a payment gateway, there’s no way around it. If you’re a newbie to the world of payments, this may seem extremely complicated and out of you league.
The truth is, payment gateways aren’t as nearly complex as you may have initially believed.
Here’s a closer look at what payment gateways are and why they’re important for eCommerce sites. You will also find out how you can get started with your payment gateways immediately.
What Is a Payment Gateway?
“A payment gateway is the service that sends all of your credit card transactions to your credit card processors,” writes Will Lipovsky in a previous Due post. “It also sends you a message from your credit card processor that lets you know a transaction has been authorized. There are even some payment gateways that will automatically add tax and screen for fraud.”
In other words, a payment gateway is simply a software application. It’s basically a conduit between an eCommerce website and the bank that authorizes (or declines) a customer’s credit card payment.
Credit and debit cards, eCheck (ACH), and even cryptocurrencies like bitcoin are all processed through payment gateways.
Ultimately, a payment gateway is the final step of the sales process on an ecommerce website. Without it you won’t be able to securely charge your customers when they purchase items from your website.
What is the Role of a Payment Gateway?
Payment gateway services are required for all online credit card processing. It’s the same exact process as a point of service (POS) device does when you pay for your lunch at restaurant.
The Payment gateways works with your purchase items from a brick and mortar retailer. So, the main role of a payment gateway is to authorize transactions between you and your customers.
Remember, without a payment gateway approving the transaction process cannot go move forward and you won’t receive your money.
Do I Need a Payment Gateway?
If you run a strictly eCommerce site, which means that you’re processing payments online, then the answer is absolutely, yes. There’s no other way to accept credit cards through the internet without a payment gateway.
Keep in mind that since transactions are processed over a payment gateway they are processed as “card-not-present” transactions. This means that the merchant is simply relying on the credit card information that the customer enters. The merchant doesn’t actually see the customer’s credit card.
During the card-not-present sale, there is no way to run the data on the card’s magstripe or EMV chip. The result is that there’s potential for higher instances of fraud. As a result, you may be charged a higher rate than card-present transactions.