Today, there is a dramatic change in the payment system, the online payment system is quickly replacing the traditional way of payment which involves the contact between buyers and sellers, being adopted by giant businesses, government and financial institutions it became the need for every business to provide the customer with a payment interface, having a payment gateway is not only necessary to facilitate customers with a digital payment system but also to bring a good business image in the public attention.
What is a payment gateway?
A payment gateway is a part of the software solution intended to accept payments online, it’s a bridging element between a software and a merchant account, payment gateway allows users to fill the card details in the appropriate fields in the form inside the software and can make payments in a couple of clicks, it enables an online customer to transfers funds from his/her account to the sellers account.
How does it work?
Starting from cardholder or customer when a customer fills in the transaction details and presses the “pay” button, the details are sent to the merchant’s web server.
- The payment gateway:
The merchant’s server receives the data and sends it to the payment gateway in the form of API which is called an ephemeral token.
- Payment processor:
The information then goes to the third-party payment processor, payment processors are connected with merchant’s account and the payment gateway, then it transfers the transaction information both sides, payment data is passed through a card network, for example, Visa, Mastercard, Discover etc.
- Card network:
Card network passes the information to the issuer bank. The issuer bank processes the details at their end and sends back the approval or denial status to the payment processor.
- Transaction Status:
The payment processor sends the transaction status to the payment gateway and payment gateway passes the same to the user interface.
- Fund transfer:
If the status is “Approved” The funds are transferred to the merchant’s account from issuing bank in a matter of a day or two.
Choosing a Payment Gateway:
While choosing a payment gateway it’s important to keep in mind that the service should be cost-effective, easy to integrate, reliable, supports useful payment methods and currencies and known for its data safety.
There are majorly two types of payment gateways that you can choose according to your business need. One is external or redirect payment gateway, the other is direct or transparent payment gateway.
- External or Redirect payment gateway:
When the user hits the “Pay” button it gets redirected to another page to proceed with the further payment process.
- Direct or Transparent payment gateway:
When the user presses the “Pay” button it doesn’t take the user away from the website and performs the further payment process within the website.
Cost comparison among some of the popular service providers in the market.
PCI DSS (Payment Card Industry – Data Security Standard) is necessary to consider if you are processing card payments, it is s safety standard set by four biggest card processors association Visa, American Express, Mastercard and Discover, card data is processed and saved in the server, thus as a security measure you have to PCI-DSS compliant.
In case you are working with a third-party payment processor, the card data is saved in the server of the vendor and you are not bound to be PCI compliant.
Integration, stripe example:
Stripe is a service which is highly recommended because of its trustworthy image, it gives many more useful options, Stripe provides its own SDK for iOS and Android platform in the official Stripe’s website along with a strong mobile library which makes it easier for your software development team to work, it reduces the time consumption in the process.
As the card data is saved in the Stripe’s server you are not liable to be PCI compliant.
Create an account with Stripe by filling in necessary details, you will get your dashboard, further activate the account by filling in details like your bank account details, business details and few personnel details, once you have successfully activated the account Stripe gives the test keys called “Sandbox keys” for development and testing purpose, later you can use the production keys for live payments after the deployment.
Go to Prebuilt iOS UI for iOS and Prebuilt Android UI for Android, to retrieve the necessary insights of development, it will precise the time and effort of your software development team and help them to build a payment gateway more efficiently.
If you want to gain brand value in the market, creating a custom payment gateway from scratch gives you a good brand image. Integrating the third party payment processor is suitable for startups and small volume businesses, way of integration depends on the type of payment gateway chosen, it requires a sound accuracy and experience for your development team to do it efficiently, in many cases customers leave the payment process in between because of the complex payment checkouts.