A payment gateway is a crucial component of the online payments system as it facilitates secure transactions by verifying and transferring cardholder data between parties. As online sales surged to $5.7 billion in 2022 due to the Covid-19 pandemic, payment fraud also increased, resulting in a loss of $41 billion. Therefore, payment gateways play a vital role in managing the intricacies of online payment processing and ensuring a seamless and safe checkout experience for both consumers and businesses.
The key players in online payments
Merchant:
The online business that accepts card payments.
Operates in any vertical (e.g., travel, retail, eCommerce, gaming, forex, etc.).
Delivers digital or physical products or services to consumers.
Customer:
The person who purchases goods and services from a merchant is called the cardholder. They initiate the transaction by accessing the merchant’s offerings.
Issuer:
The bank, financial institution, company, or credit union that issues or helps issue payment cards to customers on behalf of the card schemes.
Acquirer:
The financial institution that processes card payments on behalf of merchants.
Payment Gateway:
The technology merchants use to authenticate and securely transfer payment data between the various parties involved in the transaction process.
Sends the relevant message to the merchant once the parties involved approve or decline the payment.
Card Schemes:
The entities that enable payments between merchants and card issuers.
What are Payment Gateways and their importance?
An online payment gateway is a technology that facilitates secure card payments on the Internet by capturing, storing, and transmitting card information between the customer and the acquiring bank.
The importance of a payment gateway lies in its ability to protect sensitive payment data by encrypting and relaying it securely between the merchant, acquiring bank, and issuer.
Security features of payments gateway
Payment gateways prioritize security and compliance due to the sensitive nature of payment card data. However, the rise of eCommerce has also made online businesses and their customers more vulnerable to cyber threats, with online payment fraud expected to reach $48 billion by 2023. Therefore, merchants must invest in robust risk management solutions to detect and deter fraudulent transactions, and selecting the right payment gateway is an essential step in this process. Here are some security measures commonly employed by payment gateways to help merchants make an informed choice for their eCommerce business.
PCI DSS compliance
The Payment Card Industry Data Security Standards (PCI DSS) are a globally recognized set of security regulations established by card schemes. PCI DSS aims to protect credit and debit card transactions and prevent the misuse of cardholders’ personal information. Businesses that handle sensitive card information, such as accepting, storing, processing, and transmitting it, must comply with PCI DSS to prevent fraud. Keeping up to date with PCI compliance is essential for these businesses.
Tokenization
Payment gateways use tokenization to protect users’ payment card details during transactions. When a payment is made, the sensitive bank card information is replaced with a unique identifier known as a token. Anyone who tries to intercept the data will only see an unintelligible form.
With tokenization, customers can input their payment card details just once, eliminating the need to re-enter the same information for future transactions. This technology makes payment processes smoother and safer for customers and merchants, as customers have one less step to take at checkout after their first transaction on the merchant’s website.
3D Secure authentication
3D Secure is a security protocol used for online card payments that require customers to complete an additional verification step with their card issuer to authenticate the payment. Payment gateways that support 3D Secure make online payments more secure and easier across different devices.
Visa and Mastercard have announced that they will decommission the 3DS1 protocol globally and only support 3D Secure 2 (3DS2) starting October 2022. This new version, 3DS2, is an enhanced version of 3DS1. It is important to note that merchants in India and Bangladesh must upgrade to 3DS2 by October 2023, as mandated by the card schemes.
Role of a merchant account
A merchant account is a specialized bank account that enables businesses to accept customer electronic card payments. Various institutions offer this type of account, such as payment service providers, acquirers, and payment gateways. It ensures that businesses can receive payments securely and promptly. It’s essential to understand that a merchant account is distinct from a regular business bank account used for day-to-day business expenses.
Instead, it proves that the merchant is the rightful owner of the payment data transmitted to the bank and that they receive the funds from online transactions.
When a customer makes a payment, the payment gateway, or the entity that set up the merchant account, deposits the funds into the merchant account. This account is necessary when the customer submits their card details and the funds are transferred from the acquirer to the business account. The merchant account simplifies the payment process by collecting all payments in one place before moving them to the business bank account as a single deposit.
Supporting different currencies with your payment gateway
For merchants who accept international payments, payment gateways that support multiple currencies are crucial eCommerce infrastructure. These gateways allow businesses to charge customers in different currencies (such as British pounds or euros). With Logibiztech, online merchants can use multi-currency pricing (MCP) on their websites, making global expansion smoother. MCP allows businesses to price and charge their products/services in multiple foreign currencies while receiving a settlement and reporting in their domestic currency.
By using a payment gateway that processes payments in multiple currencies, merchants can:
- Boost customer trust and conversions: According to a survey from The Payers, over 73% of cross-border buyers feel more comfortable buying from a brand that includes their local currency in pricing. Accepting payments in different currencies can increase sales volumes and profitability, all through a single payment gateway integration under the same merchant account.
- Gain a competitive edge: Accepting payments in the preferred currency of target consumers can provide a strategic advantage over competitors who do not offer this service.
How can someone choose the most suitable payment gateway for their business?
Partnering with a reliable and experienced payment service provider and the acquirer can make payment gateways less complicated. With over two decades of experience in online payment processing, Logibiztech can provide you with a hassle-free and engaging payment experience for your customers. We are proud of our PCI Level 1 compliance, which we maintain annually, and our all-in-one approach. Our flexible and user-friendly payment platform includes payment gateways, global acquiring, alternative payment methods (APMs), card issuing, and in-house risk and fraud management services, all in one place.
By utilizing our comprehensive payment solution, designed for today’s discerning consumers, you can deliver smooth and secure checkout experiences to your customers, increasing revenue.
