Online payments have become a crucial part of our daily lives. Most consumers are transacting online through different modes, be it digital wallets, UPI, net banking, and others. As per statistics, the total digital transaction value is projected to reach $160,660m in 2021 and is further expected to grow with a CAGR of 13.6% till 2025. On the other hand, accepting payments from their customers online has become the need of the hour for almost every business.
Amidst the COVID-19 pandemic, there is a rush amongst local businesses to undergo digital transformation. If there is one thing that they need to understand before making this transition, it is the functioning of a payment gateway. Accepting payments online on an e-commerce platform requires the integration of a suitable payment gateway.
If you want to turn your local business into a full-fledged e-commerce store, you need to first understand what a payment gateway is and how it works. Let’s find out more about the payment-side of running a successful online business.
What is a Payment Gateway?
A payment gateway, also known as PG, is a modern technology that helps online businesses to accept payments from their customers. It can also be considered as software that connects the bank account related to a business to an online portal – website or app. This way, the amount that customers pay for their online purchases reaches the linked business bank account.
In simpler words, a payment gateway gives your online platform the much-needed payment processing functionality to conduct and process a transaction. Most of the payment gateways support different payment modes, including credit card, net banking, debit card, UPI, and digital money wallets.
In the past, various banks in India were only authorized to provide payment gateways. But nowadays, you can easily find several payment solution providers entering the foray to provide these gateways. If you are in the middle of setting up an online business portal, you should know that a payment gateway is what will keep your payment system rolling smoothly.
Benefits of a Payment Gateway for Online Businesses
The benefits of integrating a payment gateway on your e-commerce platform or app are not limited to accepting payments from your customers. With the right selection of a PG, you can provide a simplified experience to your end customers.
Here are some of the main benefits of using a reliable payment gateway:
Security of Personal Data
PCI-DSS compliant payment gateways ensure utmost security of personal information of end consumers transacting on a portal. It also enables users to store information, like bank details or credit card numbers for recurring payments. It is the integrated payment gateway that will keep the data secure from possible cyber threats.
Ease of Integration
Top-rated payment gateways in India are known for their quick and seamless integration into websites and apps. In other words, they are developer-friendly and come with clean, robust APIs, libraries, and plugins supporting all major platforms and languages.
Facility to Accept Payments Through Mobile Wallets
Digital transactions through mobile wallet apps in India are increasing with time, which is why most renowned payment gateways allow accepting payments through these wallets. This benefit caters to the individuals who prefer bringing their money to a mobile wallet app and then use it further to make online payments on other websites or apps.
Fraud Detection in Place
Payment gateways also facilitate online businesses with various fraud detection tools, including Card Code Value, Card Verification Value, and many others. This way, they minimise the risk of losing customer’s information and also prevent fraudulent activities through a user account.
Real-Time Bank Settlement
With the right payment gateway selected for your online business, you can get a quick, real-time bank settlement done for all the payments you receive through your customers. You will also benefit from its higher success route based on intelligent routing and dynamic switching between gateways/card networks.
In a nutshell, a payment gateway creates a secure path between a customer and businesses to transfer payments. Millions of users can use the gateway simultaneously, making it possible for you to sell goods or services online to your target customers.
How Does a Payment Gateway Work?
There are several steps involved in the working of a payment gateway. It is because it (PG) focuses on making the payment transfer along with securing the sensitive information shared by the users.
Here is how a payment gateway typically works:
- When users confirm an order on an online platform or an app, they are taken to the integrated payment gateway.
- At this step, they enter all the required payment details about the bank or card.
- The next step involves the authorisation of a transaction on a 3D secure page of the issuing bank.
- After getting approval for the transaction, the gateway checks for the availability of sufficient balance to proceed in completing the transaction.
- In case the balance is insufficient, the users receive an error message about the issue(s) related to the bank or card.
- If it has a sufficient balance, the bank or card settles the money with the payment gateway.
- Once this process ends, the end-users get a confirmation message of their orders being placed
How are Merchant Accounts Related to Payment Gateways?
A merchant account refers to a bank account that is linked to payment gateways to accept payments online. You can obtain it via payment gateways, payment processors, or payment service providers. Once you have a merchant account, you will receive a Merchant Identification Number (MID). This MID is required to process transactions and transfer funds from your customer’s account to your business bank account.
A common question that many business owners ask is – why can’t the amount be transferred directly to their bank accounts? The answer is simple – merchant accounts form a crucial part of the approval chain that links the customer’s payment information with a business bank account. It takes into account the instances of refunds, returns, and chargebacks that are common while selling merchandise online. It is the acquirer who subtracts the return amount from the funds in a merchant account before transferring the remaining amount to the linked business bank account.
A merchant account also simplifies the reconciliation process. For example, your online store might be receiving small amounts from multiple sources for the orders placed. A merchant account, in such a situation, combines those small deposits into a bigger amount and then transfers it to your bank account.
Stakeholders Involved in the Working of Payment Gateways
Typically, a payment gateway involves participation from the following stakeholders:
It is the financial institution that manages cardholder activation and participation (SecureCode by MasterCard or Verified by Visa). It validates cardholders when they make an online purchase and provides a response to the merchants for every transaction.
It refers to the account holder of a debit or credit card in use for an online transaction. He/she uses the card to pay for online purchases.
