44.5% of e-commerce payments globally have been taking place through payment gateways or digital wallets since 2020. All such factors add to the immense benefits that e-commerce payment processing brings to the table for merchants with online businesses.
Customers spend their money differently now due to digitalisation, for example, UK Finance reported that cash payments went down 16% from 2017 to 2018 and said that they would decrease sharply by 2028. Therefore, people expect easy and simple, safe payment gateways when buying online.
As a business, we suggest offering relevant, accessible and trusted digital payment methods to your customers. This is where payment gateways come into play because they take care of the security side of things and allow you to easily offer card and other digital payments on your website.
Most payment gateways offer reporting features (so you can keep track of your payment flows), and fraud detection tools, among other features to make your life easier.
At Midnight Monkey, our digital geniuses can set up your payment methods so your customers have an easy and safe method to use when buying from your online store.
What Are Payment Gateways?
In short, a payment gateway in eCommerce is a platform that allows you to accept online payments. It is a service that allows eCommerce sites to offer a secure payment interface, without the complications of in-house development, getting a Merchant Account, and worrying about PCI compliance.
And all is well until you start looking for a payment gateway that suits your needs and budget. There are thousands of payment gateways available worldwide, each with its own array of features.
How to choose, then? Contact us and we can help you decide.
How Does It Work?
At their core, payment gateways are services that allow you to connect your store to a payment processor. They will securely handle all the technical details of receiving the payment details by:
- Providing an interface to input the payment details (this can be customised to match your brand’s look and feel, or the payment gateway can be connected to your custom checkout form via API, for example).
- Encrypting the data and sending the payment information to the payment processor.
- Relaying the result of the transaction back to you and your client.
It is essential you use payment gateways if you want to accept online payments on your website because they act as a physical POS card reader does in a shop.
Payment gateways are often offered directly by payment processors, which are licensed financial institutions. This means that they can help merchants accept credit card payments from customers and process refunds if necessary.
The fee structure of payment gateways usually follows one of two models:
- Fixed fee + a percentage of the transaction’s value.
- A SaaS-like monthly subscription plan.
In addition to their core functionality, payment gateways often have different features (e.g., reporting, advanced notifications, payment routing), but they all have one thing in common: they are used by merchants who want to accept payments online.
The Process Goes Like This…
As we have seen, payment gateways are systems that allow you to accept digital payments from customers.
We will not get too technical, but this is a quick step-by-step rundown of how payment gateways operate:
- The end-user decides to checkout and is presented with a form to enter her/his card and personal details (or other necessary details if the payment gateway works with an eWallet like PayPal)
- The data is encrypted and passed on to the payment processor.
- Important! Very often processor and gateway are used interchangeably because most processors offer their own gateway solution, but the two systems are different.
- The payment processor relays the information (encrypted again) to the acquiring and issuing banks and facilitates the exchange of funds
- The payment gateway receives the result of the transaction from the payment processor (successful/unsuccessful) and notifies the merchant and the customer
5 Powerful Benefits Of Payment Gateways For Online Stores
Now that you understand how payment gateways work, we would like to show you their benefits.
The below explains why all merchants are resorting to online businesses nowadays and how online payment processing helps merchants scale their businesses to the next level.
1. Save Time
Payment gateways are the fastest way to receive card payments. This process is much quicker than manual processing and you can usually begin accepting payments within a 24hr period after setting up your payment gateway.
Speedy payments are an important aspect of digital transactions and E-commerce success. Online shoppers are notorious for impulse buying, so ensuring your customers are not having to wait to make a purchase can be the difference between making a sale or not.
2. User Experience
Payment gateways offer additional features to improve the real-time user experience. Typically, customers can add products directly to a shopping cart, save bundles and add items to their favourites. Users are able to easily set up a profile and keep their payment information securely saved, so transactions are instantaneous with a single click.
For merchants, payment gateways often allow you to have full control and intercept if problems arise. However, integrating payment gateways to your site can be a costly, lengthy process – but we believe it is well worth the investment.
3. Expand your Customer Base
Using a payment gateway will open up your business to a new market. Shoppers from around the world can access your store and easily make trusted transactions. Secure digital payment options are becoming essential to attract and retain customers, particularly when operating an online store.
E-commerce is increasingly becoming a global market. Due to technologies like payment gateways, people are increasingly more confident with online purchases, and this gives them the freedom to source the best or cheapest products, regardless of location. Additionally, affiliate marketing partnerships are an additional feature of payment gateways to help funnel more leads to your business.
4. Secure Transactions
With a payment gateway, all payment transactions are heavily encrypted to ensure the data is protected. This will help your business meet GDPR and industry-standard requirements such as PCI DSS compliance (Payment Card Industry Data Security Standard).
Secure payment transactions protect the customer and merchant from potential fraud. Customers will usually use the more secure payment options, so gaining their trust to make purchases with your business should be a priority.
5. Convenience
Payment gateways allow your business to collect payments 24 hours a day. This means that you can rest assured that your website can continue to process payments at all times. But this is not just a benefit for the merchant.
As we know, online shoppers enjoy impulse purchases, so this feature allows them to place an order at any time, day or night. This creates an accommodating experience for users, particularly those who would not ordinarily be able to access a physical store during its set hours.
Provide Excellent Check-Out Experiences
Essentially, businesses use payment gateways to sell products or services online and need to accept digital payments from their customers. They also provide refund management and other useful tools like reporting.
Also, payment gateways are imperative for eCommerce businesses because they help them keep track of transactions and ensure safe payments for customers.
Want to find the perfect payment gateway for your business? Head over to our contact us page and get in touch with our team.
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