Online sellers who offer merchandise or services online through a website or app are referred to as merchants. They may develop their own payment solution or use a third-party payment facilitator like Paytm.
Card infrastructure providers like MasterCard or Visa form the card network. They verify authentication results from the issuer and respond to acquirers as per the transactions held.
These are financial institutions that register merchants for card networks and ensure that they (merchants) operate as per the rules and regulations of card network programs.
What are Payment Gateways Responsible for?
As a whole, a payment gateway is responsible for managing the following tasks:
- Manages switch configurations for merchants and communicates with the payment switch to validate online transactions
- Defines transaction roles for a merchant, i.e., the maximum and minimum amount a merchant can transact in a specific duration, restricts transaction from a specific geographical location, etc.
- Communicates with the card network and checks if the cardholder is enrolled for 3DS
- Process payments made by the customers
- Sends the records of payments to both merchants and customers
- Ensure data security
How to Integrate a Payment Gateway into a Website?
Step 1: Establish your website
Many online businesses use software by third parties to build a website for their consumers. This software manages to create the ordering page and all the code required for assigning payment information to the gateway. Making and generating this code from the beginning is one of the most challenging tasks for web advancement, so it’s normally better left to specialists.
Step 2: Combine payment methods
The means for this will differ from one service to the other. Still, you will usually have to record your payment gateway information for each payment method you plan to allow (Visa, Mastercard, and more.). Your payment gateway decides which cards are allowed. This can be done by you from your website’s management page or dashboard. Find the transactions page or something equivalent to begin.
Step 3: Examine the gateway
Your payment gateway service will typically grant you Test or Sandbox accounts. These enable you to make artificial transactions to warrant that the payment process is working accurately. Be certain to experiment with this before making your website live. This provision usually changes from one service to the other. Check your payment gateway‘s help site for particulars on experimenting with your gateway’s integration.
How to Choose a Payment Gateway for Your Business?
Selecting a suitable payment gateway is a crucial step towards growing your business online. Here are some of the most common features you should look for in a payment gateway:
- PCI-DSS compliant security
- Intuitive, easy to use dashboard
- Quick to integrate
- Round-the-clock customer support
- Single-click checkout
- Instant refund facility
- Ease of offering products on EMIs
- Ease of accepting payments in foreign currencies
- Low pricing and zero setup/maintenance fees
Payment Gateway for Startups:
Suppose you are a startup moving into the online business world. In that case, you will require a payment gateway to collect money from your consumers and manage your finances in the most efficient way possible. And we understand that choosing the best one for yourself can be a very challenging task.
Most businesses proceed with one of India’s top 5 payment gateways. While this is a solid idea, any payment gateway among the most beneficial might not suit the specific requirements that your online business has.
Here are particular tips that are necessary to consider before finalizing a suitable payment gateway of your choice:
- Setup fee / Transaction charges: As a startup, you might not desire to pay any setup or maintenance fee and should therefore choose a payment gateway that doesn’t charge you for the same. Even if you are an established brand, we recommend always going for the lowest transaction charges you can find.
- Automatic Billing: Does your online business require Automatic Billing? If you extend subscription-based or recurring payments, you must select a payment gateway that promotes automatic payment for recurring plans.
- Switch as per requirements: You can always switch from your payment gateway to the other depending on how your chosen platform is developing and the number of transactions you can complete in a stipulated period.
- CMS support: Before finalizing a payment gateway, check if it supports your online business’s CMS.
- Overseas customers: If your business is global, you need to be sure that your payment gateway supports accepting and making international payments with the number of international currencies it allows.
- Reputation: Judge the company’s current market standing to be assured that it is reliable and has pleased customers before you.
Why Should You Use Paytm Payment Gateway?
There are many reasons that make Paytm Payment Gateway the go-to choice for many small and big brands in India. With our PG solution, you get the following benefits:
- Ease of accepting payments through all payment modes
- Seamless integration of checkout
- PCI-DSS Level 1 Compliant to ensure robust data security
- Powerful dashboard to manage everything related to payments
- Easy integrations with all platforms and e-commerce plugins
- Extended products which include Subscriptions and Payment Links
- Migration assistance, and all the features mentioned above.
Payment Gateway FAQs
#1. How is an online money wallet different from a payment gateway?
An online wallet works as a payment instrument that can be used by customers to store money for later use. On the other hand, a payment gateway is a full-fledged payment solution that helps online businesses to accept money via a website or app.
#2. Why do businesses need a payment gateway?
A payment gateway plays a crucial role in approving the transactions that happen online between a customer and a business. It also authorizes the transactions, thus enabling business owners to simplify payment processing for their end customers.
#3. How much does a payment gateway cost?
The cost of integrating a payment gateway varies from one solution provider to another. You can check the pricing of the Paytm All-In-One Payment Gateway here.
#4. Which payment modes are supported by the Paytm All-In-One Payment Gateway?
Using the All-In-One Payment Gateway, you can accept payment via credit and debit cards, net banking, UPI, Paytm Postpaid, EMI, and online wallets.
#5. Which platforms does the Paytm All-In-One Payment Gateway support?
Paytm All-In-One Payment Gateway helps you accept payments online across mobile web, desktop, Android & iOS devices.
#6. How can I get a payment gateway?
With Paytm, you can easily get a payment gateway by submitting your business details and completing the KYC process. Sign up now to start accepting payments online using Paytm All-in-One Payment Gateway